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MINISTRY OF FINANCE AND
ECONOMIC DEVELOPMENT
ANNUAL REPORT 2014
PO Box 67
Bairiki, Tarawa, Kiribati
Telephone 686 21806.
Website: www.mfed.gov.ki
2
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
RAA Revenue Administration Act
SOE State Owned Enterprise
SPC Secretariat of the Pacific Community
SPFM Strengthening Public Financial Management
TIN Taxpayer Identification Number
VAT Value Added Tax
1
Table of Contents
Minister’s Introduction .......................................................................................................................................... 3
Secretary’s Overview ............................................................................................................................................. 4
Vision and Mission ................................................................................................................................................. 5
Vision ............................................................................................................................................................................. 5
Mission ........................................................................................................................................................................... 5
About the Ministry of Finance and Economic Development .................................................................................. 5
Role and main functions ................................................................................................................................................ 5
Our priorities .................................................................................................................................................................. 6
Our legislation ............................................................................................................................................................... 6
Organisational structure ................................................................................................................................................ 6
Governance .................................................................................................................................................................... 9
Our stakeholders ............................................................................................................................................................ 9
Our critical issues ......................................................................................................................................................... 10
Accountant General’s report ................................................................................................................................ 10
Consolidated Fund Recurrent Revenue and Expenditure ............................................................................................. 10
Income for MFED ......................................................................................................................................................... 12
Expenditure for MFED .................................................................................................................................................. 13
Comparison of actual MFED financial results with 2014 Budget ................................................................................. 14
Kiribati National Statistical Office ........................................................................................................................ 16
Internal Audit ...................................................................................................................................................... 17
Accounting and Financial Services ....................................................................................................................... 18
Corporate Services ............................................................................................................................................... 19
National Economic Planning Office ...................................................................................................................... 19
Kiribati Customs Services ..................................................................................................................................... 23
Taxation ............................................................................................................................................................... 24
Kiribati Fiduciary Services Unit ............................................................................................................................ 24
Table of Tables
Table 1: MFED Establishment, 2013 and 2014 .......................................................................................................................... 7
Table 2: Government Recurrent Revenue by Source in 2014 ...................................................................................................11
Table 3: Government Recurrent Expenditure by Source in 2014 .............................................................................................12
Table 4: Income by Divisions of MFED, 2014 ...........................................................................................................................13
Table 5: Expenditure by Divisions of MFED, 2014....................................................................................................................14
Table 6: Expenditure for MFED Divisions against Budget, 2914 ...............................................................................................15
2
Table 7: Revenue for MFED Divisions against Budget, 2014 ....................................................................................................15
Table 8: Expenditure by Type against Budget, MFED, 2014 .....................................................................................................16
Table of Figures Figure 1: Revenue Equalisation Reserve Fund, Kiribati, 1984 to 2014 ......................................................................................21
Figure 2: Annual Debt Payments, Kiribati, 2014 to 2043 .........................................................................................................22
3
Minister’s Introduction
I would like to present the Annual Report of the
Ministry of Finance and Economic Development
(MFED), Kiribati for 2014. This reports provides full
details of the operations of the Ministry and the
achievements throughout the year. 2014 has been
another year of reform, particularly with in the field of
taxation with the introduction of the VAT in April 2014
combined with the abolition of Customs Duties.
Significant other economic reforms continued in 2014
including reforms to State Owned Enterprises (SOEs),
as the SOEs adjusted to the new SOE Reform Act that
was passed in 2013.
The Annual Report is based on the Ministry of Finance and Economic Development Strategic
Plan 2012–15. It is those strategies that have formulated the development of the Ministry in the
past year.
This Annual Report builds on our program to disseminate information about the performance of
the Ministry so that the Ministry is accountable and transparent to the public. I would like to
extend my thanks to the staff of the Ministry for their continued dedication in 2014 and their
important work towards the progression of the economic reforms that will serve Kiribati well
into the future.
Hon Tom Murdoch
Minister of Finance and Economic Development
July 2014
4
Secretary’s Overview
It is my pleasure to present the Annual Report of the Ministry
of Finance and Economic Development for the calendar year
2014.
Having been Secretary with the Ministry since December
2014, I would like to acknowledge the enthusiasm and
leadership of my predecessor, Mr Elliot Ali who has taken up a
position with the World Bank. Under his leadership, the
Ministry achieved many reforms particularly with regard to the
management of State Owned Enterprises and the introduction
of the VAT commencing in April 2014. These reforms will
provide lasting benefits for the people of Kiribati. I shall
continue with the momentum for change particularly in public financial management and
economic reform.
I would also like to thank those donors who have supported economic reform in 2014 including
the World Bank, the IMF, Australia, New Zealand and the ADB. I would also like to
acknowledge the work of the Pacific Financial Technical Assistance Centre (PFTAC) for
assistance with financial management, taxation reform and the upgrading of statistics through the
year. As well I wish to thank other donors who have assisted with statistics (SPC, IMF) and with
other projects (the EU). The Pacific Regional Infrastructure Facility has also been of great
assistance in monitoring the performance of our large infrastructure projects.
In this report, the achievements of the Ministry in 2014 will be chronicled including:
The introduction of the VAT and Excise Taxes which commenced in April 2014 and the
abolition of Customs Duties.
The first budget support from donors including the World Bank, ADB and New Zealand
in recognition of major economic reforms undertaken by the Government.
The measures undertaken to progress the State Owned Enterprise Reform Act of 2013.
The constructive management of the Government’s debt through the new policy reforms.
The successful Development Partners’ Forum which was held in March 2014.
Further strengthening of public financial management through the introduction of an
upgraded software system to enable Ministries to maintain better records of commitments
and expenditure.
Further improvements in statistical collections, in particular, information on National
Accounts and Balance of Payments.
A collaborative report with the Ministry of Fisheries and Marine Resource Development
on the revenue collections from fishing license fees.
The upgrading of the Ministry website.
Eriati Manaima
Secretary
Ministry of Finance and Economic Development
5
Vision and Mission
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 mission of MFED is 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.
Inclusive economic growth in a sustainable manner is vital for a country such as Kiribati which
is heavily dependent upon its marine resources for economic development. Inclusive growth
means that all citizens of Kiribati share in the prosperity gained from the implementation of
economic reforms. The economic reform program has been important in modernising public
financial management and ensuring that government funds are not diverted to uneconomic
activities.
The broad sector strategy toward promoting inclusive economic growth and poverty reduction
includes the following macro strategies as aligned within the Kiribati Development Plan (KDP)
2012-15:
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.
Improved public financial management
Aid effectiveness and results based management
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:
6
As a lead Ministry its main role is to coordinate all efforts from supporting Ministries on
the implementation of the KDP.
More specifically MFED works 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 2014 included working towards
improving revenue performance through such measures as the adoption of the VAT and Excise
Tax and improving the management of State Owned Enterprises and the public debt, and raising
the standards of public financial management.
Our legislation
MFED is the responsible authority for the following Legislative Acts: Public Finance (Control
and Audit) Act, Procurement Act, Stores Regulations, Internal Revenue Board Act, Statistics
Act, Census Act, Kiribati Provident Fund Act, Kiribati Insurance Act, Development Bank of
Kiribati Act, Loans and Borrowing Act, the State Owned Enterprises Act, the Excise Tax Act,
Value-Added Tax Act, the Revenue Administration Act and the Anti-Corruption Act.
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
(iii) Accounting Division
(iv) Internal Auditing Division
(v) Taxation Division
(vi) Kiribati Customs Service
(vii) Kiribati National Statistics Office
(viii) National Authorizing Office
(ix) Kiribati Fiduciary Services Unit (playing supportive role)
(x) Information Technology Unit (IT)
The total number of staff in the Ministry was unchanged at 170 between 2013 and 2014. There
were 166 permanent and 4 Supernumerary positions in 2014. Table 1 shows the establishment
by Division.
7
Table 1: MFED Establishment, 2013 and 2014
Division 2013
Establishment
2014
Establishment
Corporate Services 21 22
Accounts 51 51
Customs 33 33
Internal Audit 5 5
National Economic Planning Office 14 14
Kiribati National Statistics Office 14 14
Taxation 21 21
IT Services 6 6
Total Permanent Posts 165 166
Supernumerary Positions1 5 4
Total 170 170
Source: PSO
1 One Human Resource Manager and four Taxation Assessors in 2013. In 2014, four Taxation Assessors.
8
The functional Organizational Chart showing the organization of the Ministry’s departments is provided below.
Minister
Secretary
State-Owned
Enterprises
DBK
KPF
KICDeputy
Secretary
SPECIAL UNITS-KFSU, NAO
Director
NATIONAL STATISTICS
OFFICE
Republic Statistician
INTERNAL AUDIT
Senior Internal Auditor
ACCOUNTING & FINANCIAL
SERVICES
Accountant General
CORPORATE SERVICES
Assistant Secretary
NATIONAL ECONOMIC PLANNING
OFFICE
Director
KIRIBATI CUSTOMS SERVICES
Comptroller of Customs
TAXATION
Commissioner of Taxation
INFORMATION TECHNOLOGY
IT Manager
9
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 Team
monitors the progress of achievements. Each division provides a full report of its progress at these
meetings.
The Internal Revenue Board which includes 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 2014. 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 2014 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, and two members from the
private sector.
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 2014 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, MFED provides advice and support on strategic
planning, budget management, public finance, 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.
Kiribati Insurance Corporation
The Kiribati Insurance Corporation business is responsible for insurance business in Kiribati.
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.
10
ANZ Bank of Kiribati
The Kiribati Government’s share in the ANZ Bank of Kiribati is 25%. 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 in
the Pacific. Roughly two-thirds of the country is two meters above mean sea level. The coral islands are
rather infertile so that agricultural production possibilities are limited. Because the islands are low-lying,
Kiribati is subject to major natural risks especially with regard to climate change.
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 Pacific. Kiribati is highly reliant on imports,
including foodstuffs and fuel. Key exports are coconut products and fish. The trade deficit in 2013 was
65% of GDP. The significant demand for government resources is also a problem, due to low levels of
revenue collection.
The taxation base is very low and therefore revenue raised through personal income taxes and company
taxes are also low. Non-compliance with regard to company taxes has been a continuing problem which
leads to less than adequate government taxation revenue. Fisheries license fees are the major source of
revenue with 75% of total government revenue from that source in 2014. However, revenue from
fisheries is volatile depending on a range of issues including the international price of tuna, the weather,
and the stock of tuna. The Government of Kiribati closed the Phoenix Island Protected Area from
commercial fishing from 1 January 2015. This volatility in revenue raises challenges with regard to
adequate forecasting of future streams of revenue.
The sovereign wealth fund, the Revenue Equalisation Reserve Fund (RERF), has suffered in the past due
to the Global Financial Crisis and drawdowns to support the government deficit. However, in more
recent years the RERF has achieved more positive outcomes.
In the recent past there had been significant growth in SOE subsidies which placed pressure on recurrent
expenditure for basic services. Improving the commercial management of SOEs, reducing inefficiencies,
and increasing the transparency of subsidies were regarded as priority reforms. As a result, the
Government has embarked on an ambitious program of State-Owned Enterprise reform. An SOE Reform
Act was passed in 2013 which provided for Community Services Obligations for SOEs. As well, SOEs
have to abide by strict guidelines in the provision of regular financial statements and business plans.
Under the Act, issuing directorships of SOEs is regulated by stringent guidelines.
Accountant General’s report
Consolidated Fund Recurrent Revenue and Expenditure
Table 1 shows a comparison of actual and budgeted revenue collections in 2014. The total recurrent
revenue collected in 2014 was $187.84 million. This is $109.08 million over the total revenue budget
estimate of $78.76 million. The significant increase in revenue is due to fishing licences which rose to
$141.57 million. Total revenue from fishing license fees exceeded its budget by $103.57 million and
reflected the move to the Vessel Day Scheme which has had a significant impact on fishing revenue.
Total revenue from all fishing sources was $142.68 million.
11
There was a large increase in revenue collection in the year 2014 compared to the previous year. In
2013, the total revenue collected was 126.76 million whereas in 2014 revenue had risen to $187.84
million, an increase of $61.08 million or 48.2%.
Table 2 below shows the revenue collected in 2014, by source. Fishing Licenses acounted for 76.0% of
total revenue, Budget support was 5.5%, then VAT at 4.5%, Personal Taxation at 3.7%, Company
Taxation 2.4%, Excise Tax at 2.4%, Import Duties at 2.1% and the Line Ministries revenue at 1.5%.
Total taxation revenue actually received was 105.8% of the budget estimate.
Table 2: Government Recurrent Revenue by Source in 2014
The list shows once again that the government revenue base is very small, and very volatile. Fishing
licences, for instance, were estimated to be $38 million for the year 2014 yet the actual licence received
was $141.57 million — nearly four times the amount initially estimated. Revenue from fishing licenses
rose from $89.0 million in 2013. The taxation base however was on $28.4 million in 2014 compared with
the actual result of $29.6 million in 2013. This decline was mainly due to time lags associated with the
introduction of the VAT in April 2014.
The original government budget for expenditure approved by Parliament for 2014 was $114.2 million
(excluding supplementary estimates) however during the course of the year budget supplements of $6.05
million were requested bringing the total approved budget for FY2014 to $122.12 million.
The actual expenditure incurred in 2014 was $120.25 million (Table 3). This is slightly below the
approved revised budget figure resulting in an overall savings of $1.87 million at the end of financial year
2014. Total expenditure was 98.5% of the budget estimate. The major reason for the savings was a large
reduction in the copra price subsidy down from the budget estimate of $7.95 million to the actual figure
of $5.31 million, a saving of $2.64 million. With the government total expenditure for financial year 2014
Estimate ActualActual
Percentage
Variance
Under/ Over
$ $ % $
Personal Taxation 5,600,000 6,963,362 3.7 1,363,362
Company Taxation 5,500,000 4,511,017 2.4 (988,983)
Import Duty 4,200,000 4,006,320 2.1 (193,680)
Hotel tax 21,000 63,030 0.0 42,030
VAT 7,950,000 8,426,510 4.5 476,510
Excise Tax 3,600,000 4,465,677 2.4 865,677
Tax Revenue 26,871,000 28,435,917 15.1 1,564,917
Dividends from Shareholdings 1,100,000 1,239,536 0.7 139,536
All Fishing Revenue 38,413,500 142,682,265 76.0 104,268,765
JAXA 1,300,000 1,485,141 0.8 185,141
Registration of Ships 550,000 725,207 0.4 175,207
Other Ministries' revenue 2,028,270 2,873,485 1.5 845,215
Other Financing Support 8,500,000 10,401,013 5.5 (8,500,000)
Total Revenue 78,762,770 187,842,564 100.0 98,678,781
12
at $120.25 million and the total revenue received at $187.84 million (excluding the RERF drawdown),
this resulted in a surplus of $67.59 million. This follows the surplus of $21.18 million in 2013.
Table 3: Government Recurrent Expenditure by Source in 2014
Income for MFED
The following table 4 shows the income derived from the various Divisions of MFED in 2014. Total
revenue from MFED amounted to $40.69 million which accounted for 21.7% of revenue from all sources
(excluding the RERF drawdown). The largest amount was Budget Support of $$10.4 million followed
by VAT of $8.43 million.
13
Table 4: Income by Divisions of MFED, 2014
Expenditure for MFED
Table 5 shows the recurrent expenditure by Division for MFED for 2014. Total expenditure
was $2.81 million in 2014, a small increase on the 2013 figure of $2.71. Personal
emoluments accounted for 63.2% of all expenditure in the Ministry. Of the operational costs,
external travel was the highest area of expenditure accounting for 20.3% of total operational
costs, followed by electricity and gas at 17.9% of operational costs. The high external travel
expenditure reflects the high cost of international flights from Kiribati.
Accounts Admin Customs Statistics Taxation Grand Total
Budget Support 10,401,013 10,401,013
Company tax 4,511,017 4,511,017
Customs Division Servic 5,156 5,156
Customs Licence Fees 66,883 66,883
Dividend 1,239,536 1,239,536
Excise Tax 4,465,677 4,465,677
Import duties 4,006,320 4,006,320
Interest on consolidated fund 313,706 313,706
Interest on loan charges 18,435 18,435
Other taxes - Hotel 63,030 63,030
Personal income tax 6,963,362 6,963,362
Sale of Publications 10 10
Sale of warehouse Rent 98 98
Sundry revenue 198,064 198,064
VAT 8,426,510 8,426,510
Grand Total 1,437,600 10,733,154 4,078,457 10 24,429,597 40,678,818
14
Table 5: Expenditure by Divisions of MFED, 2014
Comparison of actual MFED financial results with 2014 Budget
Table 6 shows the actual expenditure for the Ministry against Budget estimates for recurrent
expenditure. On the expenditure side, all Divisions were slightly under budget in 2014, except for
Customs and Administration. In total. $2.81 million was spent in 2014 by the Ministry, with under
expenditure being $46,320 or 1.6% of the total revised budget.
Admin Accounts Customs Internal Audit IT NEPO Statistics Tax Grand Total
KPF Contribution 12,782 29,417 17,186 4,021 4,220 10,504 7,284 10,735 96,149
Salaries 159,950 367,230 204,655 51,140 52,329 138,086 112,117 164,659 1,250,164
Housing Assistance 2,356 7,781 3,894 2,091 12,345 1,057 4,188 33,712
Allowances 19,125 10,767 11,034 1,713 - 4,069 10,386 57,093
Overtime 16,263 26,886 37,363 112 1,017 331 18,066 100,038
Temporary Assistance 18,778 26,430 25,804 3,938 6,405 81,356
Leave grants 16,500 37,375 20,875 3,250 4,099 5,063 9,750 14,980 111,891
Sub total 245,753 505,885 320,810 58,523 69,407 165,997 134,608 229,419 1,730,402
Transport to work 44,608 3,436 20 11,379 59,443
Internal Travel 8,694 7,252 10,205 15,108 4,790 3,135 9,721 20,229 79,134
Local Training 1,913 300 1,259 1,016 4,488
Local Training - Catering 2,148 2,148
Relocation Expenses 5,045 5,045
External Travel 80,688 26,291 12,745 15,432 12,779 15,382 52,064 215,380
Cleaning 674 165 839
Telecomms 96,304 96,304
Electricity and gas 144,132 43,764 2,227 190,123
Water 2,003 2,003
Entertainment 9,495 9,495
Printing 1,560 1,897 3,457
Stationery & Supplies 19,603 10,956 3,420 17,914 16,214 2,506 8,283 78,896
Office Equipment & Furn 14,929 13,618 4,924 22,681 5,527 61,678
Repairs Equipment 1,613 214 1,247 3,074
Uniforms 10,181 10,181
Local Services 27,844 8,406 9,685 2,426 9,188 9,710 32,481 99,739
Overseas Services 54,841 54,841
Sundry Purchases 2,591 2,591
Hire of Plant/Equipment 54,213 42,040 96,253
Sub Total 480,907 136,967 155,934 20,953 72,830 33,674 44,271 129,575 1,075,112
Total Recurrent Expenditure 726,660 642,852 476,744 79,476 142,237 199,672 178,879 358,994 2,805,515
Other Commitments
Debt Servicing 10,087,262 10,087,262
Copra Price Subsidy 5,310,551 5,310,551
Freight Subsidy Local produce - -
Pension and KPF 6,242 6,242
Community Service Oblgations 5,000,000 5,000,000
Local Contribution to Development Fund -
International contributions 1,104,074 1,104,074
Domestic Airfare Subsidy (AKL) 163,467 163,467
Sub total 5,163,467 11,197,578 - - - 5,310,551 - - 21,671,596
Grand Total 5,644,374 11,334,546 155,934 20,953 72,830 5,344,225 44,271 129,575 22,746,708
15
Table 6: Expenditure for MFED Divisions against Budget, 2914
Table 6 shows the actual revenue for the Divisions of the Ministry against budget (excluding
RERF drawdowns).
Taxation revenue was $24.43 million which was above budget by $1.76 million or 7.8%.
Both personal tax and VAT collections were above budget expectations but poor compliance
issues saw company taxes fall below budget. The other main source of revenue, Customs
revenue was $4.08 million, which was $.20 million or 4.7% below the budgeted level. The
dividend from the Government of Kiribati’s shareholding with the ANZ Bank in Kiribati was
$1.24 million and was $139,538 higher than the budget estimate of $1.1 million.
Table 7: Revenue for MFED Divisions against Budget, 2014
Table 8 shows the expenditure by type against the budget estimates for 2014. While personal
emoluments were down significantly against budget (under expended by $90,908 or 5.0%),
operational costs were almost on budget with an excess of expenditure of $44,589 or 4.3%
difference.
Revised
Budget
Actual Variance
Over/(Under)
$ $ $
Administration 726,263 726,660 (397)
Accounts 644,505 642,852 1,652
Internal Audit 88,718 79,476 9,242
NEPO 210,239 199,672 10,567
Tax 372,000 358,994 13,006
Customs 475,651 476,744 (1,093)
Statistics 185,000 178,879 6,121
IT 149,459 142,237 7,222
Grand Total 2,851,834 2,805,515 46,320
Revised
Budget
Actual Variance
Over/(Under)
$ $ $
Admin 8,500,000 10,733,154 2,233,154
Accounts 1,160,000 1,437,600 277,600
Internal Audit
NEPO
Taxation 22,671,000 24,429,597 1,758,597
Customs 4,281,200 4,078,457 (202,743)
Statistics 500 10 (490)
IT
Total 36,612,700 40,678,818 4,066,118
16
Table 8: Expenditure by Type against Budget, MFED, 2014
Kiribati National Statistical Office
The KNSO is mandated to operate under the Statistics Act (and during the national
population census, 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.
Revised
Budget
Actual Variance
Over/(Under)
$ $ $
KPF Contribution 105,237 96,149 9,088
Salaries 1,365,729 1,250,164 115,565
Housing Assistance 57,516 33,712 23,804
Allowances 61,297 57,093 4,204
Overtime 73,978 100,038 (26,060)
Temporary Assistance 37,429 81,356 (43,927)
Leave grants 120,125 111,891 8,234
Sub total 1,821,311 1,730,402 90,908
Transport to work 55,802 59,443 (3,641)
Internal Travel 98,753 79,134 19,619
Local Training 18,190 4,488 13,702
Local Accom & Allowances 330 330
Local Training - Catering 4,995 2,148 2,847
Relocation Expenses 14,200 5,045 9,155
External Travel 152,019 215,380 (63,361)
Cleaning 1,600 839 762
Telecomms 128,000 96,304 31,696
Electricity and gas 154,000 190,123 (36,123)
Water 200 2,003 (1,803)
Entertainment 7,000 9,495 (2,495)
Printing 4,000 3,457 543
Stationery & Supplies 80,631 78,896 1,735
Office Equipment & Furn 53,101 61,678 (8,577)
Repairs Equipment 13,500 3,074 10,426
Uniforms 7,000 10,181 (3,181)
Local Services 56,322 99,739 (43,417)
Overseas Services 49,300 54,841 (5,541)
Sundry Purchases 2,400 2,591 (191)
Hire of Plant/Equipment 129,180 96,253 32,927
Sub total 1,030,523 1,075,112 (44,589)
Total Recurrent Expenditure 2,851,834 2,805,515 46,320
17
One of the major roles for the KNSO in 2014 was the implementation of the 2015 Population
Census which included pre-census activities prior to the commencement of the Census. This
involved much planning, budgeting and documentation of project proposals. A few of the
early census processes such as household listing were undertaken towards the end of 2014.
Other statistical productions of the KNSO in 2014 included figures for International trade
Statistics, balance of payments, copra statistics, immigration movements, the retail price
index, national accounts (GDP figures), government finance statistics, meteorological
information, electricity generation and usage, and other business statistics.
In 2014, the KNSO reported Government Finance Statistics and Balance of Payments to the
IMF.
Training programs in 2014 undertaken by staff of the KNSO during the year through the IMF
(PFTAC) technical assistance included work on the balance of payments and national
accounts. The SPC also assisted in the preparation of the project proposal for the 2017
Household Income and Expenditure Survey.
Training programs in 2014 undertaken by staff of the KNSO were:
Statistics New Zealand Pacific Annual Attachment Program, 6 March to 17 April
2014
Workshop on practical issues on the compilation and dissemination of Capital
Accounts, (PFTAC), Nadi, 6-12 April 2014
GDP Attachment, (PFTAC), Suva, 13-19 April 2014
Government Financial Statistics, (IMF/JICA) Nadi, July 2014
Regional Workshop on Gender Statistics and Human Rights Reporting, Nadi, 4-8
August 2014
Workshop on practical issues on the compilation and dissemination of Foreign Direct
Investment Statistics, (IMF), Singapore Statistical Training Institute, 29 September to
3 October 2014
GDP Workshop, (PFTAC), Suva, October 2014.
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 and regulations.
While the Internal audit activities had been mainly focused on financial audits in the past, the
internal audit division has started to broaden its area of auditing by carrying out some payroll
audits. This is a huge task taken on by a small number of internal audit staff but it is
anticipated that with more experience in carrying out this task, more payroll audits would be
undertaken each year.
Performance, management and IT audits will be the main targets or goals of the Internal
Audit in the near future.
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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
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, and co-funded by the Asian Development Bank and the Australian Government was
officially concluded on the 30th of March 2015.
The project has three overarching outcome objectives as follows;
Output 1: Building the effectiveness and efficiency of MFED,
Output 2: Strengthening budget management, monitoring and evaluation,
Output 3: Strengthening capacity in the Accounting Department.
Under Output1-- the objective is to identify core competencies required of staff or group of
staff working in a particular area of responsibility or function and then develop and build
capacity on that core responsibility. The core competency-based assessment based on the
core responsibilities and training concept that was to culminate in the awarding of in-house
Certificate in Government of Kiribati Accounting Practices however due to staff movement
has made progress in this important initiative slow.
Under Output 2-- the objective is to align format of the development budget Chart of Account
with that of the recurrent budget Chart of Account so that integrated planning and
consolidated reporting could be facilitated. The SPFM project has assisted in this resulting in
the design of new and improved COA which the Accounting Department has already used.
Another important achievement under this output was that a budget which is more realistic
and transparent (an important budgetary feature major donors would like to see) as well.
Output 3--is based on Output 1 but focused on improving internal processes and procedures
within the Accounting Department. Major achievements under this output were improvement
in management and accounting for TELMOs. It is now easy to track, monitor and even
identify anomalies in the telmos system. Knowledge and competence in using Attaché was
also improved. One major setback however under this output was the inability of Attaché to
facilitate commitment management and expenditure control. This is an add-on feature of
Attaché which is expected once running and operational will improve tracking of
commitment (LPOs and DWs), reconciliation between line ministries and MFED and of
course timely production and submission of Financial Reports whether it is for management
of auditing purposes. The functionality to achieve these important outcomes is not available
in the Attaché system. During the last four months of the projects, several attempts were
made by an Attaché expert but failed to make it work. Realizing that this will never work and
fortunately with the assistance of the local TA at that time a solution was developed to work
in parallel with Attaché. The parallel solution was developed using Microsoft Access
database all ministries have since been using.
In November, just toward the end of 2014 a new TA- Advisor to Treasury, now under the
funding of the EU fund commenced, however, after four months of working he rendered his
resignation. In May 2015 a replacement came in to carry on the task of the former TA from
where he stopped. The Terms of Reference and focus of the new TA was to improve internal
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processes and procedures which is very much an extension of the SPFM project to sustain
good progresses already made. The new TA and Acting. Accountant General priority
objective which they have already embarked on was perfecting the E-Votebook which all
ministries are now using to address and improve commitment accounting. The E-Votebook
was created and designed in such a way that its features and usage can span all ministries.
While work on this was progressing, a feasibility study will be undertaken to determine an
alternative accounting package more aligned and synchronised with the nature and scope
within which the Government of Kiribati operates. The EU funding facility has expressed its
interest to fund this study.
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 Division is to ensure that the Information Technology infrastructure is
always available, secure and working as expected to support the core services of the Ministry.
This infrastructure include the servers and networking equipment that are hosting and
servicing the Accounting Information System, the Taxation Revenue System as well as the
internal IT Systems for the Ministry’s headquarters in Bairiki. A staff of the IT Division is
also posted with the Kiribati Customs Services office in Betio and is tasked with the support
of the Customs IT Systems on site. The IT Division also provides technical support and
advice to all Divisions of the Ministry and from time to time to the Treasury officials who are
outposted in each government ministry. In the past year, the IT Division has also been
involved in some major projects of the Ministry including the rollout of the new version of
Taxation IT Systems and as well as the upgrade of the Accounting System currently used in
the Ministry.
The Ministry website was continually upgraded to provide more information to the public,
including statistical data and economic reports. The number of hits on the website will be
monitored over forthcoming years. There were 493 hits in December 2014.
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.
Within NEPO the Strengthening Public Finance Management Project has been assisting with
linking planning and budgeting. An integrated Planning and Budgeting Operating and
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Training Manual has been completed. 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
seven times during 2014. 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 projects on outer islands including Abemama, Arorae, Butaritari,
Nonouti, Marakei, and Onotoa.
The Development Partners Forum was carried out in March 2014. The Forum covered a
wide range of issues including the progress of the KDP, and the Government’s priority areas
of poverty alleviation, population, rural development, energy, and infrastructure. 49
development partner participants attended the Forum.
Participants at the 2014 Development Partners’ Forum
Seminars for Ministries were undertaken for the year with the Project Cycle, Budget Process,
Monitoring and Evaluation, and the Logical Framework Approach. Staff training was carried
out on Risk Management, Monitoring and Evaluation, Excel, Word, PowerPoint, and Charts.
The Investment Committee met three times during 2014. The Revenue Equalisation Reserve
Fund (RERF) stood at $678.97 million at the end of December 2014 compared with $660.92
million in December 2013. A total of $8.37 million was withdrawn from the RERF in 2014
for the purchase of land in Fiji. This compares with a withdrawal of $9.62 million in 2013.
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Figure 1: Revenue Equalisation Reserve Fund, Kiribati, 1984 to 2014
The Debt Management Unit was established in early 2014 following the approval of the debt
policy by Cabinet in late 2014. The unit is attached to the SOE and Investment Unit within
NEPO with a staff member who is responsible for the overall function of the debt
management (debt issuance and risks monitoring).
In late 2013, Cabinet approved the debt policy which was based on four principles
i. The avoidance of non-concessional debt for central government operations;
ii. All borrowing and issuance of guarantees should provide economic or social benefits
and generate financial returns adequate to cover the cost of servicing debt;
iii. Appropriate authority will be gained for all borrowing and issuance of guarantees;
iv. Cabinet and decision-makers will receive appropriate advice before authorizing any
borrowing and guarantees.
Since the policy has been implemented one new loan was approved for the amount of
AU$20,227,983. The loan agreement was signed on 6 August 2014 with ICDF (Taiwan).
This is a concessional loan under the principles of the policy. The purpose of the loan is to
upgrade and repair the Bonriki International Airport. In addition, outstanding loans mainly
from SOEs were all paid off in early 2014 for the amount of AU$9.1 million.
At the end of 2014, the present value of the total debt was AU$27.7 million which is
equivalent to 401% of export earnings, 13.8% of GDP and 14.8% of revenue. Annual debt
payments in 2014 were $10.1 million of which $9.1 million were the outstanding SOE loans.
This was 145.9% of exports and 5.4% of revenue. Annual debt payments will reach a peak in
2021.
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Figure 2: Annual Debt Payments, Kiribati, 2014 to 2043
Source: NEPO
During 2014, measures under the new SOE Act were implemented. This included full
compliance of all SOE board appointments with the provisions of the Act; the provision of
Statements of Intent by SOEs2; and SOE community service obligation were included in the
2014 annual budget. A roadmap for reform and rationalization of the coconut industry has
been approved by Cabinet.
The ADB has approved a second technical assistance project entitled “Enhancing economic
competitiveness through State-owned Enterprise reform” to further progress the SOE reform
program. Reforms will include the rationalization of three SOEs (including the Plant and
Vehicle Unit and domestic shipping) as well as providing training workshops for SOE
managers and SOE directors on planning, finance, performance monitoring, human resources
and reporting under the Act.
As a result of the economic reforms and reforms to SOEs, for the first time, Budget Support
of $10.4 million was provided by the World Bank, New Zealand and the ADB. The support
was based on the Government of Kiribati meeting agreed targets in the economic reform
program including:
A joint report on sources of fisheries revenue produced by the Ministry of Fisheries and
Marine Resource Development and MFED. This report is available on the MFED website. Key provisions of the new SOE Act were implemented, including: i) full compliance with
legislative provisions for all board appointments; ii) the five largest SOEs submited full
financial statements to the Government within three months of the end of the 2013 fiscal year;
and iii) inclusion of community service obligation subsidies in the annual budget.
Cabinet approved a roadmap for reform and rationalisation of the copra sector
Cabinet approved key RERF management reforms.
Reforms in the telecommunications sector.
2 Statements of Intent are statements of the agreement between Ministers and the SOE on their business strategy over the next three years.
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Seminars for Ministries were undertaken for the year with the Project Cycle, Budget Process,
Monitoring and Evaluation, and the Logical Framework Approach. Staff training was carried
out on Risk Management, Monitoring and Evaluation, Excel, Word, PowerPoint, and Charts.
Conferences, workshops and training courses attended by staff in 2014 include:
PFTAC/Department of Finance Workshop on Public Financial Management Strategic
Development in Australia 17-28 February
Fourth Asian Regional Public Debt Management Forum, Tbilisi, Georgia, 23-25 April
SPC-EU EDF10 Deep Sea Minerals Project Pacific ACP States Regional Workshop:
Fiscal Regime and Revenue Management, in Cook Islands 13-16 May
Climate Investment Funds 2014 Partnership Forum, Montego Bay, Jamaica, 23-24
June
Fourth Steering Committee Meeting for the EU funded Global Climate Change
Alliance: Pacific Small Island States Project (GCCA: PSIS). Niue from 20-27 June
2014.
Small Islands Developing States meeting, New York, June
Small Islands Developing States meeting, Samoa, 1-4 September
Training Workshops for Pacific Island Countries on Developing Funding Proposals
for the Kyoto protocol Adaptation Fund & Strengthening the Capacities of National
Designated Entities of the Climate Technology Center and Network (CTCN). –
SPREP and UNEP - 15-20 September, Apia
Workshop on national health accounts, Fiji, 22-26 September 2014
Least Developed Countries Expert Group Regional Training workshop on National
Adaptation Plans for Pacific Least Developed countries Vanuatu, 3-7 November
Asian Regional Cooperation and Integration Roundtable Conference on Productivity,
Manila, (ADB), 17-18 November
"Climate Change Adaptation Strategy for Small Island Developing States", Singapore
from 24 to 28 November 2014, sponsored by Japan/Singapore
EDF 11 Regional Conference 25-26 November, Tahiti
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 Service core functional roles are revenue collection, border security and
trade facilitation. It also provides policy advice to the Government through MFED. Kiribati
Customs Service 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.
Since 1 April 2014 with the introduction of the new tax regime, a Value Added Tax (VAT) and
Excise Tax replaced Import Duty. This marked the turning point of Kiribati Customs Service
in its revenue collection. Since Import Duty has been abolished, the KCS is now focused on
VAT at the border and Excise on certain commodities. The bulk of the revenue collection is
now with the Tax Office through the VAT. In 2014, the KCS collected $5.5 million in VAT
and $4.4 million in Excise.
Besides revenue collection responsibilities, this division is also tasked with border
management/security and trade facilitation. This deals with ensuring safe and secure borders
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while continuing to improve the flow of imports and exports which shall ultimately contribute
substantially to social and economic well-being of the nation. All approved ports of entry in
the Republic except Canton Islands are manned by customs officers to ensure all matters
pertaining to Border Management are attended to. The ports of entry include the seaports of
Betio, Kiritimati, Fanning and Canton; and international airports of Bonriki, and Kiritimati.
There is a plan in future to increase the number of staff to cater for the increase in the volume
of trade in Kiritimati as well as to reinstate Customs officials in Canton to coincide with the
PIPA development.
Kiribati Customs Service continues to strive for the best in its modernisation practices and to
international changes. It will maintain its obligations to the Government at the regional and
international levels.
Taxation
The outputs of the Taxation Division includes collection of Personal income tax or Pay As
You Earn (PAYE), Company or Business Tax, The Value Added Tax (VAT) and improving
of tax voluntary compliance by educating taxpayers through radio, pamphlets, circulating
letters and outer island visits and consultation with business and employers throughout
Kiribati.
In December 2013 Parliament enacted three new Tax laws namely:
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 Act
commences it operation from its ascension i.e. on 31 December 2013.
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 came into operation from 1 April 2014.
The Revenue Administration Act (RAA) 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 on time. Like the Excise Tax Act, The RAA
commenced it operation from its ascension on 31 December 2013.
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.
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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.
