THE CONTROLLER AND CHIEF AUDITOR’S
REPORT TO THE LEGISLATIVE ASSEMBLY
FOR THE PERIOD 1 JULY 1997
TO 30 JUNE 1999
11.1 Accident Compensation Board - 1997 to 1999
The Corporation continues with steady growth in the past three years, culminating in the construction of its new building early last year. Total cost of the project was estimated at $21.5 million tala.
With most of the Corporation funds now tied up with the building, revenue generated from leases etc., is very vital to meet its operational obligations.
(a) Revenue
Aggressive efforts are necessary to recover uncollected levies from employers. Some of these are more than ten months in age;
(b) Specified Conveyance Fund
This fund is mainly to meet claims from employees being victims of fishing boats and traffic accidents. Every year, its source of revenue (5 sene per gallon fuel levy) is insufficient to meet the claims filed.
As at 31 December 1999, this specified conveyance Fund owed $1.7 million tala to the Workers Compensation Fund. Two options were recommended for the Accident Compensation Board’s considerations - an increase in fuel levy or amalgamate the two funds. Both options require an amendment to the Accident Compensation Act 1989.
(c) Fugalei Market
The Board investment in the Fugalei Market is continuing with promising results. Full recovery of the investment ($4,250,635) should be realized within the next seven years, given the current trend of profitability.
Any shortfall below the 9% rate of return is reimbursed by Government per Section 51 Accident Compensation Amendment Act 1997.
11.2 Agriculture Store Corporation 1 July 1994 to 30 June 1999
(a) Credit Policy
The Corporation should review its credit policy. As at 30 June 1999, the total debtors stood at $707,087 and about 80% of it is doubtful.
(b) Staff Loans
In 1996 the Board of Directors, without any expressed or implied authority, allowed housing loans to two(2) staff members. The Act is silent on such issues and given the aims of the Corporation, such action is unlawful and is detrimental to the statutory functions of the Corporation;
(c) Owing to Treasury $2,781,514.00
The issue concerning the amount owing to Treasury has been unresolved for sometimes since 1994 and Treasury must initiate action to resolve this account accelerating.
11.3 Apia Park and Sports Facilities Board - 1994 to 30 June 1998
(a) The Board’s Financial Operation
(i) The Apia Park and Sports Facilities Complex is governed by the Apia Park and Sports Facilities Board Act 1995. The audit of the Board’s accounts from 1994 to 30 June 1996 was completed and the opinion was issued on 17 December 1998, and the audit of the accounts from 1 July 1996 to 30 June 1998 was completed and the opinion was issued on 11 January 2000;
(ii) In 1995, 1996 to 1998 accounts, current liabilities exceeded current assets. Therefore, the Board rely mainly on Government grant of $340,000 for 1994, $40,000 in 1995, $200,000 in 1996, $200,000 in 1997 and $200,000 as at 30 June 1998 for its ongoing operation;
(iii) There were cash misappropriations by former employees amounting to $1,662.45 on 9 April 1997 and only $150 was recovered. A further cash shortage of $260 occurred on 13 September 1997 and the matter is currently under Police investigations.
There were numerous instances of delayed bankings;
(i) There were cases where no invoices or statements to support payment Vouchers, and there was no evidence of any check made of invoices to ensure that no double payment had incurred.
Particularly, some payment vouchers and supporting documents were not stamped paid and not signed by authorizing officer;
(b) Other Matters
(i) Tools were stolen from the Board’s Store Room and these had not been recovered to date. There was no proper Fixed Assets Register kept by the Board to enable identifying what assets are operative and in existence and what are not there.
It is suggested that a proper Fixed Assets Register be kept to record all fixed assets and valuable equipments.
(ii) There is inadequate follow-up of debtors and the accumulated provision for doubtful debts is increasing. Included in the provision for doubtful debts, is an outstanding account of $17,815 owed by TV Samoa;
(iii) The Board does not maintain a proper Sundry Debtors Ledger, Journals and record of accruals. The absence of these records and lack of qualified accounting staff were the main set backs in the finalization of the Annual Accounts for 1994 to 30 June 1998.
11.4 The Betting (Totalisator) Agency Board 1992 to 1997
(a) The Board’s Financial Accounts
The audit of the Agency Board covering the financial years 1992 to 1997 was completed in September 1999. The accounts for 1998 and 1999 are now due and we are looking forward to receiving the same for auditing. As a result of the late submission and late auditing of the accounts, the accounts serve little purpose except as historical record;
(b) Audit Observations
During the course of our audit, the following matters should be given urgent attention:
(i) There is a need to recruit an Accountant /Administrator to be responsible for accounting and control of the Board’s assets, revenues and expenditures. The work involved requires a person who has the necessary accounting qualifications;
(ii) There were no written guidelines and operational procedures on how the Agency Board performs its functions. It was difficult to trace the where about of files for licensed operators. Correspondences and accounting records were mixed up in three(3) files;
It was noted that the Totalisator Agency Board was not involved in the observation and scrutiny of lottery draws. Observation of Lotto Samoa draws are currently being conducted by the Police Department. Tattslotto draws used to be live on Televise Samoa but not any more;
The TAB being the authority that issues Lottery licenses in Samoa and the regulatory or monitoring body for license holders of Lottery operations, should be the first independent body to be informed of the details of any draw. Under the status quo, draws are only made known to the TAB Secretary at the time of payment of the commission of a draw or draws, which is at the discretion of the operator.
For the sake of the public, confirmation and observation of all Tatts Lotto draws should be live on Televise Samoa as were before. In the case of Lotto Samoa draws, a TAB representative should be present to observe and scrutinize the draws.
11.5 Development Bank of Samoa - 1997 to 1999
With lending as its main function, risks assessment of proposed investments has to be thorough and complete.
It was noted that evaluation of some small loans up to $5000 do not contain sufficient detailed reports from loan officers relating to the usage of such funds. e.g., no confirmation as to the correctness of project photos as to whether they indeed relate to the correct loan project.
Similarly, some loans are secured by motor vehicles which are ten(10) to fifteen(15) years old with market values insufficient to cover loan balances.
(a) Loans
The above factors may have resulted to a provision of $5.8 million tala in doubtful debts, which represented about 11% of the total loans as at 30 September 1999.
In the past four(4) years the Bank wrote-off loan debts totaling $5,018,571 as follows:
1996 $ 514,118
1997 $2,401,205
1998 $1,176,137
1999 $ 927,111
and Audit questioned these write offs on the contention that the Bank does not have the authority to write-off these debts. The authority rests with Parliament in terms of Section 72, Public Moneys Act 1964 (Refer Part 9, “Other Matters” of this Report).
(b) Overseas Loans
The arrangements for repayments of some loans with Treasury have not been complied with. About $5 million tala (IDA 1520 Loan) is supposed to be repaid to Treasury by September 2001. Total overseas loans as at 30 September 1999 amounted to $29.6 million tala.
11.6 Electric Power Corporation - 1997 to 1999
(a) New Vehicles
In 1997, seven vehicles were purchased with a total cost of over $500,000. Prices range from $28,000 to $166,300 per vehicle.
There was no Board approval for the purchases. The Corporation should manage their fleet replacement program properly and that any Management decision to commit Corporation Funds on capital acquisitions must be subject to the Board’s approval;
(b) Goods not received
An amount of $207,987 was paid on October 1996, to GEC (New Zealand) for electrical materials. Only part of the goods arrived in 1999. Another prepayment order of $78,000 paid to Cain Electrical in 1996 for supply of two shipments of stradulux, only one shipment was received. This reflects adversely on the Corporation’s Management;
(c) Outstanding Electricity Debtors
Special Project Development Corporation and Samoa Finance Corporation owed about $52,000 and $17,000 in electricity accounts respectively. How these debtors could accumulate electricity accounts without disconnection Audit could not obtain any satisfactory answers. The overall total electricity debtors as at 30 June 1999 were $3,745,187.
(d) Non Electricity Debtors
About $1,165,475 are non-electricity debtors. These debts arise from private line extension works etc., not paid. Recovery of some of these accounts are doubtful.
(e) Loans
(i) Up to 1999 Electric Power Corporation owes a total of $34.4 million tala to Government for repayments of overseas loans. The Corporation could not meet its loan repayment commitments given the current financial capabilities without relying on Government.
To operate productively and efficiently the Corporation must manage its resources wisely and effectively as it has been spending funds in the past on unproductive assets (lands) and over valued machinery. Prompt preparation of annual accounts to comply with loan agreements is required.
(ii) The Corporation should exercise proper control on costs of its operational activities, especially the maintenance of its hydro power stations, which were not properly maintained in the past.
(f) Local Cost Rural Electrification Project and Street Lights Installation Costs
Claims for the Rural Electrification Projects for the period 1 November 1996 to 30 June 1997, 1 July 1997 to 30 November 1997, 1 December 1997 to 30 June 1998 and 1 July 1998 to 30 November 1998, were certified by the Audit Office before these were reimbursed from Treasury Department.
11.7 Housing Corporation - 1997 to 1999
The audit of accounts for the three (3) years 1997, 1998, and 1999, were completed and opinions issued on 8 September 1998, 30 May 1999 and 30 May 2000 respectively.
The provision of doubtful loans in 1997 of $600,000, 1998 of $860,000 and in 1999 of $1,111,650, is only a provision in line with prudent accounting policies and Housing guidelines. Prudent accounting policy requires debts be classified that could not be recovered within a specified period as doubtful loan debts. Over time as the situation improves with management follow up action and borrowers ability to repay, doubtful debts are often repaid.
(a) Land Debtors Refund
About $71,000 in refunds paid to land debtors were without supporting lists;
(b) Contribution Account Reconciliation
Regular reconciliation of subsidiaries to main ledgers should be done on monthly basis instead of annually as per current practices. This will enable management keeping abreast with the flow and regularity of contributions and thereby fostering timely follow up actions on slack employers;
(c) Loans and Advances
In the last three years, the Fund investment in loans increased by 33% from $80,965,968 in 1995 to $119,055,931 in 1999. However, the provision for doubtful loans has increased skyrocketing by $5,278,000 or about 155%, from $3,408,000 to $8,686,000 for the same period. This substantial increase in doubtful loans provision requires a thorough review of the Fund lending policies. The bulk of the fund investments were on loans and advances and these unpaid debts significantly deprived members of extra benefits from their contributions.
Bad debts of over $200,000 and $72,000 were written-off in 1998 and 1999 respectively. Audit feels that the Board has no authority to write off these debts which authority rests with Parliament (Refer Part 9 – “Other Matters” of this Report).
There were loans processed and funds released without proper security documents being completed. This is poor financial management control inciting irregularity and fraudulent practices;
(d) Senior Citizen Benefit Scheme 1997 –1999
The Senior Citizens Benefit Scheme is funded by the Government. This Fund has been increasing steadily in the last four years due to increases in pensions approved by Government yearly.
However, administration costs including pension costs (boat fares and medical expenses) also increased steadily and resulted in a deficit of $184,900 in 1999.
11.9 National University of Samoa - 1993 to 1997
The financial accounts of the National University of Samoa have been in arrears for a very long time. Accounts for 1993 were only completed in 1998, followed by 1994 and 1995 accounts in 1999 while the 1996 and 1997 accounts were finalised in June 2000.
As the University annual budget is mainly funded from Government appropriations, it is imperative that its final accounts be prepared timely and audit promptly. From the Audit examination of the above period, it is noted that the same weaknesses raised in previous audits of weak internal controls as in delayed banking and unbalanced bank reconciliation, were still present.
For the University to be effectively administered and efficiently managed, financial accountability must be brought up to the standard befitting of the Institution.
(a) Gratuity Allowances,
The gratuity, which is 15% of basic salary, is part and parcel of salary package paid to the Head of Department (HOD), Head of Faculties (HOFs) and comparable academic staff. These allowances should be subject to income tax. However, they are paid in advance without tax under the approval of the Finance Registrar. We have recommended this practice to be discontinued;
(b) Part time Lecturers
There is no set policy on the employment of part time lecturers and tutors with respect to their appointments, hours worked and rates they are paid;
(c) Break In
In March 1999, the Office of finance registrar (Cashier’s room) was broken into and funds of about $5,000 were stolen. Although the funds ($4,303) were recovered from the Insurance Company, a report on the matter was requested. Despite follow-ups the NUS never submitted a report on how the $5,000 was taken out of the cashier’s room.