Financial and Compliance Report 2016/17

CHAPTER 1: INTRODUCTION


This report summarizes the results of all the financial and compliance audits that we carried out and reported during the working year, July 2016 to June 2017, which is similar to the financial year of Government. Moreover, this information is usually part of the TOAG’s Annual Report of past years, Section 2 “Reports of Each Division”. In our Annual Report 2016-17, we stated that “this section will be subject to a separate report in the future” and this is the separate report of the results of our financial and compliance audits for the year ended 30th June, 2017.

But firstly, a brief statement of the nature of financial audit and compliance audit for update of information:

Financial Audit

is our independent and objective examination of the Government’s, and Public Enterprises’, financial statements as of the end of each financial year. In complying with the Public Audit Act 2007, we conduct the audit of the financial statements of Government, (the Public Accounts), and public enterprises which appointed the Auditor General as their external auditor. For those public enterprises which appointed private accounting firms as their external auditor, the Auditor General is to review and approve their audited financial statements.

The objectives of our audit of financial statements are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework. The applicable reporting framework is either the International Financial Reporting Standards, IFRSs, the International Public Sector Accounting Standards, IPSASs, or as specifically stated by law.

The expressing of an audit opinion is normally issued on all audits of financial statements and are of two forms; (i) unmodified opinion, and (ii) modified opinion.

  1. Unmodified opinion: is expressed when the Auditor General concludes that the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework; and
  2. Modified opinion: is expressed when the Auditor General:
    1. concludes that, based on the audit evidence obtained, the financial statements as a whole are not free from material misstatement; or
    2. is unable to obtain sufficient appropriate evidence to conclude that the financial statements as a whole are free from material misstatement.

Type of Modifications of the Auditor’s Opinion               

Qualified Opinion

The Auditor General expresses a qualified opinion when:

  1. having obtained sufficient appropriate evidence, concludes that misstatements, individually or in aggregate, are material, but not pervasive, to the financial statements; or
  2. is unable to obtain sufficient appropriate evidence on which to base the opinion, but the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive. 

Adverse Opinion

is expressed when the Auditor General, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements.

Disclaimer of Opinion

is expressed when the Auditor General is unable to obtain sufficient appropriate audit evidence on which to base the opinion, and concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive. 

Compliance Audit

is based on the premise that management is responsible for the entity's compliance with the law governing the entity. In complying with the Public Audit Act 2007;

“the Auditor General shall monitor compliance with the requirements of any Act governing the management and control of public money and public resources”, (section 10(4)).

It also states that;

“the Auditor General shall review and confirm the discharge of financial management obligations, including maintenance of accounting records and an adequate accounting system of accounting control, to ensure that Ministries, Government agencies and public enterprises have complied with their financial management obligations under the law”.

“Monitoring compliance” is through compliance audit which the TOAG have been carried out to all Government Ministries, Departments, and Agencies (MDAs). The report of compliance audits is through “audit management letters” to the CEOs or Head of the MDA being audited. All of the audit management letters are summarized and reported in our annual report. But in this year, 2016 – 17, they are summarized and hereby reported in this separated Financial and Compliance Audits Report 2016-17.

Government MDAs do not prepare a separate financial statements at the end of each financial year. However, they are all required to comply with all financial obligations under the law. We carried out compliance audit and report on the “financial management obligations under the law”, as stated in the Public Finance Management Act 2002, its Regulations, the Treasury Instructions, and policies and directions issued by the Minister of Finance from time-to-time.

We put the audit of all development projects we carried out under the Compliance Audit, since the significant part of their audits is the review and confirm the compliance with the terms and conditions under respective signed project documents, the standards and operational manuals of the applicable donor, and compliance with the Public Finance and Management Act 2002.

In this situation, compliance audits usually are performed in conjunction with financial statements audit since we have to issue our audit opinion on the projects’ financial statements as a result.

Chapter summary and background

Each chapter starts with the summary of the overall results of the audits covered in that Chapter.  It follows by a short background of the nature of audits reported in each Chapter then the summary of audit findings and recommendations.

CHAPTER 2: GOVERNMENT FINANCIAL STATEMENTS (PUBLIC ACCOUNTS) 2016 – 17


Summary

We issued a qualified audit opinion on the Government Financial Statements (Public Accounts) 2016 – 17, and it was the same with prior years’ audit conclusions. The basis of the qualification was the modification of the cash accounting basis in order to bring forth the fair valuations of Government assets and liabilities as of the balance date, 30th June, 2017.This modification process has been carried out for several years with very minimal indication of moving forward towards full accrual accounting basis.

A total of 28 issues are reported to the CEO Finance and National Planning from the audit of the Public Accounts 2016 – 17. We also issued 32 recommendations as remedial actions for the Ministry’s consideration and actions.

Background

The Government accountability and transparency is supported by the preparation and audit of the Public Accounts.

The Public Accounts is prepared by the Treasury Department of the Ministry of Finance and National Planning, (MOFNP) and presented by the Minister for Finance. The Public Accounts and associated financial information and analysis provide information to assist in assessing the financial performance and position of the Tongan Government. The financial results presented in the Public Accounts inclusive of all results of Government Ministries, Departments, and Agencies whose allocation of public funds were approved in the Government budget for the financial year.

Audit Findings and Recommendations

Significant Matters

i.    Audit Opinion

We have issued a Qualified Opinion for the Public Account 2016/17. The basis was the modification of the approved reporting framework, the International Public Sector Accounting Standards, (IPSAS), Cash Basis of Accounting.

The Minister, in his Statement of Responsibility (page 1), stated that he has modified the cash basis of accounting in order to enable the including of accounting and reporting of assets and liabilities of Government as at balance dates. The modification of cash accounting have been consistently applied as in previous years, and it allowed for adjustments to the cash basis value of assets and liabilities in order to report the fair values of those assets and liabilities as at the balance date. Referring to Note 16 to the financial statements, the value of the adjustments (debit) made to the valuation of receivables, payables, investments, public debts, property, plant and equipment that reported in this year’s statement of assets and liabilities totalled to TOP$74,614,075 (TOP$65,334,853 debit in 2016). It states that this amount represent the cumulative amount of the effect of accounting for assets and liabilities as at the balance day and the total fund balance as of 30th June, 2017 is reduced by that amount.

We agreed with the assertion made by the Minister and fully support the continuation of this exercise. However, until all assets and liabilities of Government are completely accounted for with fair valuation as in full accrual basis of accounting, the scope of the audit is continued to be limited to the recorded and reported assets and liabilities.

Other Significant Matters

i.     Financial Reporting Framework

The financial reporting framework adopted in the preparation of the financial statements is the International Public Sector Accounting Standards, IPSAS), under the Cash Basis. This is set out in the Accounting Policies Note 1 (i) and (ii). As part of an initiative of the Minister of Finance, the Ministry has undertaken a major task to convert the basis of financial reporting from the traditional cash basis to cash modified approach to enable the accounting of assets and liabilities. This is set out in the Statement of Responsibility. The disclosure of assets and liabilities signalled a move from cash to accrual basis. The current basis of preparation is regarded as a Cash Modified (partially accrual basis).

While the financial statements is said to have adopt some principles of the IPSAS accrual basis standards, the accounting policies does not explicitly states which IPSAS accrual standards has been adopted in the preparation of the financial statements, nor to what extent the IPSAS accrual basis has been implemented. In the absent of the specified IPSAS accrual standards, management has reservation to choose which assets and liabilities to disclose in the face of the financial statements, disclose only by way of notes and those not to disclose.

ii.    Chart of Accounts, Sun System and the Financial Statements

The Chart of Accounts established in the Sun System corresponds to the Approved budget. All cash transactions (cash receipts and cash payments) are posted into the Sun System into their respective vote head as per the budget. The Chart of Account does not include any account code for assets, liabilities, income or expenditures but only receipts and payments.

When it comes to financial reporting and the preparation of the financial statements, the Sun System derived the Statement of Receipts and Payments. This is derived from its transaction listing of cash receipts and cash payments during the financial year. The Statement of Income and Expenditure is also prepared, however it is just the replica of the Statement of Receipts and Payments. This is misleading for users of financial statements since the cash receipts and cash payments is different from the income earned and expenditure incurred during the financial year and therefore should not be presented as such.

Audit acknowledged that this is due to the Sun system not having account codes for income and expenditures. Furthermore, audit also acknowledged that there is collective effort needed from the line ministries in providing income, expenditures, assets, payables and receivables if a correct statement of income and expenditure is to be formulated.

With respect to the Statement of Asset and Liabilities, audit observed the same limitation. Since there are no established account codes for assets and liabilities to be posted to the Sun System, they are manually managed outside the sun system.

If the government hope to successfully move towards IPSAS Accrual Basis of Accounting, there needs to be modifications to the Sun System to enable Income, Expenditures, Assets and Liabilities to be posted to the System.

iii.    Statement of Income and Expenditure

As mentioned above, this statement has for many years just a replication of the statement of receipts and payments. The statement does not realize income and expenditures that were earned and incurred respectively for the financial year.

 iv.     Statement of Assets and Liabilities

As mentioned above, this statement of assets and liabilities is prepared manually outside the Sun System. The assets and liabilities disclosed in the financial statements are only for those line items which is processed through the Ministry of Finance and National Planning plus any other assets and liabilities. Assets and liabilities of individual line ministries are not consolidated into the public account due to lack of information available to MFNP to prepare the financial statements. The completeness of assets and liabilities has been considered in forming our audit opinion.

v.     Inconsistency in Treatment of Certain Items

There were inconsistencies identified in the treatment of certain financial statement items. These were for instance;

  • Interest Payable and Receivable - Interest Payable on Public Debt has been omitted from the Statement of Assets and Liabilities while Interest Payable on Transfer Preserved Account were disclosed in the Transfer Preserved Account under Non- Current Liabilities. For Receivables, interest receivable has also been omitted from the financial statements. 

  • Movement in Exchange Rates - For Development Fund were realized as a cash balance in the development fund amount while exchange rate movement in public debt is realized under equity.

The omission of a certain class of assets or liabilities from the financial statements is not consistent with the principles of the IPSAS standards. This is due to the IPSAS standards adopted in the recognition of assets and liabilities not being specified clearly in the accounting policies. This has given management reservation to decide which assets and liabilities to disclose and omit from the financial statements. Some liabilities such as contingent liabilities is disclosed only in the notes, not the Statement of Assets and Liabilities.   It is recommended that management is to ensure that the IPSAS accrual standards adopted is to be clearly stated in the Notes to the Accounting policy.

Audit Findings (2016/17)

i.     Dishonoured Cheques

We identified several dishonoured cheques which has been dishonoured from the bank. Dishonoured Cheques identified were for the financial year as far back as 2006/07 up to the current financial year (2016/17). The impact of dishonoured Cheques is that it results in loss of revenue for the government and further it is difficult to chase up customers. This is evident in several cheques which has been dishonoured in 2007 and has yet to be recovered.

Recommendations

1.  MFNP management should seriously consider the risk of dishonoured cheques. Personal cheques should not be accepted as a form of payment.

ii.    Aging Reconciling Items

We identified from our review of bank reconciliation there are aging reconciling items which are still included in the bank reconciliation forms. For example, there are items for Lodgement not yet credited which are dated back to 2013/14. The ministry has yet to identify these outstanding items. Aging Reconciling items not yet identified increased the risk of fraud going undetected if these relates to public funds not yet paid in to the bank.

Recommendations

1.  MFNP management should ensure that bank reconciliation are prepared and reviewed on a timely manner.

iii.    Bank Reconciliation

We noted bank reconciliation is not being prepared on a timely manner and reviewed. There were significant delays in providing bank reconciliation for audit review. Timely preparation of bank reconciliation will ensure timely availability of financial information to aid in decision making. This will also prevent and detect errors or fraud on a timely manner.

Recommendations

1.  MFNP management should ensure that bank reconciliation are prepared and reviewed on a timely manner.

iv.     Inactive Bank Accounts

We noted from our review of bank confirmation, there are inactive bank accounts which has not been closed. These bank accounts has NIL balances and are still open. The impact of inactive bank accounts is that the government could incur unnecessary cost to the government in respect of bank fees if not closed in a timely manner.

Recommendations

1.  MFNP management should ensure that all the government bank accounts are reviewed and that bank accounts that are not operating are closed as soon as possible.

v. Safe Custody of Cash on Hand

The recent misappropriation of funds at the Vava’u branch shows the vulnerability of cash on hand in the Ministry’s safe to the risk of fraud. Cash on Hand is a high risk item and that sound internal control procedures should be in place to ensure such risk is mitigated. The weaknesses in the internal control surrounding cash on hand is highlighted in this recent fraud.

Recommendations

1.  The Internal Audit Division should from time to time carry out surprise cash counts on the Cashier’s float as well as the ministry’s safe on a regular basis.

vi.    Independent Record Kept by the Ministry

We noted that for Investment and Transfer Preserved Accounts, there is no independent record maintained by MFNP. During the preparation of the financial statements, external confirmation are sought from the Ministry of Public Enterprises, Public Enterprise’s audited accounts and Retirement Fund Board for the closing balance which is manually inserted into the Statement of Assets and Liabilities.

Recommendations

1.  MFNP management should ensure that independent record are maintained in the ministry to ensure accurate of records. External confirmation should be sought only as checks and balances against the ministry’s record.

 

Status of Prior Year Audit Matters

The following issues were raised in our previous management letter. We have followed up these issues in this year’s audit and their status is explained below.

1. Audit Matters raised in and before 2014/15

Prior Year Matters

Status observed in 2016/17 Audit

1. Property, Plant and Equipment

Description

The audit opinion on public accounts have been qualified for many years now, on the basis, that audit cannot satisfactorily confirm the fair valuation of assets.  The presentation of assets and liabilities as part of the public accounts was an initiative of the Minister for Finance, to bring into account the assets and liabilities of the government thus promotes more transparency and accountability in public sector

This issue is still outstanding. It is acknowledged that this issue needs collective effort from the line ministries

2. Disclosure of budget information in the Financial Statement

Description

IPSAS requires that the budget information be presented in the financial statements and actual amounts on a comparable basis with the budget.  Disclosing budget information on the financial statement completes the accountability cycle by enabling the users of the financial statements to identify whether resources were obtained and used in accordance with the approved budget.

This issue has been resolved. The financial statements also include an additional statements, “Statement of Comparison of Budget and Actual” in accordance with the requirement of IPSAS Cash Basis.

3. Treatment of External Assistance

Description

Issue with respect to the external assistance raised in the previous management letter still stands

This issue is still outstanding

4. Payment by third parties on behalf of the government

Description

Payments made by third parties on behalf of the government is not disclosed in the financial statements. This is required to be disclosed in the Statement of Receipt and Payments in accordance with IPSAS Cash Basis. The Statement of Accounting policies note (vi) stated, MFNP has not been formally advised of whether payment has been made or has otherwise verified any payments. Regardless, this is still a required disclosure under the IPSAS Cash Basis

 

This issue is still outstanding.

5. Disclosure of Non Compliance with Significant Terms and Condition

Description

With respect of Budget support that were to be received during the financial year but were not received. Disclosure should be made on the total budget support received, the amount yet to be received and the reason.

This issue has been resolved in the 2016/17 financial statements.

 

 

2. Audit Matters raised in 2015/16

Prior Year Matters

Status observed in 2016/17 Audit

1. Receipts – Presenting Budget Information in the financial statements

Description

The presentation of budget information should follow the same aggregate totals as adopted in the budget to be in compliance with IPSAS.

 

This issue has been resolved

2. Receipts – Misclassification of Revenue (Domestic Fees, Licensing, Entrepreneurial and Property Income).

Description

We identified receipts which were wrongly classified into incorrect vote head. We recommended that journal entries into the Sun System should be independently checked on a regular basis to reduce risk of errors in posting transactions.

 

This issue is still outstanding. The 2016/17 audit also identified receipts which were misclassified.

3. Capital and Other transfer

Description

Receipts posted to Capital and Other Transfer should be clarified as to what these receipts are for to ensure they are correctly classified.

 

 

This issue is still outstanding.

4. Budget Support – Policy Statement

Description

The Policy Statement with respect of budget support needs to be disclosed in the financial statements. This to include, the amounts agreed as per the agreement and also the amount owed.

 

 

This issue has been resolved. Policy Statement as per the Joint Policy Reform Matrix has been disclosed in the financial statements.

 

5. Payroll System

Description

We noted from our testing of the Payroll system that there were variances between the Micro-Pay Report and the Payroll Journal Voucher. Further, the costing sheet printed from the Micro Pay were not filed with the salary voucher, and there was lack of segregation of duties as salary officer was handling most of the salary process.

 

 

This issue has been resolved. The Payroll Section has strengthened its organization structure with the appointment of the Principal Accountant and division of duties amongst appropriate personnel of the section

 

6. Operational Grant Agreement

Description

Audit found that operational grant paid out by ministries on behalf of the government to third parties does not have grant agreements. While, these grants have cabinet decisions attached, it is still required that agreements be made and signed with third parties to comply with section v, clause 35(2) of the Treasury Instruction.

 

 

This issue is still outstanding.

7. TDB Managed Fund (Private Sector Development Support)

Description

Audit noted that the balance of Managed Funds in the Tonga Development Bank is not disclosed in the Public Account. Further, there were variances identified in the brought forward balance reported in the TDB’s quarterly report. Audit recommended that MFNP verify accuracy and completeness of the quarterly report from TDB. Any variance identified to be discussed with TDB management.

 

 

This issue is still outstanding.

8. Development Projects outside Government Accounting System

Description

It was accepted that the MFNP has no control over donor funded projects implemented by NGO and that funds are transferred directly from the donor to NGO. However, disclosure of these development projects is encouraged. Audit recommended that these projects be disclosed by way of notes to the financial statements.

 

 

We commend the effort of MFNP in the inclusion of development projects outside government system in the 16/17 financial statements.

9. Unpresented Cheques

Description

Unpresented Cheques were identified which were dated back to 2011 financial year. This is five years outstanding and no action has been taken to either cancel or reverse from the MFNP’s system. Audit recommended that these long outstanding cheques be investigated and cleared

 

 

This issue is still outstanding. Unpresented cheques dating back to 2012 were still identified during the 2016/17 audit.

10. Receivables – Split between Current and Non-Current

Description

Audit cannot confirm the split between Current and Non-Current Receivables. This is due to lack of justification and supporting schedules which set out the break-down of balances relating to current and non-current. Further the interest receivables are not disclosed in the financial statements.  Audit recommended that interest receivable is disclosed and that split between current and non-current is supported by a supporting schedule

 

 

This issue is still outstanding. Interest receivables is yet to be disclosed and no justification for the breakdown of current and non-current receivables.

Tonga Trust Fund (TTF) Financial Statements 2012 – 13 

Financial year ended 31st March, 2013 was issued on 5th April 2017

On 5th April, 2017, an unqualified audit opinion was issued on the Financial Statements of the Tonga Trust for the financial year ended, 31st March, 2013.

Management report on the Tonga Trust Funds for the financial year ended 31st March, 2013 was submitted on the 5th April, 2017.  The summary of the audit findings were as follows:

i.     Audit did not identify any material matters other than identified misstatements already discussed and have now been corrected.

ii.    Disclosure and presentation of the Government Advance of $800,000 were discussed and agreed that this item was not an advance but a budget support.  In consistent with the accountant treatment of this item in the Public Accounts, this item was reversed.

iii.   Audit refereed to email from Pillsbury Winthrop Shaw Pittman Ltd in the United States regarding the reducing of the retention deposit from USD$100,000 to USD$10,000.  As discussed and agreed, this issue is expected to be addressed in the near future.

iv.   Audit acknowledged good cooperation from management and employees during our audit.  To the best of our knowledge we also had complete access to the accounting records and other documents that we needed in order to carry out our audit.

Review of Quarterly Performance of Receipts and Payments

Unqualified Audit Certificates were issued on the 17th March, 2017 for the Quarterly Summary Reports of Receipts and Payments of public funds for these periods respectively:

i.   July 1st to September 30th, 2015

ii.  July 1st to December 31st, 2015

iii. July 1st 2015 to March 31st, 2016

Management report on the Quarterly Summaries of Receipts and Payments for the Quarter ended 30th September 2015, December 31st, 2015 and March 31st, 2016 was issued on the 17th March, 2017.

These quarterly summaries for Quarter September 2015 was received 31st October 2015, December Quarterly summary 2015 was received 2nd March 2016 and March Quarter was received on 9th April, 2016.

1.  Trial Balance

Although the draft for September 2015 quarterly summaries of receipts and payments were received on time, the trial balance was received, six months after received the draft quarterly summaries of receipts and payments. This issue has been discussed with Head of Treasury Operation and support staff and the importance of submitting documents and records on time.

Further, the trial balance presented was in detail level while the Quarterly Summaries of Receipts and Payments were in aggregate level where receipts and payment were presented in categories.  Audit requested that the trial balance be presented in categories in accordance with various operating receipts and payments as they appear in the quarterly summary, but this was not acceptable to MFNP and the trial balance was still presented as extracted from the sun system.

The impact of these problems is that the audit was delayed for a long time.  A lot of audit time were spend of completing procedures that MFNP would have completed before submit the quarterly summaries to audit.

Given the trial balance was not only received six months late, but were not formatted into the format Audit requested, a significant amount of time were spend in trying to sort out the trial balance into categories to agree with the Quarterly Summaries.  Audit acknowledges that this process is not part of audit duties but they are of the Treasury Operation which they did not complete.

Recommendations

1.  That the detailed trial balance be accompanied with summary of categories, consistent with the categories of receipts and payments.

2.  Discrepancies in Draft Summaries

The comparative figures for September 2015 Quarter in December 2015 Quarter were different from the figures disclosed and presented in the quarterly summaries for Sep 2015. The sun system did not agree with the September quarterly summary but agrees with September figures under December Quarterly Summaries.  This happened when the sun system continued to be updated after submit the quarterly statement to audit.  The sun system is not locked on balance date and that is considered a weakness in the internal control system.

Due to these discrepancies, Audit cannot complete the audit of the September quarterly summary but requests Treasury Operation to confirm figures for September Quarter and submit the signed final draft with the correct figures. Audit regrets that this audit had been dragged on for about a year now.

3.  Cut-off points for each quarter

Discrepancies between the quarterly summaries and the sun system reflected that the sun system cannot be locked at the end of the reporting period to avoid any further changes and that there is no cut-off policy on balance date or there was cut-off policy but were not complied with.  Again these are indicators of ineffective internal controls system.  These issues were discussed with Head of Treasury Operation and support staff.

Given the issue highlighted in the paragraph above, audit wishes to recommend as follows:

Recommendations

2. That MoFNP is to develop a clear policy for cut-off points, clearly communicate to relevant staff and effectively supervise compliance with the cut-off policy.

3. That once the Quarterly Summaries of Receipts and Payments are prepared and submitted to audit, that no entries are to be updated into the sun-system.

4. That any subsequent update needed after cut-off dates are to be carried forward and accounted for the next month and quarter.

5. Should MoFNP finds impractical to comply with requirements for preparation of Quarterly Summaries of receipts and payments, in accordance with Public Finance Management Act 2002, revision of the legislation would be an option to consider.

4.  Records and documents requested by audit

Audit noted that records and information requested were not readily available for audit.  The audit were delayed and dragged on for a considerable amount of time.  It is important that the audit is completed in a timely manner thus maintain the quality of the audit as expected.

Recommendations

6. That Head of Treasury Operation ensure that information and documents requested for audit are provided on time, i.e. within a day or two of requests.

 

CHAPTER 3: GOVERNMENT MINISTRIES, DEPARTMENTS, AND AGENCIES, MDAS

Summary

We audited 11 Ministries & Departments, 2 overseas mission offices, 1 follow-up audit, and 1 special audit investigation during the year.

We raised 144 issues and reported in our management letters and special audit report. Relatively, we issued 209 recommendations for remedial actions to be taken in regards to the issues we raised. We included the responses from MDAs that we received. However, for those MDAs which did not response to our audit management letters there was no response included in this report.

Background

The financial reporting function of Government is centralised in the Ministry of Finance and National Planning, which prepared the Public Accounts for each financial year. MDAs do not prepare end of financial year’s financial statements.

However, MDAs are to manage, process, and record all their financial activities in compliance with the financial accounting systems of Government as stated by law. And we are to audit the discharge of their financial management obligations in compliance with the requirements of the laws governing the management and control of public money and public resources.

Our compliance audits of MDAs cover the period of operation continuously. That is, we plan and carry out the audit from the end of the period covered by the last audit up to the time of commencing the current audit. The period covered in each audit is also stated here as in our audit management letters.

The audit findings are from our normal audit procedures designed primarily for the purpose of examining and reviewing the accounting system and control procedures of each MDAs. Consequently, our work did not involve the detailed review of all aspects of the systems and cannot be regarded as the comprehensive statements of all weaknesses that exist, or of all the improvements that might be made.

 

Audit Findings and Recommendations

1. Palace Office

Period Covered: July 2014 – June 2016 (24 months)

1.  Safe for secured custody of revenue

Revenue collected from the National Identification Card Fee at the Office of the Election Commission were kept at the Office of the Lord Privy Seal in a small black money box.

Recommendations

1. That the above practice should be ceased immediately.

2. That the Accountable Officer should ensure that the public money is safely stored.

2.  No independent checking of revenue

There was no independent checking carried out throughout the process of collecting revenue. 

Recommendations

3. That the independent checking should be carried out before and after every banking.

3.  Late Banking

The paid in of revenue collected from the National Identification Card fee was late throughout the audited period contrary to the Treasury Instructions 48(7).

Recommendations

4. That all cash collected by the Office should be paid in on a daily basis as instructed by the Instructions above.

5. That the banking documents and cash should be reviewed by a senior officer on a regular basis.

6. That any repetition of the above practice will be a serious breached of disciplined.

4. No Experience

According to the information received from the responsible officer, Computer Assistant, she did not know about the Treasury Instructions.

Recommendations

7. That a proper training for revenue collector should be taken immediately.

8. That the Accountable Officer should supervise the work of the revenue collector(s).

9. That the Accountable Officer is responsible for the overall proper supervision of the designated revenue collector.

5.  Short Banking

There was a short paid-in at the Office on 20th October, 2015 amounted $50.00.

As a result, there was an undetected short deposit of receipts on 20th October 2015, receipt number 335092, amounted $50.00. It was not posted to the Cash Book and not deposited to the bank. The Revenue Collector reimbursed the amount and receipted on receipt number 378818 on 22nd August, 2016 and deposited to the bank on the same day.

Recommendations

10. That the above occurrence should not be happened again.

11. That the Officer responsible should be appropriately disciplined.

12. That a senior officer or a supervisor should review the banking process on a regular basis.

6.  Not signing on and off on the Attendance Register

Two employees are not signing on and off on the Attendance Register.

Recommendations

13. That all employees of the Office should sign on and off on the Attendance Register.

14. That the Attendance Register should be reviewed by the CEO on a regular basis.

7.  One vehicle has no Log Book

It was identified one vehicle has no log book.

Recommendations

15. That the Toyota Van P.1295 should have a Log Book.

16. That the Transport Supervisor should regularly review all Log Books.

8.  Privately used of Government Vehicle

One officer used government vehicle for private purpose and claimed that the officer paid for the maintenance and fuel for this particular vehicle.

Recommendations

17. That this practice be ceased immediately and the Toyota Van P.1295 should be returned to the care of the Office until obtaining the written authorization of the CEO.

2. Office of the Commissioner for Public Relation (CPR)

Period Covered: July 2014 – April 2016 (22 months)

1.  Follow ups

The issues raised in the previous audit were followed up and found that no action made on the following two issues so the recommendations are repeated.

  • Unrecorded of vehicles’ log books; and
  • Vote book not properly recorded and updated

The risk of misusing of the office vehicles and unaccounted expenditures increased.

Recommendations

1. That the driver of each Office’s vehicles ensures that the log book is completed for every trip made and to be reviewed by the supervisor on regular basis.

2. That the responsible officer for updating the Vote Book ensures that payment vouchers are recorded in the Vote Book on a timely manner.

3. That the Senior Officer designated to review vote book reconciliation, ensures that this is carried out on monthly basis and it is correctly done.

4. That the CEO should ensure that the senior officer’s reviews of the reconciliation is carried out on a monthly basis and is correctly done.

Commissioner’s Office response

Agreed and arrangement is under way for daily supervision of the Vote Book, in order to ensure proper record is kept at all time. In regards to vote book reconciliation with Treasury, the challenge is the doing it right, in timely manner, and consistently and it has been a problem of the past and has continued to affect the work even today.

2.  Order Book

The numbering of Order Book No.7 was not in sequential order. Skipped a sequential number might raise concern that the Office has made a commitment but does not aware of it.

Also Order Book No.5 used during the audited period was not located during the audit visit.

Recommendations

5. We recommend that the account officer ensures that the order is numbered in sequential order.

6. We also recommend that the account officer ensures that all accounting records are filed and be made available during the audit visit.

Commissioner’s Office response

We made arrangement and extra efforts to monitor the Order Book and usage to avoid leap fogging the proper next order.The same goes to the carbon, and to replace in time while still usable. Also, we have used separate folders for each and every paper work of its kind, for ease of reference, and continue to monitor the record-keeping, and that is securely stored.

3.  Overtime without a work plan during annual leave

There was an Officer that had an overtime on 24th November, 2015 while on Annual Leave on the same day.

Recommendations

7. That the CEO should emphasize the importance of a work plan for overtime request and that overtime should not be approved for payment without an approved work plan.

Commissioner’s Office response

We undertake to continue to monitor this also for accuracy and completeness, and with proper authorization.

3. Ministry of Foreign Affairs - Immigration Division

Period Covered: March 2015 – September 2016 (19 months)

 The scope of this audit was narrowed to the movements of all passports and the completeness of the passport register.

1.  Stock and Movements of Passports

The completeness and existence of passports were confirmed apart from fourty five (45) blank passports explained to have been transferred to the High Commission Office, London UK, but the Immigration Office did not maintained the relative documents declaring of these passports movement in their records.

However, we confirmed when we visited our High Commission Office in London that they did receive the concerned 45 passports; 30 on 30th September, 2015 and 15 on 14th October, 2015. Of these 45 passport, 15 were Diplomatic, 15 were Official, and 15 were Ordinary passports.

The records of the Tonga High Commission in London confirmed that the Acting High Commissioner passed on these 45 passport to the European Commission as “SAMPLE” during the final stage of the negotiations for the Schengen Visa Waiver Agreement.

Recommendations

1. That the Supervisor should ensure that complete records and documents are in place for transferring of passports to Overseas Mission Offices confirming that such passports’ movements did take place

2.  Missing Visa Label No.(00) 36651

This manual visa label No.36651 was not identified during our stock-take.

Immigration Office response

This visa label confirmed that it is a manual visa label misplaced at the Immigration Office. Account Section and Visa section are still looking for this visa label.

3.  Increased misprint of passports

We identified the big increase of misprinted passports as compared with the previous audit period. In this audit, there were 393 passports being cancelled (19 months) due to misprint compared with 76 passports in 26 months in the previous audit visit).

 Recommendations

2. That the Supervisor should ensure that misprinting of passports is minimised and proper records are kept and updated accordingly in relations to misprinted passports.

Immigration Office response

The number of misprinted passports and technical problems is increasing due to technical problems with our passport printer machine.

4. Ministry of Foreign Affairs: Tonga High Commissioner’s Office (THC), London, UK

Period Covered: March 2013 – October 2016 (44 months)

1.  Follow-up – Management Report dated 12th September 2013

The issue raised in the previous audit and reported in the above mentioned management report were in regards to related parties transactions concerning ineligible expenditures incurred for the former High Commissioner, and his domestic staff. There was no/very minimal appropriate consideration and actions by the Ministry to address these issues.

Recommendations

1. That the practice of the missions’ staff using of public fund for personal purposes and reimburse at a later stage be stopped at once.

2. That the Ministry is to ensure that all missions’ staff strictly adhere to the conditions and entitlements of the position held.

3. That the practice of paying directly to the missions’ staff of air fares and similar reimbursable personal expenses which the office is to bear be also stopped. However, in exceptional situation where payment is to be made to the staff, the staff must fully accounted for such payment by providing the complete receipts and supporting documentations to the missions office or to the Ministry’s Head Office here.

4. To always seek and to obtain the appropriate approval in the first place of matters beyond the Head of mission’s authority before any action is taken.

2.  Other Revenue and Refunds were not receipted

The inward cash accounted for as “Other Revenue” and “Refunds” were not receipted, however the bank statements entries were used as sources for posting them to the cash book.

Recommendations

5. That all direct deposits/credits to the bank be receipted and be the source documents for posting to the Cash Book.

3.  Communication between London HC Office and Head Office here in Tonga

The communication link between the London HC Office and the Head Office here in Tonga, especially on staff matters, is assessed to have been taken longer that should be. The consequences are not only impacted on the staff concerned but to the Office as a whole:

For example, the Acting High Commissioner’s appointment took about eight (8) months to finalize. The financial impact of this untimely action was adversely on the cash flow management of the Office; operation on overdrafts, increased bank interest and commissions, and it took another nine (9) months for the Acting High Commissioner to receive his full allowance, timely.

Recommendations

6. To improve the response time for directions seek by, and issue to, the missions office in London for more efficiency and more effectiveness of the overall office administration and avoiding the unnecessary incur of extra financial costs.

4.  Cash Flow Management

The remitting of funds from the Mission Office in London was not timely which causes the Mission Office to operate through bank overdraft as from December 2013.

Recommendations

7. That your Office timely liaise with the MoFNP for the appropriate times for remitting the operational funds for the Mission Office in London in order to avoid the Office’s operating on draft, manage the costs of the bank’s Commission and interest, and to eliminate the staff’s bearing the adverse impacts of having insufficient cash flow (impact – defer payment of full staff salary and allowances at times).

5.  Stock of Passports

The physical stock of passports confirmed that there were no new version blank passports at the Office and this is because the printing of all passports is only carried out at the Head Office here in Nuku’alofa. The 45 “SAMPLE” passport transferred from the head Office for the European Commission, EC, is recorded to have been pass on to the EC.

There are sixty five (65) passports of the old version (hand written) still stock at the Office. Also confirmed the stock of the Certificate of Identity to the register.

Recommendations

8. That the remaining stock of the old version of Passports be returned back to Head Office for appropriate disposal through the Government Disposal Committee, GDC.

9. That all physical transfers of passports between the Head Office in Nuku’alofa and all overseas mission offices be completely documented and registered, specifically stating the passports’ numbers and secondly, the quantities.

10. That complete records of the passports’ processing be filed as part of the mandatory record of all overseas missions’ offices.

6.    Fixed Assets Register and inoperative assets recommend for disposal

The fixed assets register was updated and completed. The list of inoperative assets re-submitted again as attachment to the report for the Head Office to process through the Government Assets Disposal Committee.

Recommendations

11. If it has not yet been processed to the Government Disposal Committee, the list of the inoperative assets from the London Mission Office which have been confirmed by the Auditor is to be processed through the GDC for their immediate disposal.

5. Ministry of Foreign Affairs: Tonga High Commission’s Office (THC) – Canberra, Australia

Period Covered: March 2013 – March 2017 (49 months)

1.  Follow-up issues re Audit Report dated 10th June, 2013

  • There was no recovery action being taken regarding the incurred AUD$5,672.89 telephone expenditure through using one of the Office’s mobile phones and paid for by the Office while the responsible officer was no longer worked at the Office.
  • There was also no corrective and recovery action for a direct debit of AUD$9,066.79 charged to one of the Office’s corporate bank card way back on 7th July, 2010. The transaction took place in Turkey but there was no officer of the Office in Turkey at that particular time as well as there was no Office’s purchase from Turkey at that period.

Recommendations

1. To note the identified loss to public fund amounted to AUD$14,739.68 (approximately TOP$25,000) as mentioned above.

2. That a revenue recovery policy and procedures be established and included in the Policy Manual for overseas mission offices and to be timely and strictly adhered to when a long overdue service fee or a loss to public fund occurred.

2.  Budget v. Actuals

As by the end of March 2017, the following line items have overspent their 2016-17 budget allocation: Domestic Travel, Telecom Charges, Postal Charges, Printing & Stationery, and Hospitality.

Moreover, there were no budget for the following two line items but there were expenditures charged to them: Maintenance of Equipment, and Maintenance of Office Building.

Recommendations

3. That corrective actions be taken immediately to put right the non-compliance mentioned above.

4. That the review of monthly returns of the Canberra Office and all overseas mission offices be timely carried out with appropriate feedback, advice, and direction on issues that may arise be sent back to them in timely fashion.  This would certainly avoid the non-compliance mentioned above and/or similar financial administration issues.

3. Salaries and Wages Register and Telephone Register

In this visit, assistance given in establishing a salary and wages register starting from July 2016. Not only that the register is a mandatory record to maintain but will help ensure the paying out of the full salary and benefits of the staff in each pay period. It was noted that there were times that deferring of paying the full salary and benefits of some of the staff did occur due to insufficient cash flow.

Also, assisted in establishing a telephone register for the Office. This is a new register which would ensure complete recording of all the official telephone lines and mobile phones and the monthly costs to the Office.

Recommendations

5.   That the just established Salary & Wages Register and the Telephone Register be continued to be completed and up-datedly maintained.

6.   That a written down policy on purchasing and the post entitled to an office’s mobile phones at each overseas mission offices be established. Also, the policy is to specifically state that only the official calls are to be met/reimbursed from public fund and all Office’s mobile phones are to be recorded into the Office’s fixed assets register.

4. Fixed Assets Register and inoperative assets recommended for disposal

There were quite a number of inoperative assets which should have been disposed.

Recommendations

7.  That the fixed assets register be improved by adding the missing information.

8.  That the list of all inoperative information to be disposed be prepared and submit to the Head Office Nuku’alofa for processing to the Government Assets Disposal Committee

5. Staff Travel – Corporate Bank Card vs. Per-diem

All the expenses of staff travels during the audited period, overseas and domestic, were paid for using the corporate bank cards of the Office – air fares, petrol for domestic travels, accommodation and other related expenses.

Recommendations

9.  That the practice of paying of official travels’ allowance of staff using the corporate bank cards be reviewed with a view for change to follow the Government’s current policy and practice.

 6. Ministry of Revenue & Customs (MoRC): Inland Revenue Division (Large Business, Small Business, Compliance and Audit)

Period Covered: July 2014 – April 2017 (34 months)

1.  Follow-ups

Recommendations

Positions at this audit visit

To appropriately review the taxpayers tax returns with repeatedly lodging of Net Losses of Taxable Business Income

The Audit Division of the Tax Office selected then reviewed and reassessed those taxpayers that repeatedly lodged Net Losses of Taxable Business Income for three (3) to five (5) consecutive years, (even more).

 Amendment of Assessments

Amendment of Assessment is carried out by the Audit Division of the Tax Office, which considered appropriate.

Domestic Consumption Tax (CT) Unclaimed Credit Balance

The Audit Division of the Tax Office is progressed with review and examine the validity and true value of those CT credit balances.

Revenue Arrears

This issue was raised again in this audit visit.

Corporate Tax – List of Taxpayers

Action made by the Ministry to update the list of taxpayers raised in our previous report was satisfactory.

Government PAYE Tax: non-lodgement of PAYE returns of line Ministries.

This issue was raised again in this audit visit.

 

2.  Un-reconciling of Government PAYE Tax

The Government PAYE was not reconciled due to the failure of line Ministries to lodge their PAYE returns for reconciliations.

Recommendations

1. That the Division shall take proper action to enforce the MDAs to lodge their PAYE Return on a timely basis.

3.  Incomplete reconciliation Small Business (SB) PAYE

Incomplete reconciling the SB PAYE for past two (2) years 2014/15 & 2015/16.  Financial Year 2016/17 is yet to complete

Recommendations

2. That the Division is to reconcile the PAYE for Small Business on a timely basis.

4.  Removed Assets of the Ministry’s Inland Revenue Office (IRO)

We found that two vehicles, registration MORC 01 and MORC 2, were taken by the then Minister for Revenue, Hon. Tevita Lavemaau, with him when he moved and being the Minister for Finance and National Planning. He also took with him a stainless steel refrigerator.

Also, there were two (2) mobile telephone hand-sets bought by the Ministry and allocated to two of its former Deputies, who left the Ministry. According to the explanation given to us, they left with the mobile phones.

Recommendations

3. That these assets should be relocated back to the Ministry’s compound immediately.

4. That these assets should be kept at the Ministry’s compound at all times

5. That any transferal of assets is to seek the authority of the Government Assets Disposal Committee, GADC, in writing.

5.  Revenue Arrears

The audit calculated the total revenue arrears for the above audited period, May 2014 – April 2017, as of 30th April, 2017 totalled $27,176,975.43. That is; total tax $10,077,648.92, and total tax penalties $17,099,326.51, and breaking down to each classification of tax is as follows:

Consumption Tax, CT 15,542,590.10
Income Tax (large Business) 6,844,691.30
Income Tax (Small Business) 1,382,335.66
PAYE (Large Business) 1,915,167.90
PAYE (Small Business) 1,375,588.35
High Profile Taxpayers 116,602.12
Total $27,176,975.43

 

We also repeated the required compliance with the “Revenue Arrears Reporting” requirement under the Treasury Instructions 2010, which was still not carried out – “That within 7 working days after the end of each month, each MDA shall prepare and submit a monthly report on the arrears of revenue status to the MFNP on the outstanding and overdue debts and correctly showing the aging of the arrears … and copy to the Auditor General no later than the 10th of the month following.”

We repeated our recommendations issued in our previous audits’ management letters, and those were;

Recommendations

6. That the Inland Revenue Office is to perform practical and cost-effective efforts to recover the arrears that is still outstanding.

7. That the Inland Revenue Office is to report the revenue arrears accordingly as required by the Treasury Instructions 2010.

6. Motor Vehicles Log Book

The independent reviewing of the motor vehicles log books was not properly and completely carried out. Some of the log books were not located, and most of the log books presented to the audit were incompletely recorded – not recorded the whole period covered. The risks involved as a result could be increased misuse of government vehicles and unaccounted fuel usage – variance of the volume recorded in the log books against the volume being ordered and paid as compiled from the expenditure vouchers.

Recommendations

8. That the Accountable Officer is to provide the information for the unaccounted fuel;

9. That the Transport Supervisor is to carry out the independent review of all log books; and

10. That the Transport Supervisor is to be warned to ensure that the independent reviewing of all log books is to be completely and properly carried out.

 7. Ministry of Revenue & Customs (MoRC) Customs and Trade Division

Period Covered: July 2014 – February 2017 (32 months)

1.  Failure to completely register manifests on the Manifest Register

It was identified that manifests provided by shipping agencies were no longer registered on the Manifest Register since 8th September, 2016.

In addition, register of manifests on the Manifest Register were not in sequential order according to number of voyages, which increased the possibilities of unregistered manifests.

The risk of releasing customs goods without paying the dues and taxes increased by failure to completely register all manifests in the Customs Manifest Register.

Recommendations

1.That all manifests should be registered on the Manifest Register.

2. That the registering of manifests should be on a sequential order according to number of voyages.

3. That the Manifest Register should be reviewed for its completeness by the Supervisor of the Border Unit on a regular basis.

2.  Releasing of goods without warrant number

In the manifest register, there were 304 items released without a closing off with warrant numbers. These items included vehicles, loose bulks and containers. This is a noncompliance with the Customs and Excise Management Regulations, (CEMR), 2008.

Recommendations

4. That an appropriate disciplinary action should be imposed upon the responsible officers for their failure to complete the register and comply with Regulation 4 of the CEMR 2008 and the system in place is followed.

3.  Allowing to pay auction goods by instalment

The allowing of auction goods to pay by instalments is not in line with the requirement of Regulation 140 (3) of the CEMR 2008 which states that Where goods are sold at Customs auction, … that any goods sold shall be paid for within 1 day, otherwise the sale shall be forfeited”.

Recommendations

5. That the approval of the auction goods to pay by instalment contradicted the above stated Regulation thus, should not be allowed.

4.  Attendant Fees

The attendant fees to Customs warehouses for the period October 2016 – February 2017 were not yet prepared and delivered and this was totalled $7,700.00. Also, attendant fees in arrears as of the end of February 2017 was $394,460.00: Airlines $393,240.00; Cargoes $540.00; and Warehouses $680.00.

Recommendations

6. That all outstanding attendant fees yet to be prepared and delivered are to be prepared and delivered immediately.

7. That all special attendance taken should be billing on a timely basis.

8. That an appropriate action should be taken to ensure that all outstanding arrears are paid on a timely basis.

9. That the monthly report of arrears of revenue status should be submitted to the Secretary of Finance and the Auditor General on a timely basis

5.  Auction goods used by the Ministry

It was identified that three (3) tarpaulins was included in the public auction on 13th June, 2015 but was directed to put them aside for the use of the Ministry.

The risk of wrongfully releasing and using of auction goods increased in such situation.

Recommendations

10. That the above practice should be ceased immediately.

11. That the Ministry responsible for the due and tax of the 3 tarpaulins and should be registered on the Customs Assets Register.

6.   Transferring of Toyota Hilux Double Cap Van P.1653

The above mentioned Ministry’s vehicle was directed by the then Minister of Revenue to re-locate to the Head Office, Railway Road, and later received an advice in writing that it is transferred to the Branch of the Ministry of Infrastructure in ‘Eua.

Recommendations

12. That the above practice should be ceased immediately and that the Government Assets Disposal Committee should be informed immediately.

 8. Ministry of Police

Period Covered: July 2014 – October 2016 (28 months)

1.   Revenue

Late banking was a follow up issue from the previous audit.  We noted that this issue still continue to exist in several sections of the Ministry.  For example, cash collected were kept at Arm License Division for more than a month before being deposited to the Head Office for banking.

The risk of misusing of public revenue increased in the situations of late banking of revenues.

Recommendations

1. That all revenue collected at all sections of the Ministry is to be deposited to the Head Office on a timely basis in accordance to the approved practice of the Ministry.

2. That Leaving of revenue longer then accepted at any receiving section of the Ministry be avoided at all times.  A regular follow-up procedure by Head Office is to be established and be followed.

Ministry’s response

Agreed and action made to register police record issued to the public and properly monitored by the supervisor appropriate remedial action will be taken.

2.  Telephones register

There are 66 official telephone numbers registered in the telephone register book. However, 3 telephone numbers were excluded in the register.

Incomplete telephone register increased the risk of the Ministry’s paying for a telephone line that is not official.

Recommendations

3. That telephone number registered book is to be updated recording by the receptionist to ensure that the Office only pay for the official telephone lines only.

4. That the Chief Accountant is to reviewed the telephone registered book regularly.

Ministry’s response

Agreed and appropriate remedial action will be taken.

3.  Financial Records

The Department failed to completely keep it’s expenditure vouchers as instructed by Instruction No.107(2) of the PFMA Treasury Instruction 2010. There were 15 expenditure vouchers to a total amount of $22,104.51 were not filed. The risk of unaccounted expenditures increased in this situation.

Recommendations

5. That all financial records be completed and properly kept at all times.

6. That the responsible Deputy Commissioner of Police should closely supervise and make sure that all financial records are completely filed at the Office at all times.

Ministry’s response

Agreed and appropriate remedial action will be taken.

4.  Electricity

Old Community Police Building at Mu’a electricity monthly rental is still paid by the Ministry without occupying it, which is “just an overlooking the bills”.

Recommendations

7. That the Ministry is to immediately take the appropriate action to terminate the rental electricity bills for the old building which not occupied by the Police anymore and also the payment for Mu’a Community Police Post electricity.

8. That Chief Accountant is to follow-up and ensure that these electricity bills are no longer paid by the Ministry

Ministry’s response

Agreed and appropriate remedial action will be taken.

5.  Fixed Assets Register

Fixed Assets Register was not updated and recorded properly as required by the Instruction No.79(1) of the Public Finance Management Act (Treasury Instructions) 2010.

Failure to update the fixed assets register increased the risk of unaccounted and misusing of the Ministry’s assets (evident in next item).

Recommendations

9. That the Ministry’s Officer-in-Charge of assets, Mr Tafa, should update and record all assets that belong to the Ministry in the Fixed Asset Register.

10. That the Chief Accountant is to review the Fixed Asset Register on a regular basis.

Ministry’s response

Agreed and appropriate remedial action will be taken.

6.  Unauthorized taking home of Government Assets

One officer took home one Ministry’s fridge from Mu’a Police station and one officer took home one Ministry’s camera from Head Office.

Recommendations

11. That responsible officers be severely discipline for taking government asset and use for personnel purposes.

12. That this practiced be ceased immediately.

13. That both assets are to be return immediately to the Ministry and to inform the Audit.

Ministry’s response

Agreed and appropriate remedial action will be taken.

7.   Asset Received Register

No record kept by the Ministry that ensure that all assets paid for were actually received by the Ministry. There was one asset being fully paid for but yet to be delivered received by the Ministry.

Audit Recommendations

14. That the Ministry is to follow the position of this weed eater and to inform the Audit.

15. That a goods and services receiving register be immediately established and maintained.

Ministry’s response

Agreed and appropriate remedial action will be taken.

8.  Missing Assets

A generator at Houma Police Station was not located during the audit.

Audit Recommendations

16. That the Ministry is to immediately investigate of whereabouts and report the missing generator.

17. That anyone involved in missing of generator should discipline immediately.

18. That Chief Accountant ensure that asset count carried out regularly and to investigate and report any missing asset immediately.

Ministry’s response

Agreed and appropriate remedial action will be taken.

9.  Avoiding Procurement

There were two (2) renovations at the Police Department conducted without followed the procurement procedure by splitting the amounts to be under the threshold; (i) renovation of Forensic Department, $14,720.00 and renovation of Barrack at PTC totalled $14,087.50.

Recommendations

19. That the practice of avoiding the procurement regulations is to be stopped immediately.

Ministry’s response

       Agreed and appropriate remedial action will be taken.

10. Fail to properly and completely recorded Log Books

Similar to the previous audit, log books were still not properly recorded and updated.

Recommendations

20. That all authorized drivers should update the log book every time an official travel is made.

21. That the Chief Accountant shall review the log books on a regular basis and sign as evidence of the review.

Ministry’s response

Agreed and appropriate remedial action will be taken.

11. Traffic Dockets – Storeroom

Missing of ninety one (91) traffic dockets from the storeroom during the stock taking carried out.

The risk of unofficially using of these dockets for personal benefits increased.

Recommendations

22. The Responsible Officer at the store room update the traffic docket registered book at all times.

23. That the staff of Traffic Division should follow the accepted practice for issuing of dockets and complete signatory at the registered book.

Ministry’s response

Agreed and appropriate remedial action will be taken.

 12. Late Banking – Bailiff Division

The revenue collected by the Division was late banked.  It was kept at the Office at the average of 3 to 35 days before banking.

Recommendations

24. That all revenue collected at Bailiff Division be deposited to the Head Office on a timely basis in accordance to the approved practice of the Ministry.

25. That a regular follow-up procedure by Head Office is to be established and followed.

Ministry’s response

Agreed and appropriate remedial action will be taken.

13.  Arrears of revenue

There is no recovery procedure implemented to collect the long outstanding arrears.  Detailed below a summary of the total arrears for the audited period. 

Year

Amount

2014

 $          74,350.00

2015

 $          75,770.00

2016

 $          67,788.00

TOTAL

 $        217,908.00

  (Source:   Ministry’s Bailiff Division)

Recommendations

26. That the Head of Division for Bailiff should prepared the monthly report of arrears for management decision.

Ministry’s response:

Agreed and appropriate remedial action will be taken.

9. Ministry of Education and Training (MoET)

Period Covered: July 2014 – October 2016 (28 months)

 1.  Revenue collected were not paid-in to the Bank

 During this period, the MoET’s revenue was collected by the Ministry of Finance and National Planning (MoFNP). Hence, the revenue was directly transferred internally to the Treasury’s cashier on daily basis for its daily operation and not firstly deposited to the bank in compliance with the Treasury Instruction 2010; Instruction 47(8), “Public money shall not be used in any way whatsoever between the time of receiving the money and the time of depositing it to the Bank

Recommendations

1. We recommend that all revenue collected by the Ministry be paid-in to the Bank on a daily basis.

2.  Textbook pin cards were not updated

The Account Division failed to update the textbooks’ pin cards and performed the stock taking on a regular basis to ensure the existence and completeness of stock of textbooks. The risk of missing textbooks and unaccounted revenue increased because of such failure. This is also failure to comply with Instruction 82 of Treasury Instruction 2010; “Accountable Officer shall be responsible for the overall supervision of the assets stock take and ensure that proper system is in place to carry out stock taking in efficient and effective manner”.

Recommendations

2.  That pin cards should be updated and initialled by the responsible officer when issuing out textbooks.

3.  That the process of stock taking and the issuing of textbooks should be reviewed by the Supervisor of the Account on a regular basis.

3.  No Register of Revenue Arrears

In the MoET, the register for the arrears of revenue is not maintained. In particular, this would the register for school fees remain outstanding at a particular time hence, the risk of not being aware of the revenue loss in unpaid school fees increased as a result. And this is non-compliance with Instruction 75(1) of the Treasury Instruction 2010 that “Each MDA shall maintain an Arrears of Revenue Register or an accounts receivable ledger for licenses, debts, Court fees and other government or MDA revenue receivable”. 

Recommendations

4. That an Arrears of Revenue Register should be created immediately and to be updated at all times and to be regularly reviewed by the Accounting Officer.

4.  No Salary and Wages Registers

There is no register for salaries and wages as required by Instruction 38 of the Treasury Instructions 2010 that “MDA shall keep a complete and updated Salary and Wages Registers containing the relevant details regarding the employee’s salary and wages details.

The risk of not being able to be updated certain of the completeness with correct values of the Ministry’s salaries and wages throughout the year is increased when this very crucial record is ignored to be established and maintained.

Recommendations

5. That a salary and wages register of all staff of the Ministry is to be created and maintained at the Head Office at all times.

6. That the format should be referred to format issued by the MoFNP.

7. That an Independent Officer should be assigned by the Accountable Officer to regularly review the salary and wages register.

5.  Paid out of Grants to Non-Government Schools without audited

Fund for grants for Non-Government Schools [Secondary (2014, 2015, & 2016) and Technical, Vocational Education and Training (TVET) Tertiary Institutions (semester 1 & 2 2015 and semester 1 2016)] were paid out without being submitted the respective financial statements to us to be audited. And this is a non-compliance with the standard Government policy and procedures as expressly given in the CD No. 782 of 16 September, 2009. The risk of detecting and correcting over-payments and under-payments was increased when forgoing the auditing process.

Recommendations

8. That the MoET is to provide the financial statements for the grants that already paid out but yet to be audited to the Audit to be audited immediately before any payment.

9. That MoET is to follow and comply with the grants policy and procedures.

6.  Fixed Asset Register was not updated and reviewed

It was found that Fixed Assets Register (FAR) was not updated, maintained and reviewed in accordance with requirements of the Instructions 79(4), (a &b) of the Treasury Instructions 2010.  In that Instructions, it required the Accountable Officer to be responsible for the accuracy and the complete updating of the FAR.  Further, it also required the Accountable Officer to review the register on a quarterly basis.

Recommendations

10. That the FAR should be updated by the responsible Officer at all times.

11. That the FAR should be reviewed by an independent senior officer or the Accountable Officer on the quarterly basis.

7.   Assets not located during stock-take

Assets were not located at their respective location at the time of stock taking. The risk of not timely knowing and appropriate investigating missing assets is increased when the assets register is not regularly reviewed.

Date of purchase

Type

Model or identification number

Purchase Price

9/03/2016

Table

meeting table 2400x1200 D-End

$1,129.23

14/04/2016

Steel Flat

100x12mmx6 mtr. 6300

4,453.22

14/04/2016

Steel Flat

50x5mmx6mtr 6300

629.23

14/04/2016

Diameter

12mmdiameterx4mtr 6300

924.83

30/05/2016

Mulch master cut

EXP Mulch master cut 560-2 Str (XMSP562)

3,520.00

25/10/2015

Rewinding motor

power saw machine

650.00

19/08/2015

PCU

PCU for MP2501

1,266.86

15/06/2016

circular saw

Makita circular saw 0235mm 200m

557.58

1/06/2016

Master cut

EXP Mulch Master cut 560-2 Str 

3,060.87

1/06/2016

Brush cutter

brush cutter SRM 265ESL

1,373.91

 

Recommendations

12. That the Ministry is to immediately investigate and report of the whereabouts of the missing assets on the table above.

13. That if an employee involved should be subject to disciplinary immediately.

14. That the Supervisor of the Account should ensure that the counting of assets are carried out regularly.

8.  Assets paid for but yet to be obtained

There are assets already paid for but yet to be received by the Ministry;

  • Purchase Order No. PO-036034 is a Tractor disk costed $1,800.00 for Tonga College

  • Two (2) steps ladder costed $1,560 for Tonga Institute of Science and Technology.

Recommendations

15. That the Ministry is to follow the status of the abovementioned assets and report to the CEO-MoFNP and the Auditor General.

16. That a goods and services receiving register be immediately established and maintained at the Ministry.

9.  Failed to properly and completely recorded Log Books

Similar to the previous audit and report, log books were still not properly and completely recorded and updated. The risk of not detecting misuse of the Ministries vehicles and fuels increased when log books are not completed.

Recommendations

17. This is a continued breach of duty of the Ministry’s Vehicles Supervisor and Drivers hence, they should be appropriately disciplined and warned to completely fill the log books and be updatedly maintained.

18. That the Supervisor of Account shall review all log books on a regular basis and sign as evidence of the reviewed.

10. Using false “P” plate number

The tractor donated by the Tonga College (TC) Old Boys for Tonga College has yet to be registered at the Ministry of Infrastructure as a government vehicles. However, a P plate (P365 probably of an old government vehicle) is fixed to the tractor only for the purpose of refill from the College’s budget.

Recommendations

19. That the above practice should be ceased immediately.

20. That the Principal of Tonga College should ensure that the Tractor is licensed as the College’s assets.

21. That the Supervisor of the Account should ensure that the above action is carried out.

 

9.1 Ministry of Education, (MoET): Technical & Vocational Education Training (TVET) Grant to Non-Government Institutions

Firstly in according to the standard practice of this grant, the MoET is to submit to us the financial statements and documentation of an Approved TVET Institution to be audited. Consequently, the TVET grant we audited is subject to the submitted financial statements from the MoET.

We received from the MoET and completed the audit of the TVET grant for the Roman Catholic Church Technical Institutes. The details of the submitted semesters and granted amount are as follows:

  1. Monfort Technical Institute:   semester 1, 2016 – $39,000.00;
  2. St Joseph Business College:   semester 1, 2016 – $71,400; and
  3. ‘Ahopanilolo Technical Institute:   semester 1, 2016 – $112,200.00.

It was raised and reported that for all the above Institutes, we received and audited the semester 1, 2016 however semester 2, 2015 and semester 2, 2016 are yet to be submitted to us to be audited.

Recommendations

22. That the MoET is to ensure that all outstanding grants be submitted to be audited before the next grant distributed.

23. That the MoET counts (of number of students) be followed the procedures provided by the related Cabinet Decisions; and

24. That the MoET is to ensure that every TVET schools submit their statements on a timely basis.

 

9.2 Ministry of Education and Training: Financial Grants to Non-Government Schools

Similarly to the TVET Grant mentioned above, item, 3.3.9.1, the audit is limited to submitted financial statements from the MoET only.

The Non-Government Secondary/High Schools financial statements received from the MoET and audited during the year are as follows:

  1. Tailulu College, Tongatapu, year 2015 – $227,600.00; and year 2016  – $238,300.00;
  2. Tailulu College, Vava’u, year 2016 – $84,000.00; and
  3. Tailulu College, Ha’apai, year 2016  – $27,600.00.

 10. Ministry of Infrastructure (MoI)

Period Covered: February 2015 – February 2017 (25 months)

1.  The completeness of cash received was confirmed however, there were occasions of delayed depositing cash receipts to the bank

Some of the receipted money at the Land Transport Division of the Ministry have been delayed depositing to the bank, and time lapsed from receipting to banking range from 6 days, ($100.00) to over 4 months, ($1,260.00). The biggest amount was $2,145.00 was delayed banking for 8 days.

Recommendations

1. That the Supervisor of Accounts should be ensured that all cash and cash records are diligently examined before and after banking.

2. That the Accountable Officer should ensure that the Officer assigned to carry out the independent checking can do it properly and regularly.

3. That the Accountable Officer should regularly reviewed the process of independent checking.

4. That these are breaches of discipline and the officer concerned to be appropriate disciplined.

Ministry’s response

We obtained the representation of the Officer concerned and just admitted that he overlooked the delayed depositing of those amounts, even though the evidence declined to validate it.

2.  Incomplete records of cash book and Independent Checking was not carefully performed

Posting of receipts into the Cash Books were not properly and completely carried out. There was no supervision hence, lacked independent checking.

Recommendations

5. That the Responsible Officer should be warned to ensure that she performed her duty to the standard required.

6. That the Responsible Officer should be closely supervised by the Supervisor of the Account and to review all cash records on a regular basis.

7. That a proper Officer should be assigned to carry out the crucial function of independent checking.

3.  Failure to comply with Revenue Arrears Instructions – (i) Civil Aviation

It was found that the Civil Aviation Division (CAD) has substantial amount of government revenue is yet to be collected on its deal with Mr Tevita Palu of Palu Aviation regarding the aircraft Y-12 hence, failure to comply with the followings:

  • Failure to maintain Arrears of Revenue Register

  • Failure to follow-up overdue revenue arrears

  • Failure to prepare and submit a monthly report on overdue revenue arrears

  • Failure of the Accountable Officer to review revenue arrears on a monthly basis and report to the MoFNP not later than the 10th of the following month

Recommendations

8. That the Revenue Arrears Register should be maintained at the Office at all times.

9. That the recovery procedures of overdue revenue arrears should be carried out and to be reviewed by the Accountable Officer on a monthly basis.

10. That the monthly revenue arrears report should be submitted to the MoFNP and the Auditor General.

4.  Marine & Ports Division Arrears of Revenue

Summary of arrears of revenue recovered and arrears of revenue incurred during the audited period.

Statement of Revenue Arrears as at 31 March 2017

$

Opening Balance

130,572.57

Add Revenue Arrears incurred during the audited period

591,602.21

Total Arrears of Revenue

722,174.78

Less Revenue Arrears recovered during the audited period

204,930.90

Balance

517,243.88

 

Recommendations

11. That the responsible officer should take the necessary action to recover the outstanding arrears immediately.

12. That the management should ensure that the Ministry collects its revenue on a timely basis.

13. That the Management should ensure the reviewing of the arrears monthly report is carried out and submit to Treasury and Audit Office no later than the 10th of the month following.

5.  Government Assets Management by the Ministry

5.1 Completeness of goods and services paid for were confirmed received

For a big Ministry and its nature, there is no audit trial in the Office’s record confirming that all goods and services paid for were all actually received.

Recommendations

14. That a proper Goods Received register should be in place to ensure the completeness of goods received and the Supervisor of Account should ensure that the above procedures are carried out on a timely basis

Ministry’s response

The Finance Division have implemented a register to start registering of these goods.

5.2 Fixed Asset Register was not update

The Ministry’s Fixed Asset Register was not updated.  There were assets identified as the Ministry’s but they were not on the Fixed Assets Register.

Recommendations

15. That the Accountable Officer should ensure that a proper system in place to timely and completely account all government assets into the Fixed Assets Register.

16. That the Supervisor of Accounts should review the Assets Register on a regular basis.

17. That the Supervisor of the Account should ensure that the above action is carried out.

Ministry’s response

Agreed and they will look into this.

 5.3 Unreturned Mobile Phones paid for by the Ministry

An iPhone 7 costed $2,299.00 bought by the Ministry for the previous Minister, Mr ‘Etuate Lavulavu, and a Samsung S7, costed $1,699.00 for the current Minister, Hon Semisi Sika, were not returned (‘Etuate Lavulavu) or gone missing in New Zealand (Hon Semisi Sika).

Recommendations

18. That a proper system should be established to ensure that any government assets used by a Minister should be left behind when their appointment terminated.

19. That the Accountable Officer should report to the MoFNP (Government Assets Disposal Committee) and the Auditor General on a timely basis any unreturned and/or missing assets.

20. That a proper action should be taken against the responsible Ministers to ensure that they are liable for the missing government assets.

Ministry’s response

Mr ‘Etuate Lavulavu required the serial number of the iPhone 7 but he recalled his memory it was gone missing.

 A response from the Minister himself, Hon Semisi Sika, he said that he bought a new phone, Samsung Edge which is better than what the Ministry have bought for him.

5.4 Removing Government Assets from the Government Quarter No.81

Assets were purchased for Government Quarter No.81 to be used by the Prime Minister (PM) were no longer at the Quarter No.81, when the audit inspection was carried out.  These assets were funded from the National Emergency Fund, total costs $14,670.48.

  • 1 King size bed

  • 1 Queen size bed

  • 1 Gas Stove Burner

  • 1 Dinning Set

  • 1 Sofa Set

  • 1 Regulator Set

  • 1 Top Loader 9.5kg Washing Machine

  • 1 Fridge/Freezer, Haier 335L Fridge/TOP Freezer HRF 335F

 Recommendations

21. That these assets should be made available for inspection as soon as possible.

22. That these assets should be reported to the Government Assets Disposal Committee for appropriate action.

Follow-up Actions:   Since these assets were for the direct use of the Prime Minister and his family at Quarter 81, we insisted on appropriately accounted for these assets and to be processed through the Government Assets Disposal Committee if they are to be disposed of. We were referred to the Prime Minister’s Office, PMO, for they handled the issue.

The above report to the MoI was dated and delivered 22nd June, 2017. The opportunity given to the Audit to physically inspect these assets, together with officer from the PMO, was on Monday 9th October, 2017 and the positions were as follows:

  • King size bed was at the Prime Minister’s residence, Hala’ovave,
  • Washing Machine was explained to have been broken down and already being disposed of,
  • Dining set was at the garage of Quarter 81 (appeared worn out),
  • The rest were stored at the Fa’onelua Convention Centre building.

The above is a noncompliance with the instructions 79, 82, and 84 of the Treasury Instructions 2010.

Once again, we strongly recommend to immediately carry out the appropriate processing for the disposal of the above Government’s assets through the Government Assets Disposal Committee including disciplinary measure for the responsible officers failed to comply with the Treasury Instructions mentioned above, especially removing the assets from Quarter 81and the recovery of the removed assets values.

6.  Staff were not signed on and off on Attendance Register

There were fifty-eight (58) staff did not sign on and off in the attendance register as required by Instructions 2A.2(1) of the Public Service Policy Instruction 2010 (PSP1) 2010(1) which states that the: “Attendance records shall record the name of all employees, the time of arrival at work and the time the employee left work”. And Instructions 2A.3(1) required that “(1) All employees are required to record their attendance when reporting for duty”.  The risk of not detecting absence from work and slacked supervision increased with such inattentive attitude.

Recommendations

23. That all who failed to sign on and off on the Attendance Register shall not be paid on those days.

24. That an appropriate action should be taken against those officers.

25. That any further supporting documents provided for the confirmation of their attendance at work shall be submitted to the PSC for approval as other means of attendance record.

7. Records related to the usage of the Ministry’s Quarry were not properly and not completely kept

The Ministry failed to have properly and completely documented the usage of the quarry products since the Ministry leased the quarry from ‘Akanesi Moa on 14 May, 2015 to January 2017. We were explained that the crush corals were removed from Pelehake quarry and stock at Ministry’s compound at Vaolōloa, convenient for its road maintenance works. However, there were no appropriate records detailing the flow of quantities for road maintenance and being sold to the public.

Recommendations

26. That the Head of Division should ensure that the proper documentation of the usage of quarry’s products is established and kept at Office at all times.

27. That all documentations refer to on recommendation (1) above should be reviewed by a Senior Officer on a regular basis.

28. That an initial of the Supervisor should be made on those documents as an evidence.

29. That a weekly report relating with the usage of the quarry’s products should be made and submitted to the Head of Division.

Ministry’s response

Agreed and improvement to the records in this important area is already progress.

8.  Job Cards are not completely kept – Machinery Pool

Job Cards of all jobs at the Machinery Pools are not completely kept at the Office. The risk of not completely accounted for all jobs and collected the total amount of revenue increased in such a situation.

Recommendations

30. That the allowing of customers to carry Division’s job cards should be ceased immediately.

31. That a proper procedure should be implement to avoid customers from accessing to the Divisions’ records.

32. That jobs records should be reviewed by a Senior Officer on a regular basis.

 11 Ministry of Lands, Survey & Natural Resources (MLSNR)

Period Covered: February 2015 – July 2016 (18 months)

Follow-ups from previous audit

1.1   Airport Land Lease

No action has been made against the un-collected poundage fees (10%) of the Airport land lease paid to the estate holder and the recommendation is repeated.

Recommendations

1. That the MLSNR should liaise with the MoFNP for appropriate action to be taken to recover the above revenue arrears.

 Ministry’s response

The above transaction was not gone through the MLSNR, but it was gone through the Ministry of Finance and National Planning (MOFNP). However, the MLSNR will follow up and report on the status. (So far, the Auditor General has not received any follow up report on the issue)

1.2 Equipment were allegedly stolen

One (1) laptop had been recovered from three (3) laptops and one (1) computer screen being stolen. According to the information received that the Ministry of Police informed the Geology Division at Vaolōloa that the one laptop had been recovered where the rest are still unidentified.  However, there was no further information received regarding the latest status of the Police investigation.

Still with the Ministry of Police.

2. Two pages of the Cash Book were torn off

The Accounts Section failed to inform the CEO regarding the damaged of these (2) pages of the cash book.

Recommendations

2. That all losses and damages to receipt books and other revenue recording forms should be notified the Secretary for Finance immediately and this is a failure on the part of the Ministry.

3. Three percentage (3%) of withholding tax were not collected

The Tonga Airport Limited (TAL) paid its land leases during the audited period where the withholding taxes (3%) were not collected.

Recommendations

3. That the total amount of outstanding withholding tax of $10,823.96 on paid lease of land should be recovered immediately.

4. That the responsible officer should ensure that all taxes should be collected on a timely basis.

5. That the supervisor of accounts should review revenue collected to ensure that all public money collected on a timely basis.

4. Sales of Sand – Failure to update the Revenue Register

The un-updated of the revenue register is not complying with the requirements of Instructions 58 (4) of the Treasury Instructions 2010. Actually, the register maintained at the Natural Resources Division was not consistent with the records kept at the Head Office; the quantity recorded on the delivery dockets and the amount receipted.

The risk of undetected leakages of revenue due to unreconciled revenue records increased.

Recommendations

6. That the revenue register should be updated at all times.

7. That the reconciliation processed should be taken on a regular basis.

5. Rate and fees for hiring heavy machinery were yet to be approved

The rate used by the Ministry to charge for hiring of Loader and Excavator are yet to be endorsed and approved as per Treasury Instructions.

Recommendations

8. That the rate for hiring the Ministry’s loader and excavator should be endorsed and approved by the MoFNP now and to be used into the future.

6. Overtime – Lack of independent checking by supervisor of overtime

It was confirmed there were differences between the attendance record and the time sheets, showing that the independent checking was not carried out.

Recommendations

9. That a supervisor to be assigned to ensure that overtime worked and documents are properly prepared and approved.

7. Revenue Arrears – Failure of the MLSNR to submit a monthly report on the arrears of revenue

The MLSNR failed to submit its monthly report on the arrears of revenue to the MoFNP and the Auditor General as per Treasury Instructions 2010.

Recommendations

10. That revenue arrears report should be prepared on a monthly basis and submitted to the Secretary for Finance and the Auditor General.11.  

That a Senior Officer should be assigned by the MLSNR to ensure that the monthly report on revenue arrears are prepared and submitted as instructed.

Ministry’s response

Agreed and will work on it.

 12 Ministry of Meteorology, Energy, Information, Disaster Management, Environment, Communications and Climate Change (MEIDECC)

Period Covered: June 2014 – June 2016 (24 months)

1. Late banking and no independent checking

Late banking was commonly practiced at the Ministry during the audited period. No independent checking of cash records before and immediately after banking was still non-existence. Both late banking and no independent checking still existed as in the prior audit with no improvement at all.

The range of late banking was from 2 days, $1,817.00 to 35 days, $19,568.10. The greatest amount was $266,511.63 was held for 10 days before being deposited in February/March 2015 for 2014 – 15, and $327,777.63 in February 2016 for 2015 – 16 financial year.

The risk of using the public funds for personal purposes before being recovered and deposited to the bank increased, and is very high risk.

Recommendations

1. That a written representation of the responsible officer is to be submitted to the Auditor General within fourteen days from the date of this Management Letter regarding with his failure to comply with the Treasury Instructions 2010.

2. That a failure to submit his responses as per the recommendation (1) above, then an appropriate disciplinary action should be made against him in relation to his failure to comply with Treasury Instruction 2010.

3. That a proper training of staff should be made regarding the requirements of the Treasury Instructions 2010.

4. That the allowing of a daily paid labourer to be a revenue collector should be ceased immediately.

5. That the independent checking should be carried out before and immediately after the banking.

6. That the Head of Division should ensure that all money collected are paid in on timely basis.

Ministry’s responses

After the last audit, the Ministry appointed a new Deputy CEO as Head of the Corporate Division in August 2014, with the aim “to make sure that the Ministry complies with all financial instructions and to assist with the smooth operations of the Division. However, he contributed to the persistent of this material weakness.

 A daily paid labourer was appointed for the revenue collection tasks which is contrary to the Financial Directions and Treasury Instructions.

 Staff explained that they do not aware of the Treasury Instructions, etc., and do not have any appropriate training.

2. No proper handover of Government assets

No proper handover being made and filed when the Tonga Weekly Newspaper (TWN) was privatized in December 2014.  There was no records kept at the Ministry detailing all assets and receipts transferred with the TWN.

Recommendations

7. That any future handover of Government assets shall be properly documented and the Head of the Corporate Division should ensure that all handover records are properly filed at Office at all times.

3. Two official receipt book (Cash Sales Dockets) gone missing

Two (2) cash sale docket booklets, (CSD), used by the TWN were gone mission:

  • No.116401 – No.116450
  • No.116451 – No.116500

A total of 500 dockets however, we were able to verify that 425 dockets were accounted for in the cash book and deposited to the bank, totalled $6,729.80. There were 75 dockets unaccounted for in the cash book and totally missed out from the Ministry’s record, dockets 116447A – 116450E and 116489A – 116500E.

The risk of missing/misused of public fund increased in these situations.

Recommendations

8. That Head of Division should submit his written representation regarding the missing of the two (2) CSD books within 14 days from the date of this letter and be appropriately discipline for his failure to ensure that all revenue receipts are safely kept at Office and to account for the 75 unaccounted CSDs.

Ministry’s response

The officers of the Ministry being aware of the missing cash sale docket booklets with no appropriate action being taken.

4. No Senior Officer assigned to review vehicles’ log-book

No Senior Officer performed the reviewing of the Ministry’s vehicles log books as required by Instructions 90(6) of the Public Finance Management Act (Treasury Instructions) 2010 (TI2010).

The risk of misusing of Government’s vehicles without being detected and corrected increased.

Recommendations

9. That the responsible senior officer should be assigned to carry out the reviewing of vehicles log books on a regular basis.

10. That the Accountable Officer shall ensure that the related Policy 14 of the Public Service Commission Policy Manual are duly adhered to.

 13. Ministry of Fisheries

Period Covered: June 2014 – June 2016 (25 months) 

1. Late Banking

We identified late banking during the audited period, June 2014 – June 2016.

The risk of public fund vulnerable to be misappropriated increased.

Recommendations

1. That all cash collected should be paid in to the bank in accordance with the requirement of Treasury Instructions, clause 25, and the Supervisor of the Account should ensure that all revenue collected are paid in to bank as required.

Ministry’s response

Agreed and will act on the recommendation.

2. Revenue

There was no approved rate for selling the Department’s produces and products; hiring of aquarium tanks, posters and brochure, reference letters, and sales of aquaculture. Pricing of those produces and products was carried out by the responsible officer, which would be subject to personal judgements and inconsistencies at times.

In complying with Treasury Instructions, the Ministry is to submit to the Secretary for Finance the proposed rates for review and endorsements and to the Competent Authority for that particular good, work, or service.

Recommendations

2. That all cash collected should be paid in to the bank in accordance with the requirement of Treasury Instructions, clause 25, and the Supervisor of the Account should ensure that all revenue collected are paid in to bank as required.

Ministry’s response

Agreed and have acted by submitted to the Secretary for Finance the “proposed rates for the hire of goods, works and services”. Also, currently reviewing the Fisheries Act and Regulations whether it would be appropriate for amendments by including the approved rates.

3. Sign on and off on the Attendance Register

Certain officers (one Fisheries Officer and 2 daily labourers) did not completely signed on and off in the Attendance Register as well as there is no evident of reviewing of the staff attendance by a supervisor.

Recommendations

3. That a disciplinary action should be taken against the concerned officers for not completely signed on the Attendance Register and that a Senior Officer should be assigned as a Supervisor to responsible for reviewing the staff attendance from the Attendance Register.

Ministry’s response

Agreed, and the officers concerned has been warned. Also, a Senior Officer from the Corporate Services Division has been assigned with the responsibility of review the Attendance Register on daily basis.

4. Arrears of Revenue

The Department failed to account and report revenue arrears as instructed by the Instruction 77 of the Treasury Instruction 2010.

Recommendations

4. That the revenue arrears report should be submitted to Secretary for Finance and the Auditor General as per required by the stated Instructions above.

5. That the Account officer should liaise with liable individual for the settlement of the revenue arrears.

Ministry’s response

Agreed, and have commenced reporting of the revenue arrears to the Secretary for Finance and the Auditor General as per Instructions. Also, recovery procedures and follow up of the existing arrears have commenced.

5. Timely registering of assets

The Department’s assets were not recorded to the register on a timely fashion.

Recommendations

6. That the account section and the responsible officer should be worked together to timely recorded all Department’s assets.

7. That an independent Senior Officer should be assigned to review the Assets Register on a regular basis.

Ministry’s response

Agreed and the Head of the Corporate Services Division has been assigned with the task of review the Assets Register and log books of all the Division vehicles.

14. Follow-up audit: Ministry of Infrastructure, (MoI), Vava’u Branch, audit of the period: October 2013 – September 2015)

A follow up audit carried out in September 2016 of the MoI Branch at Vava’u in regards to material issues raised in the audit of the Branch for the period October 2013 to September 2015. This follow up audit was carried out after about twelve (12) months from the previous audit.

The recommendations we issued in the audit and the positions of the Branch in the follow up audit are summarized as follows:

1. Vehicles’ Annual Examination Stickers & Quarterly Stickers

Audit follow up an issue of no register for vehicles’ annual examination stickers & quarterly stickers kept and filed at the Ministry of Infrastructure, Vava’u Branch.

Recommendations

1. That the Ministry ensures that MOI Vava’u register for the annual examinations of motor vehicles and issuing of registration stickers is updated immediately and to maintain an updated register at all times.

2. That the OIC of MOI Vava’u (and Head of Accounts of the Ministry) ensures appropriate segregation of duty is in place in this processing and issuing of the stickers, maintaining of the register, and receiving of fees in order to avoid and/or detect any irregularity that may occur in this account area

MoI – Vava’u Branch position

The Branch is already in progress with appropriate actions to update the registers, one staff has been added to the section, and one locker room has been identified for the storage of stickers and registers and the OIC is responsible for the keys.

2. Number Plates for Motor Vehicles

No register was kept and filed at the Ministry of Infrastructure – Vava’u branch for number plates for Motor Vehicle

Recommendations

3. That the Ministry and OIC Vava’u ensure that an appropriate register is established and appropriately maintained for the number plates

4. That the OIC of MOI Vava’u (and Head of Accounts of the Ministry) ensures that there is segregation of duties in safeguarding, process, and issue of number plates in order to avoid and/or detect any irregularity that may occur in this account area.

5. That the OIC of MOI Vava’u ensures that the number plates are stated in a secure location with access limited to authorized personnel only.

MOI – Vava’u Branch position

Register book for number plated was established and properly maintained. The OIC sighted the receipts and signed the registered book before issuing number plates or registration stickers and number plates are securely stored.

3. Daily Paid Labourers Wages

MOI Vava’u did not keep the complete attendance records of some of the daily paid labourers, therefore cannot enable audit to verify the validity of employment of those officers.

Recommendations

6. Attendance Register is to be properly kept at MOI Vava’u and the signing on and off should be monitored by responsible officer.

MOI – Vava’u Branch

The Branch have kept an Attendance Register which updated and that signing on and off are continuously monitored.

4. Reconciliation with Sub-Treasury

Monthly reconciliation of the Vote Book with Sub Treasury Vava’u is not consistently carried out.

Recommendations

7. That monthly reconciliation of Vote Book with Sub-Treasury’s be consistently carried out and the OIC be responsible for the reviews of the Vote Book and reconciliation forms to ensure that monthly reconciliation of MOI Vava’u Vote Book with Sub Treasury’s Vote Book is properly done, and to sign the reconciliation forms as evidence that the review has been performed and to be completely filed.

MOI – Vava’u Branch position

However, during the follow up audit the Vote Book was not located.  The personnel involved with the task was away from the work at the time.  A letter was given to the Auditor General explaining the Vote Book is lost.  This issue is becoming a normal practice at this office. Thus, serious breached of discipline should be charge against responsible officers at this Office.

5. Commitment Book

No Commitment Book was kept at the Branch for recording commitments.

Recommendations

8. That the OIC ensures that the Branch maintains a Commitment Book for recording of all commitments.

MOI – Vava’u Branch position

Still no commitment book and no recording of the Branch commitments as per recommendation.

 

 6. Log Books

No log books were used for recording vehicle usage at the MOI Vava’u.

Recommendations

9. That the practice of not keeping  log books should ceased immediately and log books should be kept and updated at the Branch at all times

MOI – Vava’u Branch position

All vehicles do now keep log books and are recorded and updated.

7. Fixed Asset register not updated

Fixed Asset register were not properly completed and updated.

Audit follow up and found this to be carried out hence, the format as directed on Treasury Instructions 2010 is still not complied with.

Recommendations

10. That the MOI ensures that a proper and complete Fixed Asset Register be appropriately established and updated at all its branches, at all times and to include the minimum details for each item of asset in the register as required by the Treasury Instruction 2010.

MOI – Vava’u Branch position

Fixed assets register has been maintained and updated since June 2015. However, the detailed information required by the Treasury Instruction to be included in the register are incomplete.

 8. Accident of motor vehicle licensed P.1499

The OIC of MOI Vava’u at the time was the driver of the government motor vehicle licensed P1499 when involved in the road accident.

When audit did the follow up it found the vehicle has been fixed but there was no payment or spare parts received from the OIC. 

Recommendations

11. That the OIC of MOI Vava’u at the time who was the driver of P1499 when involved in the road accident, be severely disciplined for failure to immediately report and follow through the Government’s policy and procedures for Government vehicle on road accident.

12. That the OIC be charged with the total cost of repairs to bringing back the Government Vehicle P.1499 to its original state as before the accident.

MOI – Vava’u Branch position

According to the explanation from the OIC Machinery Pool, MOI Vava’u, the vehicle has been fixed but there was no payment or spare parts received from the OIC.

 Once again, the total cost of fixing the vehicle P1499 should be reimbursed by the OIC.

9. Dump truck, P.1705, fallen off a cliff at Feletoa village in November 2014 and is still there

The accident to the Government vehicle P1705 is yet to be reported and processed for written off.

Recommendations

13. That the accident to the Government’s vehicle (dump truck) P1705 be appropriately recorded by MOI and to use it as the basis for recommending to the Board of Survey/Ministry of Finance and National Planning for the writing-off this asset in accordance to Government standard procedures.

MOI – Vava’u Branch position

Still no record of the accident and the Dump Truck P1705 has yet to be disposed (following the proper procedures).

10. Cement Truck, P.1683

The cement truck P1683 of the branch was not reported by the OIC at the time of its broken down and no record of its hiring out, causes of its breaking down, and who is responsible.

Recommendations

14. That OIC of MOI Vava’u at the time Ms Sapate Toke, be severely disciplined for poor management and oversight lead to loss of Government Asset and Government Revenue.  She failed to have made a formal written agreement in the corrective actions in accordance with the public service policy when the truck broke down.

15. That immediate action to repair the truck and negotiate the cost with Mr Talivakaola of Vava’u Marine Services Ltd.

16. That all hiring should be maintained and updately recorded.

MOI – Vava’u Branch position

  • No appropriate action against Ms Sapate Toke due to cessation of her appointment;
  • No appropriate action for the cement truck, P1683;
  • The procedures for hiring of heavy machinery has been established; and
  • A register for hiring heavy machineries has been established but the monitoring of working hours times rates against the amounts paid are non-existence.

 11. No formal contract agreement for the dry hire of a Power Screen and Bitumen Spray Machines

No formal contract was in place for the dry hire of a Power Screen and Bitumen Spray Machines.

Recommendations

17. That the Ministry should confirm the status of the Government machineries and validate their current location with appropriate and formal agreement.

18. That fees should be calculated and to establish a recovery scheme to recover government revenue.

19. Disciplinary actions taken to MoI executive management that responsible to failure in establishing a formal agreement and be signed.

MOI – Vava’u Branch position

No action

 12. Pawn of a spare part of the Ministry’s excavator

Audit found that the OIC of the branch at the time sold an excavator’s spare part without proper authority.

Recommendations

20. That the OIC be severely disciplined for selling of the excavator’s spare part without the proper authority and using the proceed for personal purposes.

MOI – Vava’u Branch position

The Ministry internally disciplined the OIC, however the final consideration of the Public Service Commission due to the severity of the nature of this case was yet to finalize.

13. Record Keeping

There were no work plans and no job cards for major projects implemented by the branch.

Recommendations

21. That no job cards being timely prepared and filed by MOI Vava’u be very well noted as one major weakness arising from reckless practice.

22. That all OICs of the MOI Vava’u during the audit be appropriately disciplined for failure to have established and maintained job cards for all projects and jobs.

23. That MOI Vava’u be instructed to establish and maintain job cards for all projects for all its jobs and works, the standard practice of the Government and the Ministry’s accounting system and yet to have been terminated or even replaced.

24. That MOI Vava’u is to immediately plan its projects/major works, submit for consideration and approval in the proper channel and to completely file and maintained as part of the records of the Ministry.

MOI – Vava’u Branch position

Work plans for projects/major works by the branch have been prepared as well as Job cards have been established for all jobs as from July 2016 and kept by the Branch.

 14. Adverse Impacts of No records

Loss of approximately $32,780 of Government revenue due to flawed tally.

Recommendations

25. That the responsible officer be severely disciplined for this flaw tally resulted in the loss of the amount stated above.

26. That because there is no records (job cards in particular) especially from January to September 2015, the TOAG could not verify the number, the locations, materials, labor and overheads applied to each and every works/projects by the Branch.

MOI – Vava’u Branch position

The Public Service Commission is currently dealt with the disciplinary measure of the responsible officer.

 15. Special Audit

 Ministry of Education and Training:

Technical Vocational Education Training (TVET) Grant to the ‘Unuaki ‘o Tonga Royal Institute (UTRI);   1st Semester 2013, 2nd Semester 2014, and 1st Semester 2015

The audit found that numbers of students were included in the UTRI list of students for the 3 semesters above but were not studied at the UTRI at those times. They were included in the total number of students as the base for the payment of the TVET grant.

From the audit evidence, we concluded that the names of individuals claimed to have been studied at the UTRI during the 3 semesters above, (totalled 942 students equalled $565,200 less adjustment from prior period’s audit of $6,600.00 equalled to $558,600.00 paid), was excessively greater than the actual number of individuals that studied and paid their school/tuition fees (totalled 19 students amounted to $11,400.00) resulting in an overpayment of $553,800.00.

Moreover, the disbursements of the TVET grant fund by the UTRI were not complied with the TVET grant’s approved terms and conditions.

Recommendations

1. That the amount of $553,800.00 is to be reimbursed by the UTRI to the TVET fund.

2. That all the UTRI practices in relation to student registration/recruitment and exchanging of paying school/tuition fees with other arrangements be ceased immediately.

3. That the approval of any institute and course/s for the TVET grant purposes be complied with before any grant is paid.

4. That the case be referred to the Ministry of Police for possible further investigations.

5. That the Ministry of Education and Training ensures that the Statement of Income and Expenditure submitted by the approved TVET institutions is completed and signed as per Standard Income and Expenditure Statement Form. and

6. That the Ministry of Education and Training be pro-active in ensuring that the TVET Grant is expended in compliance with the TVET approved policy.

Positions of this case at the time of compiling this report

The Ministry of Education and Training has already in progress with the recovery process of the overpayment.

 Also, the Office of Acting Attorney General and Ministry of Police are in progress with investigation of the case.

 CHAPTER4: DEVELOPMENT PROJECTS

Summary

We audited 9 projects, carried out 2 special audits of 2 development projects related subjects and 1 audit of one development project for the Tuvalu Audit Office.

We issued 9 unmodified audit opinions for the 9 projects that we audited for their financial statements for the year ended 30th June, 2016. We raised 36 issues in our management audit reports as well as we issued 40 recommendations for the appropriate remedial actions for management to consider.

Background

All the development projects that submitted their financial statements to be audited for the financial year ended 30th June, 2016 had all been audited as mentioned above.

The appointment of the Auditor General as the external auditor for a development project is from either the donor organisation and/or the Implementing Agency which mostly the Government Ministry that implemented the project.

The service of the TOAG is always considered as part of the contribution of Government to the project hence, our audits are free of charge and no audit fees revenue. This applies to all the projects that we audited with the exception of about one project.

Audit Findings and Recommendations

1. Tonga Aviation Investment Project (TAIP)

Financial year ended 30th June, 2016

The audit of TAIP of Tonga for the financial year ended 30th June, 2016 was completed and we issued an unqualified audit opinion.

The issues raised in our management letter were:

1. Prior year issue 2014/15

Outstanding issue

1. The meeting minutes of the PSC provided were not signed by the Chairman as to confirm that the information provided were true and correct as of the dates of the meeting. Meeting minutes must be signed by Chairperson, to confirm the minutes were approved as official.

Current Position:

Position as of 2015/16 was still the same and recommendation repeated.

2. Timesheets not properly approved

When reviewing payroll, project staff are required to submit their timesheet for each pay run.  Timesheets are also required to be signed by the Project Account to confirm accuracy of the timesheets.  Timesheets for the period were not signed by the project account.

The risk of paying staff for time that they did not work increased.

Recommendations

2. That Project Accountant ensure that timesheets are approved and signed by him/her as confirmation their correct and accurate.

 2. Transport Sector Consolidation Project (TSCP)

Financial year ended 30th June, 2016

The audit of TSCP for the financial year ended 30th June, 2016 was completed and we issued an unqualified audit opinion.

The issues raised in our management report were as follows:

1. Prior year issues 2014/15

Follow up of issues raised in previous financial year’s audit were all resolved.

2. Program Steering Committee (PSC) Meeting minutes not signed

The meeting minutes of the PSC provided were not signed by the Chairman as to confirm that the information provided as approved records of the meeting.  The minutes record the important decisions of the committee and the accuracy is crucial. 

Recommendations

1. The secretary of the Committee should ensure that the minutes are signed by the Chairperson.

Project’s Management response

Agreed

3. Incorrect declaring of conflict of interests

  • In reviewing the due process of the recruitment of the Project Manager, it was noted that two (2) members of the Evaluation Panel incorrectly declared their conflict of interest. It is important these declarations are correctly and truly completed.  If there is a potential/perceived/actual conflict of interest, it is to be declared and handled appropriately.
  • Two (2) members of the four (4) members of the Evaluation Panel were immediate family. There is a tendency for significant influence in the outcome of the associated procurement decision.

Recommendations

2. That procurement officer should review the accuracy of these declarations and ensure that members of Evaluation of Panel make the correct declaration.

3.  It is highly recommended the immediate family members do not sit together in an Evaluation Panel

Project’s Management response

Agreed

4. Timesheets not properly approved

When reviewing payroll, project staff are required to submit their timesheet for each pay run.  Timesheets are also required to be signed by the Project Accountant to confirm accuracy of the timesheets.  Timesheets for the period were not signed by the project account.

Recommendations

4. That Project Accountant ensure that timesheets is signed by him/her as a confirmation that they have confirmed to accurate.

Project’s Management response

Agreed

3. Tonga-Fiji Connectivity Cable Projects (TFCP)

Financial year ended 30th June, 2016

The audit of TFCP for the financial year ended 30th June, 2016 was completed and we issued an unqualified audit opinion.

There was no issue raised in the management report since the issues of the previous year’s audit have all been resolved. The adjustments to the financial statements as per audit findings were all been made.

 4. Climate Resilience Sector Project (CRSP)

Financial year ended 30th June, 2016

The audit of CRSP for the financial year ended 30th June, 2016 was completed and we issued an unqualified audit opinion.

The issues raised in our management report were as follows:

1. Vehicle Project currently used by the implementing agency [Ministry of Environment, Information, Disaster, Energy & Climate Change (MEIDECC)]

We noted that one of the vehicles bought by the project is used by the Ministry, MEIDECC. And the Project Management Unit, (PMU), and the existing consultants have to share one vehicle between them.

The vehicle should still be in the possession of the project PMU until the end of the project team.

Recommendations

1. That MEIDECC CEO assist in resolving this issue.  If MEIDECC will not make this vehicle available to the project PMU and its consultant, then it should provide an alternative means of transportation for the project staff to use.

2. Consumption Tax (CT)

In reviewing expenses, it was noted that the project has paid CT but from the information provided, the project is exempted from CT.

The project’s CT returns are to be prepared and lodge to appropriately identify any CT credits applicable.

Recommendations

2. That the project accountant should ensure that CT return is filed on a monthly basis to ensure that any CT paid is recovered.

5. Nuku’alofa Urban Development Sector Project (NUDSP)

Financial year ended 30th June, 2016

The audit of NUDSP for the financial year ended 30th June, 2016 was completed and we issued an unqualified audit opinion.

The issues raised in our audit management report were as follows:

1. Follow up from previous year’s audit

Of the eight (8) recommendations issued, only one was not yet resolved and is repeated again in this year’s audit:

Outstanding issues

1. That PMU should ensure that committee meeting should be carried out on a quarterly basis.

 2. Program Steering Committee (PSC) meeting minutes not signed

The meeting minutes of the Project Steering Committee (PSC) provided were not signed by the Chairman as to confirm approval and that the information provided were true and correct as of the dates of the meeting.

Recommendations

1. The Secretary of the Committee should ensure that the minutes are signed by the Chairman.

 3. Timesheets not independently certified

When reviewing payroll Timesheets are required to be independently certified for accuracy.

Timesheets captured the time work by each individual staff. The risk of staff being paid for time that they did not work increased.

Recommendations

2. That Project Accountant ensure that timesheets are independently certified for payment process.

4. Project Procurement and Tender Committee (PPTC) members not signing Confidential and Conflict of Interest Declaration form

The members of PPTC are required to complete and sign off the Confidential and Conflict of Interest Declaration form. In reviewing procurement process, this form has not been completed and signed off by the PPTC members.

This declaration is important in identifying and resolution of conflicts of interest. Any conflicts of interest not declared may result in an award being made where value for money was not considered priority.

It is also important that information regarding any procurement is protected so that all bidders have access to the same information and not being disadvantaged should an information is shared with certain or some bidders.

Recommendations

3. That the PPTC members should complete and sign the Confidential and Conflict of Interest Declaration for every procurement activity.  The Project Management Unit Team Leader should ensure that this form is completed and signed off by PPTC members.

 5. Evaluation Panel Members not signing the Confidential and Conflict of Interest Declaration form.

The project document does not require Evaluation Panel Members to make and sign this Declaration form. However, it is of the view of the audit that the members of this team should also be making this declaring because the decision of the PPTC/PSC is based on the recommendation provided by this team in the Bid Evaluation Report. Therefore it is important that Evaluation Panel team complete and sign off this declaration form, so that any conflict of interest identified is dealt with appropriately.

Recommendations

4. That the Evaluation Panel members should complete and sign off the Confidentiality and Conflict of Interest Declaration form for every procurement activity.  That the PMU team leader must ensure that this form is completed by the Evaluation Panel.

6. Incomplete construction but the contractor period has expired.

During site visit, audit has identified a construction funded by the project that was still incomplete but the contractor period has expired, the contractor is bankrupted and out of business.

Recommendations

5. That the project team leader and manager ensure that when designing bidding documents, it should cover requirements for confirming the financial stability of the bidder in order to avoid cases such as this one.

6. Tonga Energy Road Map Implementation Unit (TERM IU)

Financial year ended 30th June, 2016

The audit of TERM-IU for the financial year ended 30th June 2016 has been completed and we issued an unqualified audit opinion.

The issues raised in our management report were as follows:

1. Follow ups from previous year’s audit

The following recommendations were yet to be resolved and thus, repeated in this year’s audit:

Outstanding recommendations

1. The issue of not preparing and made available the project’s progress report (quarterly monitoring statuses) is still a non-compliance with project’s operational manual

2. As raised in prior years’ audit, there were indicators that the project would not be completed as planned according to the project’s document. Our concerns was confirmed by the extension of the project’s period to 30th June, 2017.

3. That the registration of the project website under late Sitiveni Finau be immediately corrected and updated.

4. That MEIDECC should meet regularly with the Project Management Unit, (PMU), to properly monitor the project in assessing the work done on a regular basis.

5.That all meeting should be properly documented completed and filed.

 2. Overpayment to contractor, IT Power

In reviewing payment, there was an overpayment made to one of the contractor, IT Power, of AUD1,305.30.  Up to the 2nd February 2017, it was said that IT Power has agreed to pay back this overpayment.

Audit to confirm receipt of this payment in the next audit.

Recommendations

6. That the Project Management Unit, (PMU), should avoid any further overpayment in the future.

 3. Minutes

Audit received one meeting minute for the financial period.  The minute was not signed.  The minute has a date but no month and a year.

Audit cannot confirm whether there was more than one meeting during the financial period.  So we cannot confirmed whether the minute received should have signed or not if there was a subsequent meeting.  Due to incomplete information in the minute, the accuracy of the information in the minute could not be confirmed..

Recommendations

7. That the PMU should document minutes properly with complete and accurate information.  That the PMU should provide meeting minutes on a timely manner.

 4. Progress Report

Audit requested the quarterly progress report for the financial period under audit. No progress report was maintained. This is a non-compliance with the project requirements.

Recommendations

8. That PMU should provide all documents request by the auditor.

 5. Project extension

Audit is aware that the project is yet to be extended until June 2017.  Audit requested documents regarding this extension but did not receive such information.

Recommendations

9. Once again, that PMU should provide documents request by auditor.

7. Cyclone Ian Recovery Project (CIRP)

Financial year ended 30th June, 2016

The audit of this project for the financial year ended 30th June, 2016 has been completed and we issued an unqualified audit opinion.

There was no issue raised in the management report.

 8. Tonga Cyclone Ian Reconstruction and Climate Resilience (TCIRCRP)

Financial year ended 30th June, 2016

The audit for the TCIRCRP for the financial year ended 30th June, 2016 has been completed and we issued an unqualified audit opinion. 

9. The Pacific Environment Community Funds (PECF)

Financial year ended 30th June, 2016

The audit for The Pacific Environment Community Funds for the financial year ended 30th June, 2016 has been completed and we issued an unqualified audit opinion.

The following issues were raised in our management report:

1. No supporting documents for meeting fees

There were no documents kept and filed which record the meeting fees paid and that the recipients received these fees.  Audit was not able to confirm whether these meeting took place as there were no minutes provided for these meetings, nor was there any written report.

The risk of not confirming whether these meetings took place and not confirming whether the payments were received by the relevant parties increased.

Recommendations

1. That the National Project Manager should ensure that proper and complete records of every meetings fees paid should be kept.

2. That for all meetings, minutes are to be kept and provided to auditors at time of audit.

Project’s management response

Unfortunately the record was not available for Auditors. Treasury has endorsed the payment based on supported document from us. Also, Meeting Reports and now prepared for every single training starting from Training/Meeting 2.

 

2. Fund Transfer form to Ha’apai and Vava’u were not signed as evidence of received by the respective agent

In reviewing the funds transfers, all funds transfer form for Ha’apai were not signed received by the agent, Tonga Development Bank. Some of the transfer funds form for Vava’u were not signed received as well.

Signing this form, confirm that the responsible agent /division are aware of the amount required to be disbursed and therefore the amount disbursed should not exceed the authorized transfer amount.

Recommendations

3. That the National Project Manager should ensure that this process is completed, therefore any discrepancies of amount paid to amount receipted can be rectified by referring to this transfer form where the agent/ division has acknowledged the amount to be disbursed.

Project’s management response

A copy of Sub-Treasury's approval of Transfers will be requested for next audit process. We can ask the Treasury what are not complied with and why the transfer was through if the process is not followed accordingly?

3. Consumption Tax (CT)

In reviewing expenditures, some payments were made for CT inclusive invoices. As per Financing Agreement, the project fund is to be exempted from tax.

Recommendations

4. That Project Manager, should lodge a CT refund with Inland Revenue Department for the funds paid as CT.

Project Management response

CT refund request will be made through Ministry of Finance.

4. M1 funds already spend on M2

Some of the funds allocated for M1 was spend on M2 activities. This has been disclosed in the financial statement. Audit was not provided any written document from the donor of their agreement to spend M1 funds on M2 activities.

The expenses of the project is split into different types which has a corresponding vote. This is a control mechanism to ensure that expenses for each type are within budget.

Recommendations

5. That the project manager should always get the go ahead from the donor before spending funds for one milestone on another.

Project Management response

This was approved verbally by Project Manager in PIFS flexibility of implementation is often necessary in order to achieve a better outputs for the project.

5. Ineligible Expenses

There was an amount of TOP$190.00 paid from the project funds for vehicle expense of the Ministry, MEIDECC. Funds has been spend on expenses not related to the project.

Recommendations

6. Project Manager should ensure that all funds are spent on activities and expenses that qualify for payment under the project terms and conditions.

7. That MEIDECC should reimburse this amount back to the project.

Project Management response

The transaction had been reverted, resolved.

6. Supporting documentation not properly maintained

There were some payments made without Purchase Order Request Form. This is part of the payment process that a Purchase Order Request Form is completed first before the completing the Purchase Order Form.

Recommendations

8. The project manager should always ensure that the Purchase Order Request Form is completed for every expense.

Project Management response

Will try to improve.

7. Consultant approved his own appointment.

In reviewing recruitment of consultants for the project, it was noted that one senior officer approved the Procurement proposal for his own recruitment. It is understood that this action was done in his capacity as the acting CEO at the time.

Recommendations

9. That MEIDECC should put a system in place in how to deal with situations like this avoiding a staff from approving his/her own recruitment proposal of his/her appointment or payment related matters.

Project Management response

It was carried out in good faith and not intentional and with the endorsement of Cabinet.

8. Project Manager’s contract

Project Manager has been recruited on a contract basis where he is authorized to engage in the project after work hours at 4.30pm. The Finance Agreement requires the engagement of the Project Manager on a full time basis and is most reasonable with the nature of such position.

Recommendations

10. That this non-compliance with the Finance Agreement be resolved by the CEO of MEIDECC should obtain a written confirmation from the donor that this term in the Finance Agreement can be varied therefore, the Project Manager can be employed on an after official hours basis as well as the confirm the suitability of working after official hours with the nature of this position.

Project Management response

Other duties required to be carried out by the officer due to lack of technical personnel in the Office. Obviously most appropriate people for the job are within the Ministry hence Cabinet approval was sought for a private practice to avoid confusions and to remunerate the Project Manager on top of his normal salary.

9. Timesheets for time worked not provided

In reviewing the payments of their contracts, there were no timesheets provided by the Project Manager and the Consultant confirming for their times worked (after official hours as per contract) for the project.

Recommendations

11. That the Project Manager and Consultant submit timesheets on a weekly basis for the CEO of MEIDECC to approve. These timesheets are to be submitted as major supporting documents for their claims for payments for their work in the project.

Project Management response

The records provided was not sufficient and additional should be obtained from staff registration.

10. Private Practice vs. Employee of the Ministry (MEIDECC)

The project Manager and the Consultant are paid for their roles in the project as well as their roles for the Ministry, (MEIDECC). However, we have noted that both carried out project works during the official working hours, here in Tongatapu and to the outer islands. This is contrary with respective contracts with the project that they are to work after hours, which would clearly distinguish the remunerations from the two employers, the Project and the Ministry.

Recommendations

12. That the CEO of MEIDECC should review the arrangement of Private Practice for these MEIDECC employees if it is applicable and practical. If they are involved with the project during the government work hours, then they should consider changing the arrangement to a secondment rather than the Private Practice.

Project Management response

A secondment was not the best option due to other duties of the Department and will be a loss to the whole Ministry.

11. Project’s Laptops

Three laptops were purchased from the project funds, two for the existing Project Manager and the Consultant and the third one for a MEIDECC staff who is based in Ha'apai. The individual consultant contract does not provide for the project to furnish laptops for their use. It is common for consultants to provide their own laptop and not the project providing them.

Recommendations

13. That no further investment in laptops or laptop related cost be made for consultants as they are not entitle to these in their contracts.

Project Management response

The requirement of the project management was to have a fully operational setup. Unfortunately Department's budget at the beginning was not sufficient to contribute to this PEC Fund Project.

10. Other Projects’ Audit

i. Climate Resilience Sector Project (CRSP) – Special Audit

The request for this audit came from the Ministry of Finance and National Planning and in regards specifically to expenditures considered by the donor to have been ineligible expenses for the project.

The scope of this audit was confined to a list of expenditures that were identified by the donor (ADB) as being ineligible.

It was concluded in this work that these expenditures were ineligible for ADB funding but eligible to be funded under the Recurrent Expenses funded by the government of Tonga. The issue aroused from different interpretations of the Project Administration Manual on what should be funded by the government of Tonga under the Recurrent Expenditure.

After discussion with ADB, it was agreed that ADB allows these expenditures as eligible expenses, which was a positive outcome.

ii. Safety Security Levy Audit (SSL) – Special Audit

The request for this audit came from the Ministry of Infrastructure, MoI.

This levy is part of the Tonga Aviation Investment Project which is referred to as a revenue generating project. As part of the requirements of this project, a levy will be charged for international travel and it is collected by Tonga Airport Limited (TAL). It is then split on a ratio basis between TAL and Civil Aviation Division (CAD) at the MoI.

The scope of the audit was confined to confirming the levy share of MoI and the expenses paid.

1. Passenger reconciliation not carry out by CAD

Audit performed a full substantive test of all the invoices issued by TAL and levy collected since 2013. It was noted that CAD does get report from ATS. However, TAL also provided figure for ATS which was significantly lower than the figure provided by CAD. If CAD were to verify the passengers number which TAL invoiced the airlines on, ATS figures were not accurate.

Recommendations

1.  That CAD should reconcile if any variance in the passengers number in TAL invoice with the passengers number in their record to ensure that airlines are paying the correct levy

2. Variance between the financial statement figures and Ministry of Finance financial record

Audit noted, that the total amount of the “Actual retailed by CAD” does not agree to the balance accumulated in the sun system financial system. The variance amounted to $45,498 which was a payment for August 2015.

Recommendations

2. That the Finance Division of MoI should follow-up with the MoFNP to ensure that the amount of $45,498 is correctly posted to Safety and Security Levy Fund revolving vote.

3. That MoI Finance Division should carry out a monthly reconciliation of the SSL fund with MoFNP financial system balance to correct any error on a timely manner.

4. No proper passenger reconciliation carried out by TAL

TAL collects their own passenger data. They also received passenger information from each airlines and ATS. Audit noted that there were some variances between these data. TAL assisted with explaining some of these variances. Variances in 2013, cannot be explained as no reconciliation carried out. However, it is important that TAL carry out a proper reconciliation on a monthly basis, to ensure that any variance is justified and documented. This will ensure that airlines are charged the correct amount of levy.

Recommendations

4. That TAL should carry out a proper monthly reconciliation of passenger’s number between their figures, airlines numbers and ATS. This is where the variance can be justified and documented and be reviewed by a senior staff within TAL Finance Section.

iii. Tuvalu Aviation Investment Program

The Auditor General of Tuvalu is the auditor of Tuvalu Aviation Investment Program a project under the same program Pacific Aviation Investment Program of which Tonga is also part of (Tonga Aviation Investment Program – TAIP).

As the program PAIP which is supported by Tonga Fiduciary Support Unit (TFSU) all countries involved in this program shares the operational cost of PAIP and TFSU.  Hence, the financial statement of all countries involved under PAIP has paid expenses related to PAIP and TFSU. The TFSU is based here in Tonga. All records are in Tonga. In order for auditors of the participating countries under PAIA need confirm these costs here in Tonga.

For Tuvalu, so instead of flying over their audit team, for verification of their share of PAIP/TFSU operational cost, they have asked Tonga’s Auditor General to perform this task on their behalf.

The scope of this task was limited to the tests that the Auditor General of Tuvalu requested of us. The work was completed and no report was issued but the completed audit working papers file was submitted to the Tuvalu Audit Office.

This highlights the collaboration of the TOAG with our peer audit offices within the Pacific region.

CHAPTER 5: PUBLIC ENTERPRISES

Summary

We carried out 13 financial statements audits, and 6 audit reviews during the year.

We issued 13 unmodified audit opinions for the 13 financial statements and 6 review certificates for the 6 reviews we carried out during the year. We raised 60 issues in our management audit reports as well as we issued 40 recommendations for the appropriate remedial actions for management to consider. This excludes the issues and recommendations in our management reports to the management of organisation mention in item 5.3.10 below.

Background

We audited the Public Enterprises, (PE), that appointed the Auditor General as their external auditor. For those PEs that appointed other private accounting firms/individuals as their external auditor, the Auditor General reviewed and approved the audited accounts of those PEs.

The main challenge we encountered in this Division from year-to-year is the untimeliness of submitting the draft accounts to be audited and the audit working papers (of the other external auditors) to be reviewed. Moreover, the number of audit and review we carried out is limited to only the draft accounts and working papers of other auditors submitted and received. This challenge is the major stumbling block for this Division.

We charged audit fees on this part of our audit services and deposited in full to Treasury of the Ministry of Finance.

Audit Findings and Recommendations

1. Waste Authority Limited (WAL) 2015/16

1. Prior year issues

Outstanding prior year issues

 Status

1. Contracts for all staffs

1. Outstanding

2. Trade Receivables: Waste fees accrued

2. Outstanding

3. Fixed Assets Register

3. Outstanding

4. Timesheets.

4. Outstanding

 

2. Simultaneous receipt booklets with the same number

We noted there were two different receipt book with the same number were used during the financial year. For instance receipt book number 3751 - 3900 were used in both Tapuhia and the Head Office.

Recommendations

5. Management should ensure no receipt book with same number is used.

3. Provision for the closure and post closure of the Landfill Cell I

We noted there is no provision realized under current and/or non-current liability for the closure and post closure of Cell block 1 of the Tapuhia Landfill. It is expected this closure will be in either the current or the next financial year, thereby satisfying the criteria for recognition of provision under IAS 37.

Recommendations

6. Finance Manager and Solid Waste Management advisor should work together to provide the best and most appropriate estimate for the closure and post closure cost of Cell block 1. This estimate to be disclosed in the Statement of Financial position as provision.

2. Tonga Broadcasting Commission (TBC) 2014/15 & 2015/16

1. Prior year issues

Outstanding prior years issues

 status

1.       No reconciliation of Consumption Tax payable to lodgement form.

1.       Outstanding

2.       No reconciliation between Debtor’s Control Account and Individual Ledger.

2.       Outstanding

3.       Adjusting journal entries.

3.       Outstanding

4.       Authorization of Petty Cash Disbursement.

4.       Outstanding

5.       We identified discrepancies between Fixed Asset Register (FAR) and General Ledger.

5.       Outstanding

6.       Collection of Accounts Receivables.

6.       Outstanding

7.       Provision for Doubtful Debts.

7.       Outstanding

8.       Hire Purchase and work in progress (WIP).

8.       Resolved

9.       PAYE.

9.       Resolved

10.   Impairment of Property, Plant and Equipment (PPE).

10.   Outstanding

 

2. Donated Asset (Popua Mast)

We noted the Mast at Popua donated by the Korean Communication Corporation was not disclosed in the financial statements as deferred income and Property, Plant and Equipment. This had been corrected in the financial statements.

Recommendations

11.  Management should ensure that all donated assets are correctly accounted for in the financial statements.

Client’s response

Agreed and appropriate action will be taken.

3. Tonga Market Corporation Limited (TMCL) 2015/16

1. Prior year issues

Outstanding prior years issues

 status

1. Term deposits investments with financial institution were understated by $10,872.

1. Resolved

2. Interest accrued of $10,872 was not accounted for.  This results also in understating account receivable balances.

2. Resolved

3. Property, Plant and Equipment was understated by $2,457.  This was due to additions and depreciation not being accounted for in the Fixed Asset Register.

3. Outstanding

4. There were long outstanding overdue arrears identified which were on Court Trials and Bailiff.

4. Outstanding

5. QuickBooks was not updated after finalization of the financial statements to ensure correct balance is brought forward to the following year.

5. Outstanding

2. Review of bank reconciliation

The bank reconciliation is prepared by the Accounting Clerks on a regular basis but were not properly reviewed by an independent officer. There was a TOP$379 that was posted to the Cash at Bank and not Accounts Receivable. This was subsequently corrected, however the reconciliation did not identified the differences between bank statement and TMCL’s accounting record. Review of reconciliation could pick up the cause of the variance.

Recommendations

6. We recommended that bank reconciliation should be reviewed with more rigor.

Client’s response

Agreed

3. Fixed Asset Register (FAR) not updated

The FAR is not updated regularly to include all assets that was acquired during the financial year.

Recommendations

7. We recommended that FAR should be updated and reviewed regularly to ensure all assets of the entity is accounted for at all times.

Client’s response

Agreed

4. Aging Trade Receivables

There are long outstanding debts in TMCL’s book. This had included a former employee who has been dismissed on charge of embezzlement and was ordered to pay back the money by instalments. This former employee is now residing in NZ and the recoverability of the overdue amount is uncertain.

Recommendations

8. TMCL should revised its provision for doubtful debt provision to ensure all doubtful debts are adequate.

Client’s response

Agreed

5. American Samoa Trade Receivable

We noted there was a TOP$5033 which was a credit sales made to customers in the Samoa division. From our review of the Samoa division financial performance, the division had been running a deficit since inception. Allowing sales to be on credit on a significant amount ($5,033) can contribute to the negative performance of the division.

Recommendations

9. TMCL should review its policy around credit whether it is still feasible to allow credit sales particularly in the Samoa segment.

 4. Tonga Water Board (TWB) 2015/16

1. Prior year issues

Outstanding prior years issues

 status

1. No justification to the Subsequent correction to Water Sales and why it is posted to Prior Year Adjustment.

1. Management review correction on a monthly basis.

2. Reconciliation between Teraterm and Attache did not justified the variance between the two systems.

2. Billing reconciliation with Attache is done on a monthly basis.

3. The split of Waste Fees and Water sales Revenue is not clearly identifiable which results in negative balance waste fees.

3. Waste Fees has been transferred to the Tonga Power Limited.

4. No clear rationale for the recognition of the Doubtful Debt provision @10%.

4. Outstanding

5. Current year correction that has been posted to Prior year adjustment is not justified clearly.

5. Outstanding

6. Allowance of the board is being advanced during the financial year.

6. No advancement was identified during the current year, however the policy is yet to be reviewed.

7. Report Anomalies.

7. Resolved

8. Budget overrun.

8. Resolved

9. Stock-take procedure is not robust to prevent and detect fraud in the stock balance.

9. Outstanding

10. Stock balance irregularities.

10. Outstanding

11. The inventory system is not robust to track the movement of stock between branches.  As a result there was variance in the Interbranch-Transfer balance.

11. Outstanding

12. Review of Fixed Asset Register.

12. Outstanding

13. Impairment testing of Property, Plant and Equipment (PPE).

13. Outstanding

14. Small value items were being capitalize as PPE.

14. Outstanding

15. There was no regular review of Journal entries to minimise risk of wrong posting.

15. Outstanding

2. Trade Payable

We found Payable Aging Report total did not agree to the Financial Statement figure. This reflects that reconciliation between aging report and financial statements needs to be strengthened.

Recommendations

16. Management need to ensure that reconciliation between Aging Report and Financial Statement is carried out and that variance is identified and corrected.

3. Lease

We found the properties leased by TWB for installing its water pipelines are not disclosed in the financial statements in accordance with IAS 17. We also noted the lease register is not properly updated to identify all properties leased by TWB

Recommendations

17. Management needs to ensure that a lease commitment schedule is disclosed in the financial statements in accordance with IAS 17 and the lease register is updated to include all properties leased by TWB.

5. Public Enterprises reviewed by TOAG during the year 2016/17

5.1 Port Authority Tonga (PAT) 2014/15

The following observation was noted from our review:

  • Pre-engagement Activities complied with the International Standards on Auditing, ISA.
  • Strategic Planning complied with ISA (including risk assessment to determining audit strategies)
  • Fieldwork complied with ISA
  • Review and reporting was in compliance with the ISA

Recommendations (to the external auditor)

1. We commend the effort taken by your good office to ensure your audit complies with International Accounting Standards (ISA).  For the review of the 2015/16 audit, we ask that you bring the audit file with your electronically when you visit for the 2016/17 audit so that we complete the review while you are in the country.

5.2   Tonga Asset Management and Associates Limited (TAMAL) 2015/16

1. Prior year issues

Outstanding prior years issues

 status

1.       There was no Minutes for the entry and exit meeting conducted by the auditor and the client.

1.       Outstanding

2.       There were no documentations on the audit file which set out the auditor’s compliance with the standard’s ethical requirements – Independence & Audit Engagement.

2.       Outstanding

3.       There was no assessment of Fraud risk in relation to the audit conducted

3.       Outstanding 

4.       There was no documentation of the required Understanding of entity and its environment by the auditor in accordance with the audit planning standards.

4.       Outstanding

5.       There was no assessment of the entity’s Going concern ability.

5.       Outstanding

6.       There was no Materiality level set by the auditor during the planning stage.

6.       Outstanding

7.       The audit did not conduct a robust risk assessment procedures to identify the significant areas susceptible to the risk of material misstatements.  As a result, the responses to assessed risk cannot be identified from the audit file.

7.       Outstanding

8.       The audit did not established a clear Audit Strategy and Audit Plan.

8.       Outstanding

9.       General journal entries

9.       Outstanding

10.   There was no evidence that any Analytical procedures were being applied during the audit.

10.   Outstanding

11.   There was no concluding memorandum which sets out the conclusion and the sufficiency of the audit evidence that has been collected by the auditor.

11.   Outstanding

12.   There was no evidence of any review of Subsequent events to the audit opinion carried out by the auditor.

12.   Outstanding

 

2. Pre-Engagement and Planning

We reviewed the Pre Engagement and Planning practice employed by the auditor.  We made the following observation.

  • Overall, we assessed the pre-engagement and planning phase did not comply with the ISA.

3. Fieldwork

We reviewed the Fieldwork part of the audit.  All working papers in relation to testing of the elements of the financial statements were provided for review.

  • Overall, from our review of all working papers recording work done in the fieldwork we concluded that auditor needs further improvements in order to comply with the ISA. These are highlighted below.

3.1. Audit Assertion Tested

We noted that the auditor did not document the audit assertion tested in each account areas tested.  Audit assertions includes, cut-off, accuracy, rights and obligations, completeness etc.  Documenting the audit assertion tested in each working paper helps ensure that sufficient appropriate audit evidence have been collected to draw the conclusion on the fair presentation of the financial statement figures.

We reviewed the conclusion and report part of the audit.  We concluded that further improvements still needs to be made for the audit to comply with ISA.

Recommendations

13.   We recommended that the auditor should ensure that audit assertion tested in each working papers is documented.

3.2.  Audit Opinion

The review noted that the format of the auditor’s opinion does not comply with the ISA 700.  The current format of the Auditor’s Opinion include a Heading, Reports, Responsibility of the Board of directors, Scope of Audit and the Audit Opinion along with the auditor’s signature and dates.  This format does not comply with the format prescribed by paragraph 20-42 of ISA 700.

Based on the result of our review, we concluded that the Audit conducted by Hasiloni Fungavai was not in accordance with the International Standards on Auditing (ISA).  The audit needs to ensure that the audit issues raised in the report is implemented into the audit process to ensure that the audit of the next financial year is in line with ISA.

Recommendations

14. We recommended that the auditor re-visit the requirements for the Auditor’s Report under ISA 700 and then modify the current format of the auditor’s report to be in line with the requirement of ISA.

5.3 Tonga Development Bank (TDB) January – December 2014

1. Pre-engagement and Planning

We would request for the review of the 2015/16 that the following working paper be supplied for review.

  • Work paper documenting the auditor’s understanding of the entity and its environment or similar work paper.

2. Fieldwork

For the review of the 2015/16 we requested that Price Waterhouse Coopers, PwC, provide the following working paper.

  • Work paper (or similar document) summarizing how the audit gained assurance on each audit assertions related to each level (transactions and events or presentation and disclosures).

3. Conclusion and Reporting

For the review of the 2015/16 we requested that PwC provide the following working paper which was not in the file.

  • Review of subsequent events
  • We also request the firm’s quality assurance work paper, if the firm have quality assurance practice in place.

4. Overall conclusion

Based on the result of our review, we conclude that the audit conducted by Pricewaterhouse Coopers, (PwC) was in accordance with the International Standards on Auditing (ISA).  The internal quality control system of the firm was suitably designed to ensure that the audit conducted was in accordance with the auditing standards adopted by the firm for the year ended 31st December, 2014.

5.4   Tonga Post Limited (TPL) 2015/16

1. Prior year issues

Outstanding prior years issues

 status

1. There was no documentation of the auditor understanding of the entity and environment.

1.       Outstanding

2.  There was no working paper documents the audit, assessing the risk of material misstatement in the financial statement.

2.       Outstanding

3. There was no working paper for documentation of the entity internal control.

3.       Outstanding

4. There was no link between any risks identified by the auditor to the client’s internal controls

4.       Outstanding

5. There was no documentation of assessing the audit evidence sufficiency and appropriateness of audit evidence collected

5.       Outstanding

6. The Quality control process employed by the auditor was not sufficient to ensure the audit was in accordance with the ISA.

6.       Outstanding

7. The audit did not complete all the required Pre-engagement activities specified by the standards

7.       Outstanding

8. The Materiality threshold was not set for the audit

8.       Outstanding

9. There was no signed declaration of compliance with the standard’s ethical requirements.

9.       Outstanding

 

2. Pre-Engagement and Planning

We reviewed the pre-engagement and planning practice employed by the auditor.  We made the following observation. The following process needs to be implemented and documented by the auditor.

  • An Ethical Declaration Form being signed and initialled as evidence that the ethical requirements of the ISA has been met. This will ensure there is no ethical issue including any independence issue with the client.
  • An assessment of the client’s going concern in accordance with ISA 570. This is a crucial part of the auditor’s risk assessment.
  • We acknowledged there is email correspondences with the clients where requests for information regarding the audit and some of the discussions takes place. However, the entry meeting between the auditor and the client management needs to be documented.
  • An assessment of the risk of material misstatements due to fraud to be assessed. This should be included in the entry meeting including the client’s fraud management framework/process.

Recommendations

10. We concluded that further improvements are needed in ensuring that they key planning process identified above is carried out and documented.

3. Fieldwork

We reviewed the Fieldwork part of the audit.  All working papers in relation to testing of the elements of the financial statements were provided for review. There were testing in relation to:

  • Asset
  • Liability
  • Owner’s equity
  • Revenue and other revenue
  • Expenses and other expenses; and
  • Cash Flow

All issues that we have identified have been raised in the previous year’s review.  This is highlighted in Section 3 of this report.

4. Conclusion and Report

We reviewed the Conclusion and Report part of the audit.  We highlighted the following areas for improvements:

  • The Exit Meeting between the auditor and the client may have been conducted but it was not documented.
  • A review of subsequent events between balance dates and the audit opinion is carried out and documented.
  • A concluding memorandum where it summarizes all risks identified, the result of the audit procedures performed and the conclusion reached is formulated.
  • The format of the audit opinion, needs to be reformatted to be in line with paragraph 20-42 of the ISA 700

Overall, for the Conclusion and Reporting part of the audit improvements are still needed to ensure that the audit is carried out in accordance with the ISA.  These improvements are ensuring that the key issues raised herewith are implemented and documented.

5.5   Tonga Communication Commission 2013/14 and 2014/15

The following observation was noted from our review:

  • Strategic Planning complied with ISA (including risk assessment to determining audit strategies)
  • Fieldwork complied with ISA
  • Review and reporting was in compliance with the ISA

There are documents which we noted were not provided with the audit file.  We advised your good office to please provide these for future review.  There were:

  • Minutes of Exit Meeting
  • Assessment of Sensitive Expenditures

Overall we assessed the audit conducted by Ernst and Young as complying with the auditing standards.

5.6   Other Audit Engagements of the Division during the year 2016/17

There are other bodies that we audited during the year for they appointed the Auditor General as their external auditor. These bodies are independent (separate legal entity from) of Government however, they all have direct financial relationships with Government.

All the audits mentioned below were completed and reported to Governance Body during the working year 2016/17.

These bodies are the:

  1. Legislative Assembly Retirement Benefits Board (LARBB): we audited the LARBB financial statements for the year ended 2014/15 during the year;
  2. Civil Society Forum of Tonga (CSFT): we audited the financial statements of the CSFT for the 3 financial years ended 31st December, 2013, 2014 & 2015 during the year.
  3. Tonga Business Enterprises Centre (TBEC): we audited the financial statements of the TBEC for the financial year ended 31st June, 2015. (This is a Centre in the Tonga Chamber of Commerce which mostly funded by donor, MFAT NZ).
  4. Tungī Colonade Company Limited (TCCL): we audited the financial statements of the TCCL for the year ended 30th June, 2016. (The major assets of the TCCL is the Tungī Colonade Building which is from a loan from Government).

Contents

Contents

S5 Box