Annual Report

AUDITOR GENERAL’S FOREWORD AND OVERVIEW


I am pleased to hereby present the Annual Report of the Tonga Office of the Auditor General, (TOAG), for the financial year 2016-17.

The year has been marked with the TOAG delivering the audit services against its mandate under the Public Audit Act 2007. We delivered independent and objective audit reports and advice to the Legislative Assembly, the Government, and the community. The focus as stated in our vision, is to improve the Government public sector integrity, accountability, and transparency.

Overview

We delivered the financial and compliance audits and advisory services as planned for the year 2016 – 17. We completed the audits of 22 audit units, (in Line Ministries, Departments, and Agencies), 23 financial statements, 4 audit reviews, 3 special audits, and 228 audit certifications. In our audit reports, we raised 268 issues and issued 311 recommendations, the remedial actions for the management to consider and acted upon.

We completed the audit of the Government Financial Statements for the year ended 30th June, 2017 and issued our audit opinion on 15th March, 2018. Missing out the due date for the audit, 28th February, 2018 was mainly because the Office was not in operation during the last two weeks of February due to the damages by Cyclone Gita to the office building.

Similar to previous years’ audit conclusions, I issued a qualified audit opinion. The qualification is on the modifications of the basis for the preparations and presentations of the financial statements from the International Public Sector Accounting Standards, IPSAS, Cash Basis, to “modified cash basis”, which is outside the IPSAS. This is in order to include the assets and liabilities of Government and their fair values as of the balance date in the financial statements. This work is still in progress to account and report the complete assets and liabilities of Government hence, the conclusion of the audit is qualified audit opinion until the financial statements is fully comply with the IPSAS Accrual Standards.

The audit findings from our financial and compliance audits during the year are reported in a separate report to the Lord Speaker, “Financial and Compliance 2016 – 17” as mentioned in our 2015-16 Annual Report.

However, similar to previous years, we fell short on delivering the number of performance audit we planned for the year. This is a major challenge for the TOAG for we have not yet obtained the skills and competencies on performance audit. We are seeking for every opportunity in our endeavour to build up the skills and knowledge of performance audit methodologies and techniques.

Staff Training and Professional Development Programme

The capacity building and staff development programme continued throughout the year. Deputy Auditor General, Lotomo’ua Tu’ungafasi left for a Master in Professional Accountancy course at the University of New South Wales, Sydney and Assistant Auditing Officer, ‘Akuila Lomu left for a Bachelor of Commerce at the Victorian University of Wellington, New Zealand. Deputy Auditor General Fatafehi Taumoha’apai and Filatoa Vailea still continue their further studies in Ackland, New Zealand and Shanghai, China respectively.

The Pacific Association of Supreme Audit Institutions, PASAI, is still continue their training to TOAG on difference levels added to the capabilities and competences of all staff. I would like to hereby acknowledge the financial assistance of the Department of Foreign Affairs and Trade of the Australian Government, which made these trainings possible. It added value to the TOAG’s effort for enhanced quality of audits.

TOAG is still in progress with looking for work attachment opportunity to a more advance Audit Office in the area of performance audit. TOAG also continued with its staff professional development programme, especially trying for both Chartered and Certified Accountant, CA and CPA, professional qualifications. TOAG is still the approved training institution of the New Zealand Institute of Chartered Accountants.

Audit of the TOAG Financial Statements 2016 – 17

The audit of the financial statements of the TOAG for the financial year ended 30th June, 2017 has been completed and is herewith attached as part of this annual report, item 1.5 below. The auditor, Grant Thornton New Zealand Audit Partnership, issued an unqualified opinion, and is similar to the previous financial year, 2016. This is another milestone achieved; the completed of the audited TOAG financial statements and be part of the same year annual report.

Overall, the TOAG underspent its budgeted allocation by $85,154, about 5%. The unspent amount was mainly from vacancies.

The timely completion of the TOAG annual financial statements, independently audited with unqualified opinion, and part of the Auditor General annual report may indicates that if any initiative to decentralise the financial management and processes from the Treasury, the TOAG is more than ready to implement this.

New audit computer program, Team Mate

Team Mate is an audit computer program that is widely used by audit offices. TOAG purchased and introduced Team Mate to TOAG during May/June 2015. Currently, we are at the implementation stage and most of the teams carrying out audits using Team Mate, it covers all stages of an audit from planning, field-work, review, to reporting stages. Overall, it very much help all audit officers, at all levels, with more efficiency and more focus audits. TOAG now joins with developed SAIs in using this expert audit technological package to complement its works.

TOAG is currently mastering its using of Team Mate with the assistance of the provider and the Pacific Association of Supreme Audit Institutions, PASAI.

Challenges

The major challenge is the building up of our staff capacity in order to manage the gap between the actual and the expected level of competencies and proficiencies in all our audits, and we appreciate that this is a long-term challenge. TOAG continuous staff training in all forms; on-job, training sessions by us, PASAI, and IDI, short term attachment to the Office of the Auditor General of Audit New Zealand and Australia, and our professional development programme are all aimed at meeting this challenge at all times.

Our financial resource through the TOAG allocated fund in the Government annual budget is always a challenge to our operation and our independent as a SAI. Fortunately, TOAG was allocated with the additional fund for the purchasing of the computer program Team Mate since 2014-15 Office’s Budget and still continued to this year’s budget, 2016/17, in meeting the annual maintenance fee to the supplier. Our annual fee to the provider for annual service and maintenance is expected to be considered annually in our budget.

We are fortunate to have complimented by our development partners in areas that are not sufficiently covered by our annual budgeted allocation. We sincerely hope that we will continue to receive those valuable assistances in the future.

The challenge of timely completed of audits is always in existence and the significant part of this challenge is the late submission of (draft) accounts to be audited, public accounts and quarterly statements, public enterprises, and development projects. We have started distributing a program/timetable for when each accounts to be audited to all auditees in the effort to manage this challenge.

Looking ahead

The development of the TOAG is continuously as ongoing agenda. The priority and focus is on capacity building of staff and using of computer assisted audit techniques, which overall will advance the efficiency and quality of carrying out the audits.

We are currently seeking for opportunities for our senior staff to attach to developed and more advance SAIs in the area of performance audit.

We are in progress with introducing the audit computer program, Team Mate, to all our financial and compliance audit staff and with the assistance of the supplier of Team Mate and the Pacific Association of Supreme Audit Institutions, PASAI. We are looking forward to fully operate with this Team Mate in the very near future.

We are continuing with our professional training program, currently three (3) officers are taking the CA and CPA programs and six (6) officers are taking the undergraduate courses part-time with the USP Campus here in Tonga as well as the Tonga Tertiary Institute. The Office is giving them all the assistance and encouragement that we could afford.

Restructure of our operations unit mentioned in 2015-16 annual report commenced in 2017-18 with only three (3) divisions namely: Financial Audit Division; Performance Audit Division; and Compliance Audit Division.

We are working for closer working relationship with the Public Accounts Committee of Parliament and the Audit Oversight Committee of Cabinet, particularly in the scrutinizing process of our audit reports and the appropriate responses and actions from auditees. It will move forward the endeavour for integrity, accountability, and transparency in all our works.

We continue striving for our vision, which started in January 2016 to be “Integrity, Accountability, and transparency” and obviously it is starting with us and all our audits, reports and advices and then to all our audit clients which ultimately impact on whole of Government as part of the measures to expand potential and growth.

Sefita Tangi

AUDITOR GENERAL

 

ROLES AND RESOURCES


Roles

The TOAG’s primary role is to provide independent report, assurance and advice to the Speaker of the Legislative Assembly on how government and other public bodies account for and use public money and public resources. The role is discharged by carrying out audits and report on whether government activities are carried out and accounted for consistent with applicable legislation, accounting and auditing standards, and achieve or otherwise the intended outcomes.

Core Functions of the Office

The core output of the Office for the year are classified into six (6) categories.  They cover:

  • Support and Parliamentary services
  • Financial and Compliance Audit
  • Performance Audit
  • Public Enterprises Audit
  • Development Project Audit
  • Public Accounts and Performance Review of each MDAs.

(Details shown in Item 2.1 and 3 of this report)

Organisational Structure

The management structure of the TOAG as at 30th June, 2017 is shown in Figure 1.  The six (6) main branches of the Corporate and Operations are directed by six Deputies Auditor General. Corporate Management Division is responsible for Administration and Support Services. The Operations Branch is divided into five (5) Divisions; (i) audit of the Government Ministries, Departments and Agencies (MDAs) (ii) performance audit, (iii) audit of public enterprises, (iv) audit of development projects, and (v) Public Account and Performance Review.

Staff Profile

During 2016-17 financial year, the Office had 44 staff with seven (7) vacant posts.  Twenty-nine (28) staff were female and sixteen (16) were males.  With the exception of the Auditor General, Table 2 presents the profile of the TOAG’s established staff.

Resignation

During the year Mrs Heleni Malele, Auditor resign from the work on 2nd May, 2017 to be together with her family in New Zealand.

Professional Development Program

The Office has made strong commitment to the professional development of staff through a number of key initiatives. Five senior officers are currently pursuing the CPA and CA professional qualification by taking the courses with the CPA Australia and the Institute of Charted Accountants in Australia and New Zealand. Also, five junior took part time courses with the University of the South Pacific and the Community Development and Training Centre here in Tonga.

During the year, the audit staff attended training programs conducted by the PASAI, IDI, and other capacity building institutions overseas. The areas covered were; effective communication, effective audit of public assets, strengthening the oversight functions of public finance management, cooperative audit on procurement, and preparedness for the implementation of the Sustainable Development Goals, SDGs.

Also, two of the Deputy Auditor Generals carried out the peer review of the Auditor General’s Office of Samoa under the IDI Performance Measurement Framework program, and one of those two supervised the peer review of the Office of the Public Auditor of the Marshall Islands.

During the year, the Auditor General attended the 19th PASAI Congress, August 2016 in Pohnpei, Federated of Micronesia; the XII INTOSAI Congress, December 2016 in Abu Dhabi, United Arab Emirates; and the 23rd Commonwealth Auditor General’s Conference, New Delhi, India in March 2017. He also attended the 16th PASAI Governing Board Meeting, February 2017 in Auckland, New Zealand.

The experiences and knowledge obtained from the above training and development programs and meetings very much assisted with the capacity building programs of the TOAG.

 

Figure 1:  Management Structure as at 30th June, 2017

 

 

 

Financial Activities Summary

Table 2 summarizes the TOAG operating result for 2016-17 showing estimates compared with actual amounts.  The result is based on cash accounting.

Table 2: Summary of financial results

RESULTS ACHIEVED FOR THE YEAR


Summary of the output in 2016-17

The summary of the total output achieved during the year is shown Table 3 below. The actuals are the completed audits, which indicated by the issuing of the audit opinion, management report, and audit certificate. Those audits which were still in progress as of 30th June, 2017 are not included in this summary. They will be reported when they are completed and reported.

Table 3:    Summary of the Total Output by Divisions in 2016–17

The explanations for the outputs that were not achieved against the target are as follows:

  1. Output 2, teams were continue introducing to the new IT Prrogramme of TeamMate. Again, 5 special audits were requested during the year and 2 completed but 3 was still in-progress.
  2. Output 3, similar to previous years this has been a challenge to TOAG since establishing of this Division and trying to developing the capacity and skills of the staff to do performance audit.
  3. Output 4, some has been planned but at the end change:
  • Friendly Island Shipping Agencies – change to another auditor
  • Tonga Forest Product Limited – at the end change to special audit
  • Tonga Export Quality Management – bankrupt
  • Tonga Rugby

Independent Audit Office that Lead by example

In improving our management processes, the corporate support services unit continued to manage cost as a priority.  The key strategies were to:

  • Practice good corporate governance
  • Create and maintain effective business managerial processes
  • Manage TOAG resources efficiently

Table 4 below shows the labour cost of major products at 30th June 2017.  As shown the chargeable products were the highest totalling $888,582.00 or 51% of the total cost ($1,764,486) of all activities carried out by the Office in 2016-17.

Table 4: Cost of activities at 30th June 2017

Total Revenue and Expenditure between 2012/13 - 2016/17

Revenue

Total audit fees collected in 2016-17 were $94,500 which was $105,500 below the estimate of $200,000. The estimated revenue is certainly overstated since most of the audit of Government entities and development projects are free. The audit of Government Ministries is free of charge as are the audits of foreign aid donor’s projects, the TOAG services are treated as part of the Government’s contributions towards the projects.

TOAG cannot control the number of public enterprises who present their annual accounts to audit or review during the year.

Figure 2:  Provide the trend of budget revenue vs actual revenue for the last five (5) years.

 

Expenditure

The Office actual expenditure was $1,764,486 which was below the estimate by $85,514. The office expenditure between 2012/13 – 2016/17 are shown in Figure 3 below:

Figure 3: Estimated Expenditure vs Actual Expenditure

REPORT OF EACH DIVISION


The undermentioned reports from each Division summaries the overall total of the work completed during this financial year 2016-17.  The details has been reported earlier in a separate report of the results of all the financial and compliance audits that has been carried out during this financial year.

Corporate Management Division

Background Information

The Corporate Management Division provides all the appropriate support services such as receptionist, files maintenance, information technology (IT), human resource services, audit certification of gratuity of deceased pensioner, estimates, mail and messenger, library, office supplies and equipment, accommodation, personal policies etc.  They are also responsible for Output 1: Support and Parliamentary Services.

The Division consisted of ten (10) staff altogether headed by the Deputy Auditor General, Mrs Lotomo’ua Tu’ungafasi.  During the year Mrs Tu’ungafasi with one (1) Officer left for further studies and the Division was closely supervising by the Auditor General.

Team Output Summary

The Division planned 15 outputs to perform during the year with a total budget hours of 9,073.  At the end of the year, the Division managed to achieve the budget outputs with a total chargeable hours of 9,403 which is more than the allocated budget hours assigned for the Division. Fortunately, we were able to have obtained the extra hours, (470), from some of the staff of the Division who deferred their annual leave as scheduled.

Table 5 below are the outputs achieved against the target established for this Division during 2016-17

Table 5: Output 1 - Support and Parliamentary Services

  1. Reports include Corporate Plan, Annual Plan, Annual Budget, Annual Reports, and Annual Audited Financial Statements. Audit of the TOAG by an external auditor for the financial year ended 30th June, 2017 has been completed and included in this annual report.
  2. Advisory Services were not budgeted for. However, advisory services were provided as per requests from stakeholders, Parliamentary Committees through the Honourable Speaker in particular.
  3. Support services such as information technology, human resources services, working manuals, Office web-sites, staff trainings and developments.

Auditor General’s report

The audit of TOAG financial statement for financial year 2016-17 has been completed in May 2018.  The financial statements together with the external auditor’s audit opinion is at item 4 of the Tongan Version.

Financial and Compliance Audit Division

Background Information

Financial and Compliance Audit Division (FCAD) carried out the audit of government ministries, departments and agencies (MDAs). 

The Division consisted of twelve (12) staff altogether headed by the Deputy Auditor General, Mr Maamaloa Fotofili.

Team Output Summary

We planned for 40 audit management reports and 33 audit certificates and we ended up completing 24 audit management reports and 225 audit certificates. A total 15,506 hours were budgeted at the beginning of the year however, the total actual hours recorded at the completion of the year was 14,520 altogether. The variance of less 986 hours from the budget was from staff took their annual leave for 2016 and 2017 during this working year, July 2016 to June 2017. There was also one staff of this Division resigned and migrated to New Zealand during the year. Overall, the variance of less 986 hours worked also affect the level of outputs for the year.

Table 6:  Output 2 - Outputs and performance statements of the Division

  1. Audit Management Reports cover the management reports to MDAs.
  2. Audit Certificates cover certificates on school grants, pension, and transfer values

Regardless, the performance on the actual outputs but, there were factors that hindered achieving of the planned outputs.  These factors are:

  • Unforeseeable special audits, transfer values and pension gratuity;
  • Some staff are committed to other works such as Board of Survey, and trainings that were conducted by PASAI;
  • Due to unresponsive of clients to audit recommendation. Some of the clients visited during the period has extended its scope of audit to the current financial year 2017-18; and
  • Up and going of using the TeamMate (audit computer program).

We continuously response to special and other urgent audit requests from time-to-time.  We have managed to take the challenge to strive to deliver the services with less resources.

The change of technology has a huge impact on how we execute our roles, the skills we need, the tools we used and potentially what we audit.  The challenge will be to keep pace with these developments of TeamMate and start to weave them into our roles. On the job training will be conducted monthly to upgrade and keep the pace of knowing how the application of TeamMate relates to the audit.  Monitoring is with the IT staff on a quarterly basis to assess performance of individuals of the Division and recommend improvements if needed.

Performance Audit Division

Background Information

The core function of this Division is to carry out Performance Audit according to Section 10A of the Public Audit Act 2012 (as amended).  In addition, any inquiries and advisory that may arise as a result of audit undertaking, request from the public, government ministries, department, agencies, public enterprises, public account committee and key stakeholders.

The Division consisted of five (5) staff altogether headed by the Deputy Auditor General, Miss ‘Utu’one Vena.

Team Output Summary

As shown in Table 7 below, similarly to past years since its establishment, the Division has been unable to complete any of the target Performance Audit Reports set out.  The inexperience and very little knowledge on how to do Performance Audit among the staffs of the Division was obvious, hence the ability to carry out the Performance Audit topics set out in the Office Work Plan. At year end, the total hours used up by the Division for the audits was 5,029 hours altogether.

Table 7:   Output Summary: Performance Audit and Special Investigation and Inquiry

  1. Auditor General’s reports cover only the performance audit reports.

Participating in Performance Audit Training is part of the Office initiative to train and expose the staff to Performance Audit.  Some of the Division’s staff has participated on-the-job training, PASAI Tier’s trainings, and taking part in the PASAI Regional Co-operative Performance Audit. However, we are looking and hoping for an opportunity for one or more staff attached to a more advanced SAI and actually involved in carrying out performance audit.

Since 2009, the Audit Office participate in the Pacific Association for Supreme Audit Institution (PASAI) four (4) Regional Cooperative Performance Audit on Environmental Issues. These four (4) reports were completed and finalized in June 2015.  However in July 2015, a follow-up audit on these were carried out in order to update the audit findings in the report by the team.

The Division is trying to finalize those Performance Audit Reports.

Public Enterprises Audit Division

Background Information

The Public Enterprises Division is responsible for the audit of the government’s wholly owned public enterprises, reviewing and approval of audited accounts that has been audited by private firm and audits of private sector entities which includes Non-Government organization, civil societies and private companies.

The Division consisted of five (5) staffs altogether headed by the Deputy Auditor General, Mr Kelepi Makakaufaki Jr.

Team Output Summary

Shown in Table 8 below the Division output comparison of actual vs budget for 2016-17. At year end, the total hours used up by the Division for the audits was 4,213 hours altogether.

Table 8:   Output Summary of Public Enterprises audit and review

The following explanation are provided in respect of budget vs actual.

  • Audit Opinion

Nine (9) audits were completed during the year out of the twelve (12) planned.  Two clients were planned for audit but did not submit their financial statements within the year and were deferred to the 2017-18 financial year.  There were Legislative Assembly Retirement Fund Board (LARFB) and Tonga Business Enterprises Centre (TBEC).  One audit client, Tonga Chamber of Commerce and Industries (TCCI) audit was still in progress at the year end.

  • Management Report

Nine (9) management report were issued which relates to the nine (9) audits completed during the year.  Three (3) audits were not carried out as explained in the audit opinion.

  • Review

Review of six (6) public enterprises were not completed during the year.  This is due to the following reasons:

  • Advisory

Three (3) advisory services were planned for the year.  This was based on our knowledge of the number of advisory request we received in previous years.  During the year, there were only two advisory services carried out by the Auditor General:

  • One (1) was in relation to the acquisition of the Tonga Forest Product Limited (TFPL); and
  • The other was a special request from the Judiciary for a special audit for the active court cases of the Tonga National Rugby League (TNRL) for the previous four financial years.

At year end only TFPL were completed but the TNRL was still in-progress.

Development Projects Audit Division

Background Information

Development Projects are projects and activities that are funded through loan and grant that Government Ministries, Departments and Agencies are executing.  The majority of the projects audit by this Division are funded by World Bank and/or Asian Development Bank.

The responsible of the Division is to carry out financial and compliance audit on all projects that MDAs are executing on behalf of the Government.

This Division consisted of four (4) staff altogether headed by the Acting Deputy Auditor General, Miss Sisilia Fe’iloaki.

Team Output Summary

We have planned 18 outputs and were managed to complete them. At year end, the total hours used up by the Division for the audits was 4,630 hours altogether.  Shown in Table 9 details of the output.

Table 9:   Output Summary of the Development Project Audit Division

Public Accounts Audit and Performance Review Division

Background Information

Public Accounts Audit and Performance Review Division responsible for the audit of the Public Accounts and review the performance of MDAs towards the Sustainable Development Goals, (SDGs).  These responsibility are part of the mandate of the Auditor General under the Public Audit Act 2007 (as amended in 2012).

This Division consisted of four (4) staff altogether headed by the Deputy Auditor General, Mrs Luseane ‘Aho.

Team Output Summary

The audit of the Public Accounts 2015/16 and Tonga Trust Funds 2012/13 and 2013/14 were completed with output of audit opinions and audit management reports.  An unfavourable variance of one management report not achieved in 2016-17 was due to audits still in progress at the end of the financial year.

Total budgeted hours of the team for delivery of the output were 5,000 hours as compare to 5,393 actual hours.

Table 10:  Output summary of the Public Accounts and Performance Measurement Division

  1. Audit Opinions are issued on the Public Accounts (1) and Tonga Trust Funds (2);
  2. Audit management reports are reports issued on Public Accounts (1), Tonga Trust Funds (2) and Review of MDAs performance (4)
  3. Audit Certificates on review of the Quarterly Summary of Receipts and Payments (3)

TOAG Financial Statements for 2016-17