Pacific Islands Forum Fisheries Agency PACIFIC ISLANDS FORUM FISHERIES AGENCY Financial statements for the year ended 30 June 2017 Table of contents Page Director General's report I Independent auditor's report 3 Statement of financial performance 5 Statement of financial position 6 Statement of changes in equity 7 Statement of cash flows 8 Statement of comparison of budget and actual amounts 9 Notes to the financial statements 10 PACIFIC ISLANDS FORUM FISHERIES AGENCY Director General's report The Director General of Pacific Islands Forum Fisheries Agency (FFA) is pleased to present the report on the financial statements of the FFA Secretariat which comprises the General Fund, Trust Fund, Housing Fund and Vessel Register Fund for the financial year ended 30 June 2017. In compliance with the provisions of the Secretariat's Financial Regulations, the Director General reports as follows: Review of operations and changes in state of affairs The Forum Fisheries Agency (FFA) was established in August 1979 by an international convention. The FFA's current membership comprises of the governments of sixteen countries and one territory member government, a total of seventeen members. The FFA was established to help member countries maximize benefits from sustainable use of the fisheries resources within their 200 miles exclusive economic zone. As stipulated in the Secretariat Convention, the functions and responsibilities of the Secretariat are to: * collect, analyse, evaluate and disseminate to Parties relevant statistical and biological information with respect to the living marine resources of the region and in particular the highly migratory species; * collect and disseminate to Parties relevant information concerning management procedures, legislation and agreements adopted by other countries both within and beyond the region; * collect and disseminate to Parties relevant information on prices, shipping, processing and marketing of fish and fish products; * provide, on request, to any Party technical advice and information, assistance in the development of fisheries policies and negotiations, and assistance in the issue of licences, the collection of fees or in matters pertaining to surveillance and enforcement; * seek to establish working arrangements with relevant regional and international organisations, particularly the South Pacific Commission; and * undertake such other functions as the Committee may decide. The core functions of the Secretariat remained unchanged during the financial year under review. During the financial year there was no significant change in the principal activities or state of affairs of the Secretariat other than that referred to in the financial statements or notes thereto. The Secretariat reported a net surplus of US$327,524 (2016: US$649,687 deficit). Independent audit report The financial statements have been audited by Ernst & Young and should be read in conjunction with the independent audit report on page 3. Audit fees and non-audit fees are disclosed at Note 8. Other information Pacific Islands Forum Fisheries Agency's registered office and its principal place of business are as follows: 1 FFA Road PO Box 629 Honiara Solomon Islands Tel: (677) 21124 Fax: (677) 23995/20092 Website: httc/www.ffa it 1 PACIFIC ISLANDS FORUM FISHERIES AGENCY Director General's report - continued Director General's declaration The Director General declares that: (a) the financial statements fairly present the financial position of Pacific Islands Forum Fisheries Agency ('the Secretariat') and its financial performance and cash flows as at the end of the 2017 financial year; (b) the financial statements of the Secretariat have been prepared using appropriate accounting policies, consistently applied and supported by reasonable judgments and estimates; (c) all relevant financial reporting and accounting standards have been followed; and (d) in the conduct of its work, the Secretariat has complied with the requirements of the Financial Regulations. es M ick Director General Honiara, 27th September 2017. 2 Pacific House Tel: +679 331 4166 Level 7 Fax: +679 330 0612 1 Butt Street Suva Fiji ey.com PO Box 1359 Suva Fiji Building a better working world INDEPENDENT AUDITOR'S REPORT To the members of the Pacific Islands Forum Fisheries Agency Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Pacific Islands Forum Fisheries Agency "the Secretariat", which comprise the statement of financial position as at 30 June 2017, and the statement of financial performance, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Secretariat as at 30 June 2017, and of its financial performance and its cash flows for the year then ended in accordance with International Public Sector Accounting Standards ("IPSAS). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Secretariat in accordance with the ethical requirements that are relevant to our audit of the financial statements in Fiji and we have fulfilled our other responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Director General and Management for the Financial Statements The Director General and management are responsible for the preparation of the financial statements in accordance with International Public Sector Accounting Standards, and for such internal control as the Director General and management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Director General and management are responsible for assessing the Secretariat's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Director General and management either intend to liquidate the Secretariat or to cease operations, or have no realistic alternative but to do so. The Director General and management are responsible for overseeing the Secretariat's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud and error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. 3 Pacific House Tel: '679 331 4166 Level 7 Fax: +679 330 0612 1 Butt Street Suva Fiji ey.com PO Box 1359 Suva Fiji Builng a better worldng world INDEPENDENT AUDITOR'S REPORT continued Auditor's Responsibilities for the Audit of the Financial Statements continued As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Secretariat's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Director General and management. * Conclude on the appropriateness of the Director General's and management's use of the going concem basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Secretariat's ability to continue as a going concern. If we conclude that material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures, are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Secretariat to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosure, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Director General and management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Director General and management with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Ernst & Young Chartered Accountants Sikell Tuinamuana Partner Suva, Fiji 27th September 2017 4 PACIFIC ISLANDS FORUM FISHERIES AGENCY Statement of financial performance for the year ended 30 June 2017 Note 2017 2016 US$ US$ Income Member country contributions 5 1,735,874 1,686,959 Donor funds 6 12,132,571 10,529,173 Vessel registration fees 3,904,862 3,567,671 Housing rental receipts 230,538 37,513 Interest received 41,261 26,499 Program support and cost recovery 189,192 120,498 Australia's project development fund donation 286,815 156,250 US Treaty levy 315,000 314,075 Vessel levy 84,073 143,707 Benefit from property, plant and equipment 345,598 333,479 Other income 255,195 92,160 Total income 19,520,979 17,007,984 Expenditures Output 1: High Level Advice 7 4,464,816 3,285,343 Output 2: Fisheries Management 7 3,376,790 1,871,607 Output 3: Fisheries Development 7 2,264,042 2,888,948 Output 4: Fisheries Operations 7 4,646,619 4,338,286 Output 5: Corporate Services 7 4,441,188 5,273,487 Total expenditures 19,193,455 17,657,671 Surplusl(deficit) for the year 327,524 (649,687) The above statement of financial performance should be read in conjunction with the notes to the financial statements. 5 PACIFIC ISLANDS FORUM FISHERIES AGENCY Statement of financial position as at 30 June 2017 Notes 2017 2016 US$ US$ Assets Current assets Cash and cash equivalents 21 14,119,316 10,072,717 Receivables from exchange transactions 10 461,219 836,845 Receivables from non-exchange transactions 11 340,754 624,475 Prepayments 12 174,488 189,346 Total current assets 15,095,777 11,723,383 Non-current assets Property, plant and equipment 13 7,155,782 5,609,172 Prepayments 12 83,840 78,359 Total non-current assets 7,239,622 5,687,531 Total assets 22,335,399 17,410,914 Liabilities Current liabilities Payables and accruals from exchange transactions 14 3,347,420 3,282,368 Payables and accruals from non-exchange transactions 15 9,308,041 6,299,624 Employee benefits 16 745,965 860,356 Deferred income liability 17 340,349 333,479 Total current liabilities 13,741,775 10,775,827 Non-current liabilities Employee benefits 16 158,105 142,074 Deferred income liability 17 6,730,150 5,115,168 Total non-current liabilities 6,888,255 5,257,242 Total liabilities 20,630,030 16,033,069 Net assets 1,705,369 1,377,845 Equity Accumulated surpluses 1,705,369 1,377,845 Total equity 1,705,369 1,377,845 Signed in ac dance ith the Financial Regulation of Pacific Islands Forum Fisheries Agency: Ja es Movi k Director eneral Honiara, 27th September 2017. The above statement of financial position should be read in conjunction with the notes to the financial statements. 6 PACIFIC ISLANDS FORUM FISHERIES AGENCY Statement of changes in equity for the year ended 30 June 2017 Accumulated funds US$ Balance at 1 July 2015 2,027,532 Deficit for the year (649,687) Balance at 30 June 2016 1,377,845 Surplus for the year 327,524 Balance at 30 June 2017 1,705,369 The above statement of changes in equity should be read in conjunction with the notes to the financial statements. 7 PACIFIC ISLANDS FORUM FISHERIES AGENCY Statement of cash flows for the year ended 30 June 2017 Notes 2017 2016 US$ US$ Cash flows from Operating Activities Receipts from member countries contribution 5 1,704,098 1,667,516 Donor funding 6 14,617,877 12,089,398 Receipts from vessel registration 3,869,021 3,382,828 Rental receipts 236,497 32,695 Receipts from program support 189,192 133,466 Other receipts 2,401,542 721,782 Inflows from receipts 23,018,227 18,027,685 Payments for staff costs (7,070,261) (6,650,237) Payments for project costs (8,540,061) (8,970,681) Payments for housing fund costs (1,423,341) (1,380,229) Outflows from payments (17,033,663) (17,001,147) Net cash generated by Operating Activities 21(b) 5,984,564 1,026,538 Cash flows from Investing Activities Interest received 40,233 34,061 Payments for property, plant and equipment (141,692) (186,544) Proceeds from disposal of assets 891,259 77,302 Increase on revaluation of land and building (2,727,765) - Net cash used in Investing Activities 1,937,965) (75,181) Net increase in cash and cash equivalents 4,046,599 951,357 Cash and cash equivalents at the beginning of the year 10,072,717 9,121,360 Cash and cash equivalents at the end of the year 21(a) 14,119,316 10,072,717 The above statement of cash flows should be read in conjunction with the notes to the financial statements. 8 �О iil t3� �Q С� о0 дС1 Ct и с'7 st г 00 i`J ел Сд СО N т 1+ т(� '� �- и N�7 о о[V о О Ср � С7 � и О и ED QO �� N � CD (L1 � i'�J f� и о СЯ Q О]i т V' о 1� О CV � iO N f� Q1 � i'D 1� Р- OJ 0� � ц? 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Summary of Trust Fund expenditures 2017 % of 2017 % of 2016 % of Donors Budget Total Actual Total Actual Total USD LISD LISD ADFAT - Program funding Output 1-. High level advice 1,365,366 1,092,496 863,705 Output 2-. Fisheries management 444,878 435,120 407,395 Output 3. Fisheries development 661,223 560,776 530,260 Output 4: Fisheries operations 422,231 338,545 266,070 Output 5: Corporate services 340,952 259,202 417,874 3,234,649 19.21% 2,686,140 22.75% 2,486,304 24.06% ADAWR - NTIS Output 1: High level advice 123,746 94,403 43,494 123,746 0.73% 94,403 0.80% 43,494 0.42% ADFAT - FFAIPNA Output 1 - High level advice 44,867 38,300 - Output 2: Fisheries management 32,799 65,094 - Output 5 Corporate services 38,836 9,091 22,068 116,502 0.69% 112,484 0.95% 22,068 0.19% ADFAT - CDS Output 1: High level advice 17,500 5,733 - 17,600 0.10% 6,733 0.06% - 0.00% NZMFAT - Program funding Output 1: High level advice 363,860 336,623 637,457 Output 2: Fisheries management 261,979 233,269 288,542 Output 3: Fisheries development 624,072 529,814 609,543 Output 4: Fisheries operations 554,061 309,266 - Output 5- Corporate services 14,144 - 393,077 1,818,116 10.80% 1,408,970 11.93% 1,928,619 18.67% NZMFAT - Investment, Export Facilitation Output 3: Fisheries development 552,156 506,743 436,520 552,156 3.28% 506,743 4.29% 436,620 4.23% NZMFAT - Pacific Fisheries Training Output 1 -. High level advice 889,385 778,693 406,793 889,385 5.28% 778,693 6.60% 406,793 3.94% NZMFAT - Information Management Output 4: Fisheries operation 613,093 680,841 639,284 613,093 3.64% 680,841 5.77% 639,284 6.19% NZMFAT - Infrastructure Investment Output 4-. Fisheries operation 3,213 837 96,731 Output 5: Corporate services 140,494 142,871 21,280 143,707 0.85% 143,708 1.22% 118,011 1.14% 37 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2017 - continued 26. Summary of Trust Fund expenditure - continued 2017 2017 % of 2016 %of Donors Budget % of Total Actual %of Actual %of _________________ SD SD Total UD Total USD USD UISD NZMFAT - Te Vaka Moana Output 3: Fisheries development 491,579 232,220 227,540 Output 4: Fisheries operations 114,820 73,644 96,892 606,399 3.60% 305,864 2.59% 324,432 3.14% NZMFAT - Input to Leaders Report Output 3: Fisheries development 219,490 152,137 156,923 219,490 1.30% 152,137 1.29% 156,923 1.52% NZMFAT - Increase in Employment & Economic Benefits Output 3: Fisheries development 463,811 109,430 463,811 2.75% 109,430 0.93% - 0.00% NZMFAT - SP Tuna Long line Policy & Management Output 2: Fisheries management 447,415 10,072 447,415 2.66% 10,072 0.09% - 0.00% OFCFlJPF Output 1: High level advice 434,588 281,656 208,312 Output 3: Fisheries development 579,310 288,123 243,116 Output 4: Fisheries operations 274,397 153,856 355,373 Output 5: Corporate services 73,115 0 - 1,361,409 8.08% 723,636 6.13% 806,801 7.81% OFMP2 - FAOIGEF Output 2: Fisheries management 587,113 1,141,944 - 587,113 3.49% 1,141,944 9.67% - 0.00% OFMP2 - UNDP/GEF Output 2: Fisheries management 679,861 875,392 1,104,991 Output 4: Fisheries operations - - 2,112 679,861 4.04% 875,392 7.41% 1,107,103 10.72% EUIDEVFISH Output 3: Fisheries development - - 996,764 Output 5: Corporate services _ 1,705 97,701 - 0.00% 1,705 0.01% 1,094,465 10.60% ROC/Taiwan Output 1: High level advice - - 492 Output 3: Fisheries development - 2,219 Output 4: Fisheries operation - -_2,140 - 0.00% - 0.00% 4,851 0.05% 38 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2017 - continued 26. Summary of Trust Fund expenditure - continued 2017 2017 2016 Donors Budget % of Total Actual % of Total Actual % of Total USD USD USD FAO Output 4: Fisheries operation 126,268 66,581 200,552 126,268 0.75% 66,581 0.56% 200,552 1.94% WB-IDA PROP Output 2: Fisheries management 2,439,626 717,110 175,914 2,439,626 14.49% 717,110 6.07% 175,914 1.70% EDF Output 4: Fisheries operation 41,823 41,823 58,177 41,823 0.25% 41,823 0.35% 58,177 0.56% KIOST Output 4: Fisheries operation 130,000 102,983 - 130,000 0.77% 102,983 0.87% - 0.00% Swedish Funds Output 1: High level advice 717,000 384,546 Output 3: Fisheries development 33,000 27,738 Output 4: Fisheries operation 250,000 141,557 Output 5: Corporate services 100,000 8,841 1,100,000 6.53% 562,683 4.77% - 0.00% PEW Output 4: Fisheries operation 105,000 85,391 - 105,000 0.62% 85,391 0.72% - 0.00% WCPFC Output 4: Fisheries operation - 92,178 - - 0.00% 92,178 0.78% - 0.00% Observer Cost Recovery Fund Output 4: Fisheries operation 891,804 255,215 891,804 5.30% 255,215 2.16% - 0.00% Other Output 5: Corporate services 133,154 145,150 220,834 133,154 0.79% 145,150 1.23% 220,834 2.14% Total donor expenditures 16,842,028 100.00% 11,807,009 100.00% 10,328,042 100.00% Add: Program support paid' 0 0.00% 325,562 0.03% 201,131 0.02% Total gross up expenditures 16,842,028 100.00% 12,132,571 100.00% 10,529,173 100.00% I 'The program support of $325,562 was paid and charge against revenue. On consolidation, the revenue was grossed up which resulted in donor revenue increasing to $12,132,571 (2016: $10,529,173) - refer note number 6 of the financial statements. 39 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2017 - continued 27. Recognition of interest from bonds provided by Japan Background The Pacific Islands Forum Fisheries Agency ("FFA") signed a Memorandum of Understanding ("MOU") with Overseas Fishery Co-oporation Foundation ("OFCF") dated 20 June 2008 involving an income stream to the FFA for a period up to ten years. Under the Agreement, OFCF purchased Japanese Government Bonds (JGB) with a face value of Y$8,300, 000,000 at a cost of Y$8,130,929,000, on behalf of FFA. The loan arrangement states in particular that: * The proceeds of the loan can only be used by Japanese Government bonds that are to be held by a custodian (Mitsubishi UFJ Securities); * FFA is required to pledge the bonds as security for the loan and it is expected that FFA will repay the loan by surrendering the bonds; * The interest on the bond, less commissions, remittance fees and custodian fees, can only be paid into a Promotion Fund account at the Toranomon Branch of The Bank of Tokyo-Mitsubishi UFJ, established under the MOU between FFA and OFCF; * FFA must use this income stream for projects set out in the MOU, being projects that accord the FFA's Strategic Plan 2020 and business plan, recommended by a Joint (FFA-OFCF) Committee and approved by the Forum Fisheries Committee (FFC); * FFA is not able to sell the bonds or use them for other purposes. Accounting treatment of the bond, loan and interest. Bond and loan Due to the substance of loan arrangement, the bond and the loans do not meet the definition of an asset and liability respectively because FFA does not control the economic benefits of the bond and obligations of the loan. Interest The net interest from Japanese Government Bonds financed by the Overseas Fishery Co-oporation Foundation (OFCF) and paid into an account at the Bank of Tokyo-Mitsubishi UFJ Limited is accounted for when the funding conditions are met and the interest is received. Note: A negotiation is currently taking place for a follow-on MOU for a further ten year period. The details of a new arrangement (if agreed) will be reported in subsequent years. 40