Audit uncovers $15.9 million debt over exchanged land

A debt of $15.9 million owed by the Government to the Samoa Land Corporation (S.L.C.) over land exchanged nine years ago has been uncovered in an audit.

The Controller and Auditor General, Fuimaono Afele Taimalelagi, uncovered the debt and gave brief details of it in his Audit Report for the Financial Year 2015-2016.

“There is no evidence of any follow up made by S.L.C. management for the recovery of the due from Government debt of $15,935,424 arising from the exchange of lands with the government in 2010," the report reads. 

"The debt was initially approved for write off in the 2016 accounts.” 

In response, the S.L.C. noted that the $15.96 million due was approved by its Board in their October 2016 meeting, and that it will be treated as provided in the financial statements but not as a write-off. 

“This will give time to consult with relevant Government Ministries and later seek Cabinet approval to recover the $15.9 million tala from land at Salelologa Township transferred from Ministry of Natural Resources & Environment to S.L.C.” 

It is unclear at the time whether the land in question is where the Salelologa Market is currently located, as repeated attempts to get comments from the S.L.C. Chief Executive Officer, Ulugia Petelo Kavesi, were unsuccessful as of press time. 

Ulugia was not the C.E.O. of the organisation at the time of the audit period. 

Other issues highlighted by the Auditor were the termination of industrial land sales and debtors agreements. However, businesses were still on the land in question, despite the issuing of the termination letters. 

The Auditor further uncovered terminated land sales cases which have been referred to the legal officer for court action and eviction orders. 

“There is no evidence in files showing such actions have been taken at all and in a prompt and effective manner.” 

In response, the S.L.C. management advised that at the time the newly appointed manager of lands had this as one of his priorities and was advertising for a new legal officer. 

“There is still no internal control review process of land debtors accounts with a view for the assessment of unrecoverable land debtors accounts and the assessment of provisions for doubtful debts by the land division," the audit report reads.

“Long outstanding land debtors, terminated land sale/lease that may not have been auctioned and other irregularities such as terminated land debtors still occupying the lands were noted."

Responding to the concerns by the Auditors, the S.L.C. says its executive management had already discussed the matter with Board to ensure the lands department provided the assessment on a quarterly basis, in line with mandatory quarterly financial reporting submitted to the Ministry of Public Enterprises at the end of every quarter.

Furthermore, the Auditor noted that there were no effective monthly reviews and follow up action on the majority of land debtors account on their system. But the S.L.C. in response, said their management gets updates in its monthly meetings on clients with arrears and warning letters are then issued to those with arrears. 

“In an effort to improve debt collection, Board approved the recruitment of a manager for legal services (lawyer) and two recovery officers, to speed up the collection process and that recovery works can be taken to the next level (court), when clients do not respond to recovery letters.” 

 3.31 Samoa Land Corporation for the year ended 30 June 2016

1. Some industrial land sales/debtors agreements were terminated according to the record on file, and accordingly lease/rental charges and interest for land usage ceased. Some of these businesses are still on the land despite the termination letter issued. 

The newly appointed Manager of Lands along with the Executive management will address this issue with the board immediately for further auctioning as the process is on-going.

2. When the terminated sales/leases were approved by the Board on the basis of arrears, the Board was not made aware as to the full outstanding balances unpaid from land debtors. 

The Samoa Land Corporation (SLC) met on 6 October 2016 and were informed accordingly. SLC’s new General Manager and Executive Management to take the issue on board.

3. There are terminated land sale cases which have already been referred to the legal officer for court action and eviction order. There is no evidence in files showing such actions have been taken at all and in a prompt and effective manner. 

The newly appointed Manager of Lands has these matters under priorities and is currently advertising for a new recruit to take over the Legal Officer post.

4. There is still no internal control review process of land debtors accounts with a view for the assessment of unrecoverable land debtors accounts and the assessment of provisions for doubtful debts by the land division. Long outstanding land debtors, terminated land sale/lease that may not have been auctioned and other irregularities such as terminated land debtors still occupying the lands were noted. 

The Executive Management has already discussed the matter with SLC Board and to make sure the Lands department provides the assessment on a Quarterly basis in line with the mandatory quarterly financial reporting submitted to the Ministry of Public Enterprises at the end of every quarter.

5. As reported in the prior year, LMS system needs to be updated with accurate land details. Action was taken in the reported period to allow Land staff in the Estates Section access to LMS for these updates. Unfortunately, nothing was done or only parts of it.

6. There is still a lack of communication between land and finance division when leases or sales accounts are paid off or terminated. There have been some improvement but there were several land debtors being terminated on file but has not been communicated by the lands division to the finance division for processing in the financial record of SLC. Recommendation noted, with Executive Management to work on clearing this issue.

7. Some fixed assets have not been registered. Recommendation noted. SLC will carry out a full asset count before the end of October 2016. There was a numbering system in place as noted but will perform a full count again and label all old and new assets accordingly.

8. There is no proper asset management manual that outlines specific recognition criteria for assets. This determines whether or not an item should be recognised as a capital expenditure or as an expense. Recommendation noted. Management along with Accounts Section will work on an Asset Management Manual moving forward.

9. Several payments made have no supporting documents or adequate explanation for payments to financial institutions, on vouchers. These payments are for SLC monthly loan repayments to financial institutions. Recommendations noted.

10. There is no evidence of any follow up made by SLC Management for the recovery of the Due from Government Debt of $15,935,424 arising from the exchange of lands with the government in 2010. The debt was initially approved for write off in the 2016 accounts. The update on this $15.96 million due was approved by the Board in their meeting October 2016 that it will be treated as provided in the financial statements but not as write-off. This will give time to consult with relevant Government Ministries and later seek Cabinet approval to recover the $15.9 million tala from land at Salelologa Township transferred from Ministry of Natural Resources & Environment to SLC.

11. A lack of communication from the Land Section to the Accounts as to the current status of Land Debtors at any time, and when an account is paid off, repossessed or terminated. This comment refers to very old accounts that were dormant on the system for years and were never cleared until this audit. The new process for closing accounts has been in effect since around 2012.

12. There are no effective monthly reviews and follow up action on the majority of Land Debtors account on the LMS system. Management in its monthly meetings get update on clients with arrears and warning letters are issued to those with outstanding arrears. In an effort to improve debt collection, Board approved the recruitment of a Manager for Legal Services (Lawyer) and two Recovery Officers to speed up the collection process and that recovery works can be taken to the next level (court) when clients do not respond to recovery letters.

13. Invoices/bills are not being issued to clients. Hence clients are not receiving reminders and follow up on what is due for payment. Invoices are issued on a monthly basis for Ministries/Corporation and businesses renting the premises, since most tenants rents are collected daily and are standard payments. (For lands) invoices are issued to a few companies only. All other clients are issued reminder letters.

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