Annual Report 2015/16

Annual Report 2015/16

 

Reporting Period:

 2015/16

Report Type:

Annual

Report Date: 

March 2017

Download File: Annual Report 2015/16

AUDITOR GENERAL’S FOREWORD AND OVERVIEW


Following my first full year as the Auditor General of Tonga, I am pleased to hereby present the annual report of the Tonga Office of the Auditor General, TOAG, for the financial year 2015-16. I was appointed Auditor General on 1st July, 2015. The transition was smoothly taken, all the staff contributed and responded well to the changes naturally comes with new leadership.

The year has been marked with delivering the audit services of Government public sector bodies and providing independent and objective audit reports and advice for 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. The year also awarded with additional special audits, which we carried out and reported to management, Executive, and to the Lord Speaker of Parliament.

Overview

We delivered the financial and compliance audits and advisory services as output planned for the year 2015 – 16. However in 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 get 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.

Similar to previous years audit conclusions, I issued a qualified audit opinion on the Government Financial Statements for the year ended 30th June, 2016. 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. The Honourable Minister for Finance and National Planning explained that this is in order to state the fair values of assets and liabilities of Government in the Statement of Assets and Liabilities as of the balance date. My Office and the Office of the Honourable Minister are working together to complete this exercise. However, during this time the exercise is yet to be completed, the audit opinion would be the same.

One of the positive results for the year, the preparations by the Honourable Minister for Finance and National Planning together with the audit of the Government Financial Statements for the year ended 30th June, 2016 were completed by 28th February, 2017 as the time specified by the law.

We audited and reported on the poor management of one project in Vava’u by the Branch of the Ministry of Infrastructure. In addition, there were also mismanagement of government assets and related party transactions involved. Fortunately from the results of this audit, the practice was stopped and improvements were made to the Vava’u branch of the Ministry.

During the year, we completed the audit review of the operations of the constituency funds during its first three years to 2014. We reported on the funds being operated without an established systems in terms of; basis of disbursements, record keepings, and accountability reports of the respective projects and outcomes achieved.

We are very much appreciate the appropriate response lead by the Offices of the Lord Speaker of Parliament and the Honourable Minister for Finance and National Planning in establishing the appropriate systems and have submitted for the review of the Public Accounts Committee before it gone to Parliament. The constituency fund is now, and in to the future, operated under an approved systems of processes and reporting and very much assist our audit review responsibilities.

The audit results and issues raised from all our audits during the year are summarised in Section 2, “Reports of Each Division”. However, this section will be subject to a separate report in the future.

Staff Training and Professional Development Programme

The capacity building and staff development programme continued throughout the year. Miss Sisilia Fe’iloaki, Principal Auditor, completed the Chartered Accountant, CA, professional qualification after work attachment to the Audit New Zealand in October, 2015. She filled in the gap from the departure of one Deputy Auditor General and one Auditor for further study overseas at the beginning of the financial year. Deputy Auditor General Fatafehi Taumoha’apai left for a Master in Professional Accountancy course at the University of Auckland; and Auditor Filatoa Vailea left for a Master in Auditing at the Shanghai University of International Business and Economics.

 

The Pacific Association of Supreme Audit Institutions, PASAI, led a series of staff trainings for the TOAG from October to December 2015. The trainings, Core I, II, III, and IV were aimed at different levels of the TOAG staff, 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 2015 – 16

The audit of the financial statements of the TOAG for the financial year ended 30th June, 2016 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, 2015. 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 $260,223, about 15%. The unspent amount was mainly from 6 vacancies (all senior officers) plus an allocation for the replacement the Auditor General’s vehicle was not completed by the closing of the financial year.

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 and June 2015. Currently, we are at 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 INTOSAI, 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 in 2014-15 Office’s Budget and continued to this year’s budget, 2016, 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 and internal establishments for more efficiency, effectiveness, and quality is a crucial task in to the future. The independence of the Auditor General and the TOAG greatly assist with such significant task. We are working on restructuring the operation from the current (5) divisions headed by 5 Deputy Auditor General and we will submit to be commenced in the year 2017 – 18.

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

 

SECTION ONE:  TONGA OFFICE OF THE AUDITOR GENERAL (TOAG)


1:  ROLES, OUTPUT AND STRUCTURE

1.1       Role

The TOAG’s primary role is to provide independent report, assurance and advice to the Speaker on how government and other public bodies account for and use public money. 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.

1.2       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.

Section two will provide a detailed report of each output per division forecasted.

Table 1:    Summary of the Total Output by Divisions in 2015 – 16.

The explanations for the outputs that were not achieved against the target established for 2015 – 16:

  1. The certificates in Output 2 is the audit of government grants to non-government schools and tertiary institutes. However, ths subject to how many receipients received from the Ministry of Education and Training to be audited and only 9 schools received during the year, which we audited them all.
  2. All performance audits, Output 3, are follow-ups of completed audits but yet to be reported. The follow-ups were to bring forward the scope of the audit (period covered) so that the findings are more up-to-date.
  3. Review and Approvals, Output 4, are the reviews of Public Enterprises audited by another auditor and not by the Auditor General and this subject to the ones that we did receive their records and financial statements.
  4. Management reports, Output 5, we planned for normal audit visits (compliance audit). However, the project audit teams in accordance to their total working hours, only able to cover the twelve projects that we carried out the financial statements’ audits.

1.3       Organisational Structure

The management structure of the TOAG as at 30th June, 2016 is shown in Figure 1.  The six 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 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.

Figure 1:  Management Structure as at 30th June, 2016

 

1.3.1     Staff Profile

During 2015-16 financial year, the Office had 45 staff with six (6) vacant posts.  Twenty-nine (29) 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.

Table 2Profile of Established Staff at 30th June, 2016

 

 

1.3.2     Staff Promotion

The Office continued to recognize the contributions, efforts and good performance of its staff.  Staff promotions during the year are as follows:

 

1.3.3     Staff Recruitments

During the year there were two (2) new staff recruitments which consists of:

 

1.3.4     Professional Development Program

The Office has made strong commitment to the professional development of staff through a number of key initiatives. Several officers are in progress in pursuing the CPA and CA professional qualification from accounting professional accounting bodies in Australia and New Zealand. There were officers taking part time courses with the University of the South Pacific and the Community Development and Training Centre here in Tonga.

 

1.3.5     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 Audit Office resources efficiently

Table 3 below shows the labour cost of major products at 30th June 2016.  As shown the chargeable products were the highest totalling $866,682.00 or 51% of the total cost ($1,699,378) of all activities carried out by the Office in 2015-16.

Table 3: Cost of activities at 30th June 2016

1.4       Financial Activities Summary

Table 4 summarizes the TOAG operating result for 2015-16 showing estimates compared with actual amounts.  The result is based on cash accounting.

 

Table 4: Summary of financial results

Revenue

Total audit fees collected in 2015-16 were $73,980 which was $126,020 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 $1,699,377 which was below the estimate by $260,223. The office expenditure between 2011/12 – 2015/16 are shown in Figure 3 below:

Figure 3: Estimated Expenditure vs Actual Expenditure

1.5       TOAG Financial Statements for 2015/16