MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT

ANNUAL REPORT 2013

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Acronyms

EEZ Exclusive Economic Zone

EU European Union

GoK Government of Kiribati

IMF International Monetary Fund

IT Information Technology

KCS Kiribati Customs Service

KDP Kiribati Development Plan

KFSU Kiribati Fiduciary Services Unit

KNSO Kiribati National Statistics Office

KPF Kiribati Provident Fund

MCIC Ministry of Commerce, Industry and Cooperatives

MCTTD Ministry of Communications, Transport and Tourism Development

MELAD Ministry of Environment, Land and Agricultural Development

MFED Ministry of Finance and Economic Development

MPWU Ministry of Public Works and Utilities

NEPO National Economic Planning Office

NSO National Statistics Office

PFTAC Pacific Financial Technical Assistance Centre

RERF Revenue Equalisation Reserve Fund

SOE State Owned Enterprise

SPC Secretariat of the Pacific Community

SPFM Strengthening Public Financial Management

VAT Value Added Tax

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Contents Minister’s Introduction .................................................................................................................................... 1

Strategic Plan 2012-15 ..................................................................................................................................... 2

Vision ............................................................................................................................................................................. 2

Mission ........................................................................................................................................................................... 2

Secretary’s Overview ....................................................................................................................................... 3

About the Ministry of Finance and Economic Development ............................................................................... 4

Role and main functions ................................................................................................................................................ 4

Our priorities .................................................................................................................................................................. 4

Our legislation ............................................................................................................................................................... 4

Organisational structure ................................................................................................................................................ 4

Governance .................................................................................................................................................................... 7

Our stakeholders ............................................................................................................................................................ 7

Our critical issues ........................................................................................................................................................... 8

Accountant General’s report ............................................................................................................................ 8

Consolidated Fund Recurrent Revenue and Expenditure ............................................................................................... 8

Income for MFED ........................................................................................................................................................... 9

Expenditure for MFED .................................................................................................................................................. 10

Comparison of actual MFED financial results with 2013 Budget ................................................................................. 11

Kiribati National Statistical Office .................................................................................................................. 13

Internal Audit ............................................................................................................................................... 13

Accounting and Financial Services .................................................................................................................. 13

Corporate Services ........................................................................................................................................ 14

National Economic Planning Office ................................................................................................................. 14

Kiribati Customs Services ............................................................................................................................... 17

Taxation ....................................................................................................................................................... 17

Kiribati Fiduciary Services Unit ....................................................................................................................... 18

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Minister’s Introduction

This is the Annual Report of the Ministry of Finance and Economic Development (MFED), Kiribati for 2013. The Annual Report is an integral part of the Ministry's corporate governance framework, describing our achievements, outlook and financial position for the year. The Annual Report also plays an important role in fulfilling the Ministry's commitment to accountability and transparency.

The Annual Report is based on the Ministry of Finance and Economic Development Strategic Plan 2012–15, which outlines the Ministry's key objectives and key performance indicators. The strategies for achieving our objectives, as outlined in the strategic plan, are highlighted throughout the document.

The Annual Report provides comprehensive information about the Ministry's financial position for the 2013 financial year. It also provides information about the Ministry’s:

• performance against objectives

• organisation, people management and corporate governance processes

• future direction.

The contact details for the Ministry of Finance and Economic Development are:

PO Box 67

Bairiki, Tarawa, Kiribati

Telephone 686 21806.

Our website can be found at www.mfed.gov.ki

Hon Tom Murdoch Minister of Finance and Economic Development August 2013

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Strategic Plan 2012-15

Vision

The MFED has a broad vision of a nation where stable economic development promotes well-being for I-Kiribati through sound financial and economic policy reforms.

Mission

The Government of Kiribati (GoK) in collaboration with the Ministry of Finance and Economic Development seeks to enhance sustainable economic growth and financial stability for the welfare of the people of Kiribati through the management of both government and development finances. This is achieved through the provision of appropriate economic and financial management methods and systems, computerized accounting and control systems, tax administration, customs enforcement and provision of accurate and quality national statistical services.

The GoK is committed to promoting inclusive sustainable economic growth by promoting the implementation of sound economic reforms for creation of a vibrant economy and empowerment of the people of Kiribati. A sound economy is vital component in realising the Government’s vision. It sets in place a framework of action for government portfolios and their agencies to address the requirements of for promoting inclusive economic growth and poverty reduction led by MFED.

The broad sector strategy toward promoting inclusive economic growth and poverty reduction will include the following macro strategies as aligned within the country national development plan (KDP):

• Effective Structural and Fiscal Reforms: ensuring the efficiency, effectiveness and sustainability of government finances;

• Expansion and diversification of economic opportunities for poverty reduction through the provision of economic policy advice in a manner that ensures effective allocation of government finances.

• Aid Effectiveness and Results Based Management

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Secretary’s Overview

I am pleased to present the Annual Report of the Ministry of Finance and Economic Development for the calendar year 2013.

Having been with the Ministry since January 2014, I would like to acknowledge the dedication and leadership of my predecessor, Mr Atanteora Beiatau who has taken up a position with the Asian Development Bank. Under his stewardship the Ministry has achieved many reforms particularly with regard to the management of State Owned Enterprises and work leading to the introduction of the VAT which commenced in April 2014. I will continue the work of these reforms and others in 2014.

I would also like to acknowledge the support of donors through the Economic Reform Task Force particularly the World Bank, the IMF, Australia, New Zealand and the ADB for the sound advice provided throughout the year. I would also like to thank the Pacific Financial Technical Assistance Centre (PFTAC) for the financial management assistance and assistance with taxation reform through the year. Other donors have also assisted with statistics (SPC, IMF) and with other projects (the EU).

In this report you will read about the many achievements of the Ministry in 2013 including:

• The work leading to the introduction of the VAT which commenced in April 2014 and the abolition of Customs Duties

• The passing by Parliament in April 2013 of the State Owned Enterprise Reform Act • The passing by Parliament in December 2013 of the Revenue Administration Act. • The approval by the Government of a debt policy which established policy criteria for

concessional and non-concessional public borrowing consistent with sustainable macroeconomic management.

• Strengthening public financial management through the introduction of an upgraded software system to enable Ministries to maintain better records of commitments and expenditure.

• The introduction of a new Chart of Accounts to enable compliance with international standards of Government Financial Statistics.

• Improvements in statistical collections in particular, information on National Accounts and Balance of Payments.

Elliot Ali Secretary Ministry of Finance and Economic Development

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About the Ministry of Finance and Economic Development

Role and main functions

MFED being a lead Ministry for the economic growth and poverty reduction sector has significant contributions towards achieving Government policy objectives that are set out in the Kiribati Development Plan (KDP) 2012-2015 as follows:

• As a lead Ministry its main role is to coordinate all efforts from supporting Ministries on the implementation of the KDP (fiscal and non-fiscal).

• More specifically to work closely with supporting Ministries in coordinating efforts and inputs on the cross cutting responsibilities reflected in the KDP

Our priorities

The main priorities of the Government of Kiribati and MFED in 2013 included working towards improving revenue performance through such measures as the adoption of the VAT and Excise Tax in 2014 and improving the management of State Owned Enterprises and the public debt.

Our legislation

MFED is the responsible authority for and must implement the following Legislative Acts as presented: Public Finance (Control and Audit) Act, Procurement Act, Stores Regulations, Internal Revenue Board Act, Statistics Act, Census Act, Hotel Tax Act, Kiribati Provident Fund Act, Kiribati Insurance Act, Development Bank of Kiribati Act, Loans and Borrowing Act and the Anti-Corruption Act.

In 2013, several new Acts which were the responsibility of MFED were approved by Parliament. These Acts were:

• The State Owned Enterprises Act 2012

• The Excise Tax Act 2013

• The Value-Added Tax Act 2013

• The Revenue Administration Act 2013

Organisational structure

The Ministry of Finance and Economic Development existing organizational structure embraces 10 key divisions, which are equally contributing and sharing the Ministry responsibilities, namely:

(i) Administrative Services Division

(ii) National Economic Planning Office

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(iii) Accounting Division

(iv) Internal Auditing Division

(v) Taxation Division

(vi) Kiribati Customs Service

(vii) National Statistics Office

(viii) National Authorizing Office

(ix) Kiribati Fiduciary Services Unit (playing supportive role)

(x) Information Technology Unit (IT)

The functional Organizational Chart showing the organization of the Ministry’s departments is provided below.

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SECRETARY

NATIONAL STATISTICS

OFFICE

Republic Statistician

KIRIBATI CUSTOMS SERVICES

Comptroller of Customs

NATIONAL ECONOMIC PLANNING

OFFICE

Director

CORPORATE SERVICES

Assistant Secretary

ACCOUNTING & FINANCIAL SERVICES

Accountant General

INTERNAL AUDIT

Senior Internal Auditor

TAXATION

Commissioner of Taxation

Collects and compiles statistical data, including census data, international trade, copra statistics, health statistics, national accounts, immigration movements, balance of payments and monitors the retail price index and level of inflation.

Undertakes audit inspections and provides advice and guidance to assist managers at all levels to effectively meet their financial management obligations and responsibilities and ensure procedures are followed.

Accounting and financial management services to the whole of government, including the provision of financial information, revenue collection and expenditure control and preparation of annual accounts.

Operational management, including human resources, corporate planning, policy development and planning of MFED activity, including budget management, building maintenance, registry services and support services.

KDP coordination, Budget, RERF & Aid Management,

Prepares and finalises development proposals & strategies, prepares and monitors recurrent and development budgets, provides advice on economic and fiscal issues, manages long term investments, monitors and reviews public enterprise performance.

Ensures compliance with customs regulations, collects duties, provides policy advice and also includes border management and enforcement activities.

Provides policy advice on alternative Tax Revenue, Tax Administration, and ensures that company, personal and hotel taxes are collected.

MINISTER

State-Owned Enterprises

- DBK

- KPF

- KIC

- BoK

SPECIAL UNITS-KFSU, NAO

Director

Supports special projects

IT

Manager

DEPUTY SECRETARY

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Governance

The Senior Management Team comprising of divisional heads is responsible for the Performance Monitoring of the achievements of the Ministry Strategic Plan. In its quarterly meetings, the Committee monitors the progress of achievements of outcomes and outputs identified in the Ministry Strategic Plan for each division. Each division provides a full report of its progress to these Quarterly Performance Monitoring Reviews.

The Internal Revenue Board comprising of the Secretary, Deputy Secretary, Secretary of the Public Service Office, Comptroller of Customs, Taxation Commissioner, Director of the National Economic Planning Office and Secretary for Commerce, Industry and Cooperatives sat monthly in 2013. The board monitored taxation and customs revenue against the budget throughout the year, made recommendations on the introduction of the VAT, and made decisions on unrecoverable outstanding taxes.

The Revenue Equalisation Reserve Fund (RERF) Investment Committee met 6 times during 2013 to discuss matters relating to the investments of the RERF. The Committee consists of the Minister for Finance and Economic Development (Chair), the Secretary to Cabinet, the Secretary of MFED, the Deputy Secretary of MFED, the Accountant General, the Director of NEPO,

The SOE Reform Steering Committee was set up to progress the Government’s SOE reform agenda in Kiribati. The Committee comprises the Secretary of Cabinet, Secretaries of MFED, MCIC, MPWU, MCTTD, MELAD, and a representative from the Attorney General’s Office. The Committee met more than once a month throughout 2013 depending on the urgency of issues raised.

Our stakeholders

MFED advises and supports the Cabinet on fiscal and economic policy. For all Government agencies, other levels of Government and statutory bodies, we provide advice and support on: planning, budget management, legislation and project monitoring and evaluation.

MFED has been incorporating the broad government strategy of encouraging private sector investment through public private partnerships such as the Otintaai Hotel. Some SoEs, such as the Kiribati Supplies Company Limited, have been sold off by the government. However MFED is mandated to oversee the performance of the following Corporations and Government owned enterprises:

Kiribati Provident Fund

The operation of the Kiribati Provident Fund (KPF) is governed by the Kiribati Provident Fund Ordinance. The KPF has substantial capital from employer contributions which is invested. One of the major challenges facing the Board is how KPF capital might be invested locally to spread the benefits to members and the wider Kiribati public.

Kiribati Insurance Corporation

The Kiribati Insurance Corporation business is responsible for insurance business in Kiribati and has a monopoly in this area.

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Development Bank of Kiribati

The operations of the Development Bank of Kiribati are made under the Development Bank of Kiribati Act. The Bank is responsible for providing finance by making loans to any person for the purposes of primary production; or for the establishment, development or acquisition (in whole or in part) of industrial or commercial undertaking and for home financing. In addition the Bank is to provide advice and assistance with a view to promoting the efficient organization and conduct of primary production or of industrial or commercial undertakings. The bank has difficulty collecting repayments from borrowers and this has been a recurring problem for the Bank over the years. A high default rate on its loans and the accommodation of bad debts are continuing issues for the Bank.

ANZ Bank of Kiribati

The Kiribati Government’s share in the ANZ Bank of Kiribati is 25%. The ANZ Bank of Kiribati has a monopoly on banking in Kiribati. The Secretary of MFED is a board member.

Our critical issues

Kiribati is a small country with a population just over 100,000 scattered over 33 coral attols and islands. Because of its isloation and remoteness, issues such as transport and communications are a high priority. Kiribati also has one of the lowest per capita incomes in the South Pacific which means that the taxation base is very low and therefore revenue raised through personal income taxes and company taxes are also low. There has been a culture of non-compliance with regard to company taxes which also drains the government revenue. The major source of revenue, fisheries licenses are volatile depending on the international price of tuna and weather and the volume of the catch. This means that forecasting the amount of revenue raised each year can be difficult and therefore adjusting expenditure estimates to revenue collected is also a challenging undertaking. Kiribati has a sovereign wealth fund, the Revenue Equalisation Reserve Fund which has suffered in recent years due to the Global Financial Crisis.

Accountant General’s report

Consolidated Fund Recurrent Revenue and Expenditure

The total recurrent revenue collected in 2013 was $126.76 million. This is $51.97 million over the total revenue budget estimate of $74.8 million. The significant increase in revenue is due to fishing licences which exceeded its budget by $52 million and reflected a very good fishing season in the Kiribati EEZ in 2013.

In comparison to 2012 there was a significant increase in revenue collection in the year 2013. The total revenue collected in 2012 was $91.3 million whereas in 2013 revenue rose to $126.76 million, an increase of $35.46 million or 38.8%.

Table 1 below shows the revenue collected in 2013, by source. Fishing Licenses acounted for 70.2% of total revenue, then Import Duty 13.7%, Personal Taxation 5.8%, Company Taxation 3.9%, and the Line Ministries revenue 2.4%.

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Table 1: Government Recurrent Revenue by Source in 2013

The list shows is that the government revenue base is very small, and very volatile. Fishing licences, for instance, were estimated to be $37 million for the year 2013 yet the actual licence received was $89.0 million — more than double the amount initially estimated. This high volatility can create serious problems in forecasting.

The original government budget for expenditure approved by Parliament for 2013 was $ 99.09 million however during the course of the year a budget supplement of $6.81 million was requested bringing the total approved budget for FY2013 to $105.89 million.

The actual expenditure incurred in 2013 was $105.59 million. This is slightly below the approved revised budget figure resulting in an overall savings of $0.31 million at the end of financial year 2013.

With the government total expenditure for financial year 2013 at $105.59 million and the total revenue received at $126.76 million (excluding the RERF drawdown), this resulted in a surplus of $28.18 million. This is the first surplus since 1998.

Income for MFED

The following table 2 shows the income derived from the various Divisions of MFED in 2013. Total revenue from MFED amounted to $31.36 million which accounted for 24.7% of revenue from all sources (excluding the RERF drawdown).

Estimate ActualActual

Percentage

Variance Under/ Over

$ $ % $Personal Taxation 7,000,000 7,309,915 5.8 309,915Company Taxation 7,500,000 4,885,593 3.9 (2,614,407)Import Duty 17,560,000 17,355,655 13.7 (204,345)Hotel tax 84,000 68,287 0.1 (15,713)Tax Revenue 32,144,000 29,619,449 23.4 (2,524,551)

Dividends from Shareholdings 1,700,000 1,125,369 0.9 (574,631)Fishing Licenses 37,000,000 88,999,097 70.2 51,999,097Satelite Services Payment 1,300,000 2,846,022 2.2 1,546,022Registration of Ships 500,000 662,221 0.5 162,221Other Ministries' revenue 1,803,000 3,028,201 2.4 1,225,201Interest on Consolidated Fund 474,247 0.4 474,247Other Financing Support 2,000,000 - 0.0 (2,000,000)

Total Revenue 76,447,000 126,754,605 100.0 50,307,605

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Table 2: Income by Divisions of MFED, 2013

Expenditure for MFED

Table 3 shows the recurrent expenditure by Division for MFED for 2013. Personal emoluments accounted for 62.9% of all expenditure in the Ministry. Of the operational costs, external travel was the highest area of expenditure accounting for 20.1% of total operational costs. This reflects the high cost of international flights from Kiribati, and Kiribati’s relative isolation.

Table 3: Expenditure by Divisions of MFED, 2013

Accounts Admin Customs Taxation Grand Total

Interest on loan charges 10 10

Interest on Consolidated Fund 474,247 474,247

Sundry revenue 69,115 69,115

Dividend 1,125,369 1,125,369

Personal income tax 7,309,915 7,309,915

Company tax 4,885,593 4,885,593

Other taxes - Hotel 68,287 68,287

Customs Division Services 7,405 7,405

Import duties 17,355,655 17,355,655

Customs Licence Fees 58,562 58,562

Customs Sundry Revenue 2,344 2,344

Sale of Customs Books/F 585 585

Sale of Publication 780 780

Grand Total 1,194,484 474,257 17,425,331 12,263,794 31,357,867

Expenditure Item Accounts Admin Customs Internal Audit

IT NEPO Statistics Taxation Grand Total

$ $ $ $ $ $ $ $ $KPF and Pension Contributions 30,190 14,899 14,278 3,182 3,275 10,932 7,289 10,757 94,803Salaries 347,160 176,043 179,519 50,407 47,232 114,582 118,540 140,917 1,174,400Housing Assistance 9,321 1,643 4,248 12,684 4,886 32,782Allowances 7,590 15,916 8,649 0 1,423 4,910 19,260 57,748Overtime 8,065 18,235 89,366 3,172 392 18,403 137,632Temporary Assistance 32,605 11,382 12,573 900 28,821 1,940 11,723 99,944Leave Grants 38,082 15,878 20,500 2,625 4,063 7,000 9,430 11,813 109,391Sub-total 473,014 253,997 329,132 56,214 58,643 175,441 142,501 217,757 1,706,700 Transport to normal place of work 30,168 2,639 33,212 66,019Internal Travel & Transport 15,953 8,398 974 5,650 6,823 288 3,226 6,152 47,463Staff Education, Training & Development 2,489 600 3,089Relocation Expenses 2,273 2,273External Travel & Transport 18,055 79,617 14,544 8,777 11,163 9,521 60,053 201,731Telecoms & Communication 83,033 83,033Electricity and Gas 132,425 37,654 170,080Entertainment 6,872 6,872Direct Purchases - Local 22,433 41,476 20,030 13,859 36,623 12,844 20,154 29,886 197,306Direct Purchases - Overseas 44,271 5,447 6,352 1,987 58,057Purchased Services - Local 5,054 17,355 14,531 4,448 4,950 5,218 2,339 11,337 65,232Purchased Services - Overseas 900 900Hire of plant & equipment 61,373 41,820 103,193Sub-total 110,528 460,718 138,240 23,956 63,524 29,513 36,140 142,628 1,005,247

Grand Total 583,542 714,715 467,372 80,171 122,167 204,954 178,641 360,385 2,711,947

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Comparison of actual MFED financial results with 2013 Budget

Table 4 shows the actual expenditure for the Ministry against Budget estimates. On the expenditure side, all Divisions were slightly under budget in 2013. In total. $2.712 million was spent in 2013 by the Ministry, with under expenditure being 92,870 or 3.3% of the total revised budget.

Table 4: Expenditure for MFED Divisions against Budget, 2013

Original

Budget

Revised

Budget

Actual Variance

Over/(Under)

$ $ $ $

Administration and

Policy

716,021 723,720 714,715 -9,005

Accounts Division 586,857 586,857 583,542 -3,316

Internal Audit 88,021 88,021 80,171 -7,850

NEPO 225,760 225,760 204,954 -20,806

Taxation Administration 362,265 362,265 360,385 -1,880

Customs & Boarder

Management

488,952 488,952 467,372 -21,580

National Statistics

Office

196,119 196,119 178,641 -17,477

IT Department 133,123 133,123 122,167 -10,956

TOTAL 2,797,118 2,804,817 2,711,947 -92,870

Table 5 shows the actual revenue for the Divisions of the Ministry against budget (excluding RERF drawdowns).

Taxation revenue was $12.263 million falling under budget by $2.32 million or 15.9%. This was mainly attributed to poor compliance issues with company taxes. The other main source of revenue, Customs revenue was $17.425 million, which was $207,848 or 1.2% below the budgeted level. The dividend from the Government of Kiribati’s shareholding with the ANZ Bank in Kiribati was $1.125 million and was $574,631 (or 33.8%) below the budget estimate of $1.7 million.

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Table 5: Revenue for MFED Divisions against Budget, 2013

Original Budget

$

Revised Budget

$

Actual

$

Variance

Over/(Under)

$

Administration and Policy 7,900 7,900 474,247 466,357

Accounts Division 1,740,000 1,740,000 1,193,655 (546,345)

Internal Audit - - - -

NEPO - - - -

Taxation Administration 14,584,000 14,584,000 12,263,794 (2,320,206)

Customs & Boarder

Management

17,632,400 17,632,400 17,424,552 (207,84)

National Statistics Office 100 100 780 680

IT Department - - - -

TOTAL 33,964,400 33,964,400 31,357,038 (2,607,362)

Table 6 shows the expenditure by type against the budget estimates for 2013. While personal emoluments were down significantly against budget (under expended by $87,695 or 4.9%), operational costs were almost on budget with an excess of expenditure of $2,524 or 0.3% difference.

Table 6: Expenditure by Type against Budget, MFED, 2013

Expenditure Item Budget Actual Variance

$ $ $

KPF and Pension Contributions 102,538 94,803 (7,735)

Salaries 1,287,739 1,174,400 (113,339)

Housing Assistance 59,119 32,782 (26,337)

Allowances 67,837 57,748 (10,089)

Overtime 73,978 137,632 63,654

Temporary Assistance 79,434 99,944 20,510

Leave Grants 123,750 109,391 (14,359)

Sub-total 1,794,395 1,706,700 (87,695)

Transport to normal place of work 60,062 66,019 5,957

Internal Travel & Transport 105,975 47,463 (58,512)

Staff Education, Training & Development 22,930 3,089 (19,841)

Relocation Expenses 14,380 2,273 (12,107)

External Travel & Transport 153,614 201,731 48,117

Telecoms & Communication 113,000 83,033 (29,967)

Electricity and Gas 143,800 170,080 26,280

Entertainment 7,000 6,872 (128)

Direct Purchases - Local 124,858 197,306 72,448

Direct Purchases - Overseas 40,772 58,057 17,285

Purchased Services - Local 64,772 65,232 460

Purchased Services - Overseas 13,500 900 (12,600)

Hire of plant & equipment 138,060 103,193 (34,867)

Sub-total 1,002,723 1,005,247 2,524

Grand Total 2,797,118 2,711,947 (85,171)

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Kiribati National Statistical Office

The office is mandated to operate under the Statistics Act (and when national censuses are on, the Census Act) to collect, compile, analyse, abstract, and publish official statistics relating to the commercial, industrial, agricultural, social, economic, and general activities and conditions of the people of Kiribati.

The KNSO observes the standards set up by the United Nations Statistics Division, the central mechanism to supply the statistical needs and coordinating activities of the global statistical system. The major tasks for the KNSO include undertaking and disseminating results of Censuses and Surveys. Statistical collections of the KNSO in 2013 included international trade, balance of payments, copra statistics, health statistics, immigration movements, the retail price index, national accounts, government finance statistics, meteorological information, electricity generation and usage.

Technical assistance during the year through the IMF (PFTAC) included work on the balance of payments and national accounts. The SPC also assisted in the preparation of the project proposal for the 2014 Household Income and Expenditure Survey.

Training programs in 2013 undertaken by staff of the KNSO were:

• NSO leadership Forum conducted by the ABS on 11-14 March 2013 • 4th Data Validation Workshop conducted by the ABS on 10-14 June 2013 • National Accounts Statistics Workshop conducted by IMF/PFTAC 12-22 June 2013 • Public Sector Debt & Aid Data Statistics Workshop conducted by IMF on 22-30 June

2013 • External Debt and International Investment Position conducted by the IMF on 14-28

July 2013 • Gender and Economic Policy Management Initiative training conducted by the UNDP

on 14-31 August • External Debt conducted by IMF/STI Singapore 31 October – 1 November 2013 • Regional disability inclusive budgeting and disability statistics workshop, November

2013, Nadi, Fiji

Internal Audit

Internal Audit provides assistance to managers at all levels in the effective discharge of their duties by furnishing them with analysis, appraisals, recommendations and pertinent comments concerning the activities reviewed, following audit inspections. Internal Audit assists to prevent the misuse of government monies and other assets, by trying to ensure that ministries follow proper procedures.

Accounting and Financial Services

The Accounting and Financial Services Division undertakes the recording of expenditure and revenue for the whole of the Government and provides management reports for all line

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Ministries. The work involved in the Division includes recording and reconciliation of GOK’s Bank Accounts, the Kiribati Provident Fund and Pension Contributions

The Strengthening Public Financial Management Project (SPFM), which commenced in July 2012, is co-funded by the Asian Development Bank and the Australian Government. It is working in two MFED Divisions – NEPO and the Accounting Division. In the Accounting Division a major outcome of the project will be the implementation of effective management and expenditure control at line ministries. This will be achieved by installing off-line stand-alone versions of the accounting software (Attaché) at line ministries and transferring data between these locations and MFED electronically using either email and/or USB flash drives. The project has also been working with the Accountant-General and his staff on improving the efficiency and effectiveness of the work done within the Division.

Corporate Services

The Corporate Services Division carries out the administration of the Ministry including human resource development, corporate planning, policy development and planning of MFED activity, including budget management, building maintenance, registry services and support services. It undertakes the administration of staff (leave, hiring of temporary staff) as well as managing staff transportation.

The objective of the IT section is to ensure that computer systems are running effectively to serve the Ministry. The IT Section provides technical support to all Divisions including the Taxation Office, Kiribati Customs Office (KCS), Statistics Office as well as Treasury officials who are outposted in each government ministry.

National Economic Planning Office

The National Economic Planning Office (NEPO), advises the Minister and Cabinet on economic policy, produces the annual budget and manages the budget process as well as managing aid coordination with donors. NEPO is also responsible for the SOE reform agenda, administration of the RERF, and debt management.

NEPO provides draft policies, statements, and advice on economic and fiscal issues, prepares and monitors development strategies, and finalises development proposals. NEPO has a key role in the formulation and implementation of the Kiribati National Development Plan (KDP) 2012-15 which sets the policy and public expenditure framework for achieving Government’s goal of generating “… a sustained, positive real rate of economic growth per person”. NEPO works with line Ministries to progressively implement strategies and policies. Emphasis has been placed on introducing financial management reforms through:

• sharpening the focus of expenditure, emphasising outputs rather than inputs, and integrating the recurrent and capital budgets

• bringing expenditure into line with national priorities, by appraising all budget related and other submissions on the basis of their conformity to policies and priorities as set out in the KDP; and

• improving accountability, by making it clear that Secretaries are responsible for expenditure and performance of their Ministry.

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Within NEPO the SPFM Project has been assisting with linking planning and budgeting. Specifically, an integrated Planning and Budgeting Operating and Training Manual has been drafted. This manual will guide both NEPO and line ministry staff. Also the project’s Budget Adviser has developed a spreadsheet-based tool for converting budget and actual financial data into either Government Financial Statistics (GFS) or Classification of Functions of Government (COFOG) formats for specific reporting purposes. The tool can be applied to either the former chart of accounts or the new one introduced this year.

NEPO acts as the Secretariat to the Development Coordinating Committee (DCC) which met several times during 2013. The DCC is responsible for the approval of projects submitted by Ministries for funding during the year. Once approved by the DCC, projects are then submitted to Cabinet for final approval. As part of its responsibilities, NEPO staff also undertook monitoring of 6 projects on North Tarawa and also the Betio Maternity Ward before its completion.

NEPO staff monitoring the progress of the Betio Maternity Ward

In May 2013 NEPO commenced a reorganisation of staff from previously separate “Budget”, “Planning” and “Aid Management” units into Sector Teams (Social Services, Infrastructure, General Government) and redefined staff responsibilities so that each staff economist assigned to liaise with a Ministry became a “one-stop-shop” with respect to that Ministry.

The RERF stood at $660.92 million at the end of December 2013 compared with $653.46 million in December 2012. A total of $9.62 million was withdrawn from the RERF in 2013 compared with $37.5 million in 2012.

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Figure 1: Revenue Equalisation Reserve Fund, Kiribati, 2013

Conferences, workshops and training courses attended by staff in 2013 include:

• Cost Benefit Analysis workshop at Kiribati Institute of Technology in January, 2013 • The Fourth Asia-Pacific Regional Dialogue on the Green Climate Fund: Mobilizing

the private sector, 14-15 February 2014 • Training on Monitoring and Evaluation held in April 2013 at Teuanete boardroom,

Taborio, Tarawa. • Asian Development Bank Annual Meeting, New Delhi, May 2013 • The regional conference of Climate Change financing in Cook Islands in April 2013 • Monitoring and Evaluation training, May 2013, UNICEF, Tarawa • SOEs' Directors and CEOs/Management Workshop on Budgeting & budget

forecasting (for Statement of Intent (SOI)) in Tarawa, May 2013 • Sharing Kiribati Experiences in Result Based Management, PIFS, Suva, Fiji, May

2013 • PICTA workshop on taxation and customs in Vanuatu, June 2013 • Gender and Economic Policy Management Initiative training, with UNDP, 14 - 31

August 2013, Nadi, Fiji • The international conference on the Scaling -Up Climate Finance (work programme

on long term finance wrap-up event, under the United Nation Framework on Climate Change Convention, UNFCCC) in Seoul South Korea, early September 2013.

• Regional conference on Climate Change Financing using Budget Support Modalities, mid-September, 2013 in Tonga, organized by SPC

• Senior Officials Meeting on Korean Development Assistance in Korea, October 2013 • Training on the Logical Framework Approach in September, 2013, through SPC • Regional disability inclusive budgeting and disability statistics workshop, November

2013, Novotel Nadi. • Regional Workshop on NCDs, Auckland, New Zealand, September 2013 • APEC Summit, Bali, Indonesia, 7-9 October 2013 • ADB workshop on progress on implementation of Strategy 2020, Nadi, Suva,

November 2013.

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Kiribati Customs Services

This output includes mainly Revenue Collection, Policy Advice and Compliance. It also covers border management, enforcement activities and services to clients, including the general public and Government.

The Kiribati Customs is responsible for Revenue Collection, Enforcement of Customs Laws and Regulations and giving Policy Advice. Kiribati Customs has over the last years contributed to approximately 20% of the total Government revenue (approx. 60% of total tax revenue) and as such is very conscious of this core responsibility.

Besides revenue collection responsibilities this division is also tasked with Border Management which basically deals with ensuring safe and secure borders which shall ultimately contribute substantially to social and economic well-being of the nation. In essence most (if not all) approved ports of entry in the Republic are manned by customs officers to ensure all matters pertaining to Border Management are attended to. The ports of entry includes seaports of Betio, Kiritimati, Fanning and Canton; and international airports of Bonriki, and Kiritimati.

Taxation

The outputs of the Taxation Division includes collection of personal, company, and hotel taxation revenue and improving of tax voluntary compliances by educating taxpayers through radio, circulating letters and outer island visits and consultation with business and employers throughout Kiribati.

In 2013 work commenced towards the passing of the following Acts by Parliament:

• The Excise Tax Act 2013

• The Value-Added Tax Act 2013

• The Revenue Administration Act 2013

The Excise Tax Act introduced an excise tax, and allowed for the registration of manufacturers of excisable goods. Customs Duties were abolished. The Excise tax will operate from 1 April 2014.

The VAT was set at 12.5% and the registration threshold was set at $100,000. VAT forms are required to be filled in every quarter. The Act also allowed for the prevention of price exploitation with the introduction of the VAT and provided for penalties for non-lodgement of returns. The VAT will operate from 1 April 2014.

The Revenue Administration Act allowed for a Taxpayer Identification Number (TIN). This will reinforce processes for verifying and maintaining the integrity of taxpayer information and compliance obligations (registration, filing and payment). The Act also outlines an appeals process, allows for registration of tax agents and provides for penalties for failure to lodge tax returns or pay tax owing.

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Kiribati Fiduciary Services Unit

A Kiribati Fiduciary Services Unit (KFSU) has been established within the Ministry of Finance and Economic Development and is the central unit for providing fiduciary support to all World Bank-financed projects. The Government of the Republic of Kiribati has received grant assistance from the World Bank towards implementation of several investment projects. The individual projects will be implemented by the respective Ministries and each will be supervised and monitored by a Project Manager from the individual Project Support Teams.

The projects will need to procure consulting services, civil works and goods based on the specific requirements of each project. This can be a complex undertaking, involving several ministries and agencies that also have many other responsibilities. Good knowledge of and adherence to World Bank procurement procedures and guidelines is central to ensure transparency and achieve international best practice. The KFSU was set up to ensure these standards are met.