Tonga’s Auditor-General identified a TOP$277.86 million discrepancy in government asset records and blamed “major malpractice of executive management” for overriding procurement controls in transactions worth more than TOP$6 million.
The findings are contained in the Tonga Office of the Auditor-General’s Financial and Compliance Audit report covering the Government’s financial statements for the year ended June 30, 2023.
The Auditor issued a qualified opinion on the Government’s Public Accounts because of longstanding problems involving property, plant and equipment.
“The complete accountability and effective management of all government assets are a major long-outstanding issue,” the report said.
It identified a TOP$277,864,226 difference between the Government’s updated fixed-asset registers and the accumulated balance recorded in its Sun-System accounting platform.
The discrepancy does not necessarily mean that TOP$277.86 million in public assets was stolen or missing. It means the Government’s two sets of records differed by that amount and the Auditor could not obtain sufficiently reliable information to confirm the complete and accurate value of public assets.
The Ministry of Finance was counting assets and reconfirming the fixed-asset registers maintained by individual ministries, the report said.
No complete asset register
The Auditor found that the Government still did not have a complete fixed-asset register covering all public assets.
There was also no depreciation policy to account for the declining value of assets over time, meaning the recorded balance represented amounts accumulated over many years.
The report said risk-management work relating to government financial records and the preparation of the Public Accounts had “yet to start” and remained in a similar position to the previous year.
Evaluation of the Government’s internal-control environment was also outstanding, with the Auditor calling for a more proactive internal-audit function that included physically checking transactions.
The Auditor raised 44 issues with the Chief Executive Officer of the Ministry of Finance, including matters carried forward from previous financial years.
‘Major malpractice’ in procurement
In a separate and potentially more serious integrity finding, the Auditor reviewed six internal-audit reports prepared by the Ministry of Finance and identified procurement non-compliance involving TOP$6,097,580.09 at the Ministry of Infrastructure.
The transactions involved projects including roadside drain cleaning, road sealing and widening, coral delivery and the supply of speaker boxes.
The Auditor found that formal contracts were absent from various projects, raising concerns about accountability, transparency and potential financial risks.
The Ministry of Infrastructure was also found to have used unauthorised rates.
“This deviation from approved rates is a potential breach of procurement regulations and raises concerns about the fairness and value for money in these transactions,” the report said.
The Auditor attributed the breaches to executive management overriding the Government’s internal controls and regulated procurement procedures.
“The above instances always occurred from major malpractice of executive management [which] over-ruled the system of internal control and regulated procedures,” it said.
The report did not identify the executives involved or state whether anyone had been investigated or disciplined.
Ministry gives brief response
The Auditor recommended that procurement requirements be strictly enforced before public payments were processed.
It said the Ministry of Finance should check transactions carefully, reject non-compliant payments and hold the officers responsible for identified breaches accountable.
The ministry’s recorded response was brief.
“We note the concern, and we will look at how best [to] address this,” it said.
The report does not indicate whether the TOP$6.1 million represented a financial loss, nor does it conclude that corruption occurred.
However, the absence of formal contracts, use of unauthorised rates and alleged overriding of procurement controls create serious risks of waste, favouritism and misuse of public money.
Related-party controls absent
The Auditor also found that the Ministry of Finance had not established procedures to identify and disclose related-party transactions across government ministries.
Such procedures are intended to reveal transactions involving people or entities capable of exercising control or significant influence over government financial and operational decisions.
The Auditor said the required disclosures should identify related parties, transactions involving them and compensation provided to key management personnel, including non-cash benefits.
The issue remained outstanding from an earlier audit.
Unsigned multimillion-dollar loan
The report also said a loan agreement worth TOP$6,761,247 between the Government and City Assets, formerly known as Molisi Tonga, had yet to be signed.
The Auditor described it as a long-outstanding matter and recommended that the Ministry of Finance take immediate action to resolve it.
Other continuing problems included operational grants paid to third parties without signed agreements, undisclosed third-party payments made on the Government’s behalf and weaknesses in recording externally funded projects.
Salary overpayments also remained unresolved. Of TOP$144,507.28 in overpayments recorded, only TOP$51,049.42 had been recovered, leaving TOP$93,457.86 outstanding.
A further TOP$42,926.70 was considered irrecoverable because some employees had retired or been dismissed, or because officials were advised too late that staff members had taken study leave without pay.
The audit findings do not establish that public money was stolen. However, they reveal longstanding weaknesses in the systems intended to identify government assets, control spending, enforce procurement rules and hold public officials accountable.
