THE CONTROLLER AND CHIEF AUDITOR’S
REPORT TO THE LEGISLATIVE ASSEMBLY
FOR THE PERIOD 1 JULY 1997
TO 30 JUNE 1999
- Agriculture Department, 1993 to 1998
- Customs Department – 1 July 1992 to 30 June 1999
- Education Department
- Foreign Affairs - Overseas Missions
- Health Department – 1992 to 1999
- Justice Department – 1 July 1994 to 30 June 1998
10.1 Agriculture Department, 1993 to 1998
The Audit of this Department covers six years from 1 July 1992 to 30 June 1998.
Two Ministries are involved for administering of the Forests Act 1967. The performance of functions as prescribed by the above Act is vested with Ministry of Agriculture, Forests and Fisheries (MAFF). Lands, Surveys and Environment issued licenses to saw-millers, lease of customary land for forestry purposes and collection of royalties from logging on such leases.
As at 30 June 1998 over $121,000 in royalties have not been collected from saw millers. We were unable to verify whether the $100,000 reported per audit report to 30 June 1992 were ever collected due to poor records keeping. Over $100,000 is owed by Big Save for royalties, logging and hire of portable saw mills. Both Ministries have been negligent in collecting Government revenues from forestry activities between 1993 and 1998. Shifting focus on a conservation role has been recommended.
(b) Livestock
Two cattle shipments from Australia in 1993 and 1995 boosted the livestock industry in the country. Both shipments were heavily subsidized by Government.
Having established the basis for the cattle industry from the two shipments, concentrating on advisory capacity and animal health services has been suggested to the department for consideration.
(c) Fisheries Division
In 1997, the Fishermen Safety at Sea Project, funded by the Forum Fisheries Agencies, was established. The project was mainly in the form of equipments for communications with fishermen. Included in the Aid package were 90 hand held radios. The radios were sold at $1,500 each. On cost recovery basis, the radios should have been sold at $1,776.00. Fishermen were allowed a deposit of $500 with repayments by arrangements with the Fisheries Division. At time of the audit, a total of over $50,000 was still owing by 63 fishermen to the Department.
Enforcement of the minimum size fish regulation was recommended.
During the audit of the Department, the matter concerning the status of the company, SMACK and SAMPAC came to our attention.
SMACK was involved with the Alia Building Scheme and about four hundred thousand tala ($400,000) were unaccounted. To date nothing has been done despite several requests to Treasury.
SAMPAC was leasing the fish market between 1990 – 1991. About $70,000 was owed on renting and electricity.
The Attorney General requested the Registrar of Companies to investigate the activities of SAMPAC and its directors as non payments of rent was tantamount to fraud and/or breach of the Companies Act. Soon after, Cabinet directed the Attorney General to take legal action against Mr Willis, the Director of SMACK. No action was taken and the matter appeared to be left forgotten while the same people concerned had set up another company as if nothing had happened.
(d) Research Extension Division
In the last decade, pests and diseases have affected most of the country agricultural produces. Substantial funding for research training etc., have been spent however the hard work and efforts put in by the staff have been of little success in combating the diseases.
A variety of fruit trees have been successfully developed at Avele and Nafanua. However, the Department has yet to control and monitor the fruit flies and pierce moth which are the threats to further developments of the fruit industry.
The Department does not appear to have a definite set policy on the purchase and distribution of crops, namely cocoa and coconut seedling as some farmers bought them while others were given free. Periodic checks have to be made on the sale of fruits, vegetables and plants at various nurseries.
Between November 1994 and April 1996, Government approved close to $2.5 million tala for the repairs and construction of extension buildings, farm houses, storage facilities around Upolu and Savaii, residential and training buildings at Nuu. Most of the funds were from IFAD. From the inspection of 11 extension houses in Upolu, two were vacant (Falelatai & Leulumoega). Only the night watchman lives on site to look after the places. The lab building at Nafanua was completed in 1996 and had not been occupied since, due to faulty electrical installation. It cost about $100,000 and the builder had since disappeared.
Part of the Agriculture Department audit included a separate review of the IFAD loans. Audit was however unable to perform this task due to the failure of Treasury to provide relevant financial statements.
The last audit of IFAD statements was up to 30 December 1992. It is understood that credit facility of about USD 500,000 under IFAD was returned due to absence of audit financial statements.
10.2. Broadcasting Department, 1994 to 1996
(a) In terms of Section 41 of the Public Moneys Act 1964, the Department is required to prepare financial accounts for auditing and the last accounts audited was for the period from 1 July 1994 to 30 June 1996 and those relating to years 1 July 1996 to date are still outstanding. The audit examination for the years from 1 July 1996 to 30 June 2000 is pending therefore until the accounts are completed;
Our examination disclosed that there appeared to be no improvement in the systems and procedures as some audit deficiency findings in the 1994 to 1996 audit were still present as discussed below:
(b) Credit Services System
There is apparent weakness in the way the Department handles notices and advertisements for its credit customers.
Audit noted that most requisitions for broadcasting of notices and advertisements came through the phone, verbal arrangements between the advertising section and customers or through an unsigned note in plain paper.
There is no proper documentation in existence as evidence of source document for its invoice/billing system to fall back to in the event of a dispute with the customer and for audit purposes.
The Audit Office believed that this weakness played a major part in the case where the Department was unable to convince a certain credit customer to pay a debt which the Department’s records at the time showed as owing but disputed by customers. Another example of poor management resulting in loss of public funds.
(c) Fixed Assets and Others
There is no proper system of recording and controlling of library stocks and fixed assets. Physical counting of assets was not carried out by the Department over the audited period in terms of Treasury Instructions Part K13.
All of the weaknesses noted were due to lack of experienced accounting staff and the inadequacy of internal control systems. In this connection we suggested the recruitment of a senior accountant with proper qualifications and experience, to set up systems of internal controls and proper accounting procedures so that, revenues due to Government are fully collected, and that, expenditures incurred for the Departments are justified and lawfully expended.
The Treasury as the Accountant for Government should play an active role in monitoring and assisting in ensuring that proper systems of accounting and controls are in operation in Government Departments so that proper accountability in terms of Treasury Instructions are persistently pursued and adhered to.
10.3 Customs Department – 1 July 1992 to 30 June 1999
The audit of the Department covering the period 1 July 1992 to 30 June 1999 commenced in June 1999 and was completed in May 2000.
It was pleasing to note that most matters covered in the period showed considerable improvement and that the systems and controls suggested will be implemented.
The following matters however are of concern to Audit:
(a) The Collector of Customs Deposit Account had not been reconciled for the period under examination and a discrepancy of $157,275.02 was disclosed between sight entries not yet cleared and bank balance;
(b) Deferred duties, which amounted to $5,324,665,63 as at 30 June 1999, need regular follow up.
(c) Record keeping needs improvement as it transpired that some ship manifests, which are the basic records for dutiable imports, were not subject to audit verifications as records appeared lost. This loss of records resulted to an apparent understatement of import duties, the mainstay of Government revenues;
(d) Sub-receivers need to clear their sub-receipts to a clearing master receipt on a regular basis in terms of Public Moneys Act, 1964, rather than leaving the clearance of these sub-receipts for long periods which sometimes over a month.
10.4 Education Department
(a) Trust Funds – 1 January 1992 to 31 December 1997
The Schools Trust Fund Account is made up of 15 Individual Trust Accounts and as at 31 December 1997 these Trust Accounts balances stand as follows:
(1) Apia Lower School $64,943
(2) Apia Middle School 60,316
(3) Avele College Bus Account (224)
(4) Avele Agricultural College 53,177
(5) Leififi Junior Secondary School $174,303
(6) Apia Upper School 245,167
(7) Salafai High School 22,230
(8) Salafai High School Account 8,888
(9) Samoa College Plantation 124
(10) Samoa College Account 209,480
(11) Samoa College Hostel 960
(12) Examination Operation 147,077
(13) Science 27,915
(15) Examination 4,784
$1,019,246
Except for the accounts Nos. 3, 8, 9 and 11, all Trust Accounts are funded from Book Fees collected by these Schools and Colleges from pupils.
Audit had questioned the absence of any enacted Regulations to authorise the charging of book fees in terms of Section 12 Education Ordinance 1959.
Despite Audit recommendations for the Department to have these book fees legalised as required by the Education Ordinance 1959, the Department has not responded nor does anything to meet the requirements of the law. This means that the charging of book fees and other charges referred hereunder are illegal and should be rectified.
Furthermore, the funding of Accounts headed Examination operations, Science, Curriculum Development and Examinations from fees charged to students are not legally prescribed by any Regulations as required under Section 36(a) Education Ordinance 1959. Indeed, the Department has been charging book fees and such fees for Accounts Nos.11, 12, 13 and 14 without any authority prescribed by the Education Ordinance 1959. This is a deliberate contempt of the law, and must be stopped.
Audit has recommended to the Department, supported by the expressed opinion of the Attorney General to have Regulations enacted as required by the Education Ordinance 1959 to rectify the prolong unlawful practice. In fact, since the Education Ordinance 1959 became effective, there has never been any Regulations enacted under Section 36 to lawfully regulate the various fees and charges made by the Education Department.
(b) Audit Recommendations
Audit felt that there is an urgent need to review the operation of Government Schools/Education Department Trust Funds and the following recommendations were offered as the proper course of action:
(i) If GOVERNMENT SCHOOLS Trust Funds are to be maintained, these have to be in line with the requirements of Sections 12 and 36(a) of the Education Ordinance 1959, and Section 46 of the Public Moneys Act 1964, including other legal requirements on the operation of a trust account. The services of the Attorney General in drafting legislation and appropriate legal documents, should be solicited;
(ii) Collection of BOOK FEES and treating them as School Trust Funds should be stopped. These receipts should be treated as Revenues of the Education Department in the same manner as SCHOOL FEES and therefore any expenditure should be appropriated by Parliament in the Estimates. Our examination of expenditure out of trust funds indicated that these funds were used for purposes other than for BOOK FEES. Audit felt that the issue be resolved in the earliest time possible considering that some of the School Trust Funds had material balances in their accounts which in our opinion, their accumulation at year end showed that these were not fully utilised for the benefit of the students which appeared to be the main purpose why BOOK FEES were collected in the first place.
(iii) The Trust Funds established under the EDUCATION DEPARTMENT should also be stopped as our examination disclosed that they were Revenue items and should therefore be treated as such and related expenditure should be appropriated by Parliament in the annual estimates.
(c) Other Matters
The Audit of the Education Department is in progress as this report is being prepared and other aspects of the Department will be covered in my next report to Parliament.
10.5.1 Consul General Office, Auckland 1 July 1996 to 30 June 1999
(a) General Overall Observations
Generally the financial administration and operation of this Office leaves much to be desired. Receipts were issued incongruously and short bankings of NZ$485 since June 1997 have yet to be made up. Bank Account #0132722-00 had been operating on overdraft right throughout the period examined. Treasury had been advised to monitor this account and exercise strict control to keep within approved limits;
(b) Excessive Overtime NZ$12,975
Overtime payments in 1997 was NZ$21,002 which is NZ$12,975 more than provided for. The bulk of these overtime hours were for time spent at the Airport by staff to meet arriving guests or seeing them off on departures.
The Ministry was advised to consider paying flat allowances to control this overtime hassle.
(c) Furniture and Fittings – Antiques
The Fixed Assets Register was incomplete. Furnitures and Fittings considered to be Samoa Antique were stored loosely in the basement and some appeared stolen during constructional repairs to the Residence.
Items of value should be guarded and properly maintained. The Consular and staff must exercise care and show some pride in their Office towards preserving these items of traditional values.
10.5.2 Samoa Embassy in Brussels – 1 July 1996
(a) The Head of Mission (HOM) at Brussels took up Office early 1997 and apart from the issues that were raised by audit to further improve accounting and administrative procedures, the administration and management of the affairs of the Embassy were of the standard befitting the integrity of the Office;
(b) Term Deposit
At the time of the audit, BF2,086,242 (ST$144,878) was the balance of Term Deposit No.3003091400 under the name of the Mission. This account was established by the Ambassador on 17 March 1997 with BF3,000,000 (ST208,333) remittances consistently excessive for the Embassy’s requirements at the time.
The Treasury has been advised of the account and to monitor it in terms of Sections 34 Public Moneys Act 1964.
(c) Medical Insurance
Audit confirmed an Irregularity discovered by the Counselor and HOM in the fraudulent claims of $24,292 (BF349,808) in Medical Insurance Premiums by the Office driver. The matter has been satisfactorily resolved by the Ministry of Foreign Affairs and the HOM. This is a laudable action by the HOM and the Counselor denoting a very effective and alert administration.
10.5.3 High Commission Office in Canberra - 1 July 1996 to 30 June 1998
(a) The audit was conducted from 24 to 30 March 1999, and apart from the matters noted hereunder the general standard of accounting procedures and records management and administration of the Canberra Office was found to be reasonable and effectively under control;
(b) The Revenue Account operated solely by the HOM was recommended to be under the control and administration of Treasury authorized signatories;
(c) Deakin Property
This land registered as Block 10, Section 80, Division of Deakin, was leased by the Samoan Government since 1990. On 24 May 1997 an extension of two years was granted to expire on 24 May 1999. The land was obtained for the construction of an High Commission Office. However, another property is being leased to accommodate the present Samoa High Commission Office.
Audit recommended that Government should review the position whether to relinquish the lease on Deakin Property to save paying annually Aus$4,900 rates for idle property, or commence action towards achieving the purpose for which the land was required for the construction of a Chancery. Up to the fiscal year 1997/98 total payments made by Government for rates/taxes on this property came to Aus$27,083.60. According to the HOM the unimproved value of the property at 1 January 1998 was Aus$530,000.
Government may stand to loose this valuable piece of land if no action is made towards implementing the long term objective for this land retention;
(d) First Secretary’s Residence
This residence on Samoan Government owned property is poorly maintained. The residence was intended for the HOM.
Audit recommended that major repair works must be undertaken to bring this building up to the standard fitting for a residence of the Head of Mission.
10.5.4 Samoa Mission to the United Nations – 1 July 1996 to 30 June 1999
(a) Office Premises
The Samoa Mission to the United Nations has been since the audit, relocated to its new site within the same Commonwealth Joint Office building. The new Office has more space for Offices, for storing files, stationeries and equipments and allowing rooms for visiting dignitaries. The rental is relatively the same at $25.50 per square foot;
(b) Office Vehicles
At the time of the Audit visit, the Mission Office vehicle is a 1991 Ford Chevy Caprice which has no book value and the Mission could not sell it as no buyer responded when advertised for sale.
The Ministry should replace this vehicle to save high maintenance cost and to upkeep the image of the Office;
(c) General
The HO M has received the Audit Report and apart from the few matters raised for his attention, the administration and management of the Samoa Mission to the United Nations Office is commendable in view of the fact that only the HOM and the 1st Secretary operate the New York Mission.
10.5.5 Samoa High Commission – Wellington, 1 July 1996 to 30 June 1999
(a) General Comments
The Ministry of Foreign Affairs has responded fairly and has satisfactorily attended to matters raised in our Audit Report, in respect of:
(i) Reimbursement Procedures –
That the full allocation of approved funds be remitted to Mission pending clearance procedures by the Ministry to forestall incurring overdrafts through delays in funding remittances and to also avoiding extra bank fees on overdrafts but encouraging direct effective control and administration of bank Accounts;
(ii) Education and Medical Expenses –
That the Ministry should spell out in the overseas service contracts the commitment by Government in the education of children of diplomatic staff as well as the extent of medical expenses;
(iii) Office and Residence Repairs –
That for any major works under contract affecting properties such as repairs to Office premises and Residential buildings, Treasury and Public Works Officials involved should include the HOM and staff designated in the contractual arrangements so that they are acquainted with the terms and conditions of the Contract for the Mission to monitor and follow work performance. This would avoid repetition of the Contract for repairs as was undertaken by E.R. Class of New Zealand at NZ$433,770.71 (GST inclusive) whereby at the completion of the contract there were leakage from the roof, poor workmanship and substandard materials used and NZ$21,668.31 appeared still outstanding to pay the contractor.
(b) Albeit the above comments, the overall administration and management of the Mission was quite commendable.
10.6 Health Department – 1992 to 1999
The last audit for this Department was since 30 June 1992.
(a) General:
Audit has in previous audit reports pointed out that the deficiencies of poor record keeping, ineffective accounting procedures and weak internal control systems were prevailing in the Department’s operation, and although some efforts had been put into practice to solving the problem there was still room to improve on. In order to form an audit opinion on the proper accountability, transparency and economy of Department’s activities these deficiencies must be addressed first and foremost.
(b) Special Bank Accounts
Treasury Instructions F lay out the procedures for the operation of these Accounts, but the Health Department has operated various Special Bank Accounts without compliance to those Instructions.
$134,152 was the total of payments made out of those special Bank Accounts without supporting documents hence Audit could not verify whether these funds were spent for the purpose they were intended for.
(c) Chargeable Services and Goods
Audit expressed concern that not all revenue collectible from services and medical goods are fully accounted for due to lapses and breakdown in internal control systems. There has been no reconciliation of consultation fees, dispensary sales and sale of dental gold indentures made against Outpatient Doctors consultation log, dispensary and dental stock registers, hence a clear indication of how much revenue collectible from these chargeable services and goods could not be determined.
(d) Transport Pool
For the whole country, there are 41 vehicles allocated to the Department as follows:
TTM Hospital 29 vehicles
MT II Hospital Savaii 4 “
Sataua 1 “
Foalalo 1 “
Safotu 1 “
Leulumoega 1 “
Lalomanu 1 “
Poutasi 1 “
Lufilufi 1 “
Afega 1 “
That is, for Upolu health service, there are 34 vehicles allocated thereto and only 7 vehicles serving the big island of Savaii.
Yet on top of the 29 vehicles at the disposal of TTM Hospital, vehicles are hired irrespectively.
Furthermore, 29 vehicles of the 41 fleet, were over six years old and of which 11 vehicles were over ten years old. The annual maintenance cost of repairs of these old vehicles is quite exorbitant.
There is in existence a Government Policy in FK(98)16 dated 13th May 1998 that vehicles must be replaced after 5 years of operational life and in view of 29 vehicles over six to eleven years old, considerable amount of public funds spent on maintenance could be saved had the Government policy be adhered and meticulously pursued.
(e) Fixed Assets
The Department must update its Fixed Assets Register which at the time of the audit was incomplete and hazardously kept.
The Health Department has perhaps the largest pool of fixed assets of high dollar and life saving values in the vicinity of $6 million tala. Yet, the control and maintenance of these valuable assets are less than adequate. Audit could not verify that these assets particularly high dollar and life saving valued equipments are properly insured. It was evident from inquiries that the Department assumed that these were covered by Treasury but Treasury on the other hand seemed vague and unsure.
Audit has advised the Department to immediately update stock taking and complete the Fixed Assets Register towards identifying the high dollar and life saving value equipments for insurance cover and institute control procedures for safekeeping and maintenance of these valuable assets.
Audit found in the Palauli Health Centre that the Generator funded by the Swedish Government for the Samoan Government to contribute to the Health Centre project at Palauli had been removed from the Hospital and sold by some village members to a local company sometimes in 1998 for a sum of money far less in value than the market value of the generator. The Department did not do any investigation on the sale of the generator and an explanation of the sale is still pending.
This Generator according to the Department had far more operating power and capacity than the one then supplying the TTM Hospital.
(f) In patient Debtors
Apart from the invoice listings which existed at the time of the audit there is no Debtors Register kept to be able to ascertain how much inpatient fees were still outstanding.
Whilst there exists an incomplete state of record keeping for debtors in the TTM Hospital the position is worse for the MTII Hospital in that no record existed of any inpatient’s fees outstanding for the period audited. This is the same for all the Health centres with In-patient facilities throughout the country, no record of inpatient debtors.
Audit was unfortunately unable to ascertain how much inpatient fees collectible and outstanding for the years under review because of the absence of proper accounting records.
(g) District Hospitals and Health Centre
At the time of the audit there was only one medical officer at the MTII Hospital and the same doctor was responsible to attend to medical needs of all of Savaii. This medical officer was on call for 24 hours a day. However, he was only paid an allowance for Head of Unit. He was not entitled to a District allowance, remote control allowance, consultant specialist remuneration nor was he receiving an on call allowance.
Considering that almost a third of the population live in Savaii, the manning of the health services for the whole island by one medical officer poses a very serious threat to the health care and well being of the island. This is not in accordance with Government policy to give priority to the Health services.
The Department was advised to immediately institute remedial action towards mapping out the allocation and distribution of resources inclusive so that the Health Services are evenly rendered throughout the country.
10.7 Justice Department – 1 July 1994 to 30 June 1998
(a) Trust Accounts
The Department operates two types of Trust Accounts:
(i) Maintenance Trust Account;
(ii) Apia and Tuasivi Civil Law Trust Accounts..
These Accounts have never been reconciled for most of the years under examination. Hence, irregularities have been realised resulting in a deficiency of $5,976.24 being receipts not banked into those Trust Accounts.
The problem encountered which is the same persistent in many years past and has been repeatedly reported on by Audit, was the absence of any proper accounting procedures and internal control systems. Receipt books were incomplete and missing, payment vouchers were lost, bank statements not filed and any attempt to fully ascertain the scope of irregularities committed in the operation of these Trust Accounts became futile.
It is encouraging however that the Department has now embanked on implementing proper accounting procedures and with the assistance of Treasury to ensure that these Trust Accounts are operated in line with the Treasury Instructions 1977 section F, control and proper management of these Trusts will be achieved.
(b) Warrants
These are Warrants of Commitments and Warrants of Committals administered through a Register in the Justice and a Register in the Police Department. These Warrants are issued by the Justice Department pursuant to Judgment Summons and are referred to the Police Bailiff Section for execution.
Unfortunately, the Register of Warrants in the Justice Department is never reconciled to that kept in the Police Department. There is no attempt made to follow up long outstanding warrants appearing in the Justice Department Register. In fact, considerable numbers of outstanding warrants in the Justice Department Register are marked paid and cleared in the Police Register.
(c) Companies
Most of the companies examined have not paid any annual licences and there is no evidence of any follow up actions by the Department to collect these Government Revenues.