Chief Auditor flags money issues at Ports Authority

“There was no documented policy to regulate payments made from the petty cash and the limit of payments that could be made from the petty cash. There was no independent review of the internal auditor’s reports to strengthen any matters considered in these reports”.

The Samoa Ports Authority received a mixed report card from the Controller and Chief Auditor in his 2011 report to the Legislative Assembly.

In his report, Fuimaono C.G. Afele assessed the Authority for the financial years ending June 30 in 2009 and 2010 respectively.

For 2009 he reports the Authority’s financial performance declined with a 16 per cent decrease in net profit from $104,205 in the prior year to $87,039 in the current financial year.

“The decrease in net profit was due mainly to a decrease in total income by 11 per cent,” it reads.

Other issues he noted for the year were the Authority’s financial position showed that the Authority was not able to pay its short- term obligations with its short-term assets.

“The status of the recoverability of an income tax refund of $441,966 disclosed in the financial statements was not fully assured,” Fuimaono reports.

“V.A.G.S.T. account and V.A.G.S.T. returns were not reconciled properly.

“There was no documented policy to regulate payments made from the petty cash and the limit of payments that could be made from the petty cash.

“There was no independent review of the internal auditor’s reports to strengthen any matters considered in these reports.

“Furthermore the internal auditor’s reports were not discussed in the Board of Directors’ meetings.”

The Authority did take the time to respond to the issues flagged by the auditor.

“Income for year 2009 was duly affected from sand earning due to development work at Aleipata Wharf,” the Authority says.

“The dredge was shifted to Aleipata for the purpose of deepening and widening of the channel and basin.

“There was also no community service provided during the period.

“This kind of revenue is not steady and was never included in the Authority’s anticipated revenue, only if there was an application and approval from Cabinet, then, S.P.A. is liable to provide this service and accrual of revenue is booked.

“The Insurance claim that was collected in financial year 2008 was one of the reasons why 2008 revenue was higher than 2009.”

In regards to the Authority not being able to pay its short term obligations, S.P.A. said this was mainly due to operational cash that were used to fund some of the unforeseen cost due to the project being under estimated.

“At the same time creditors were accumulated due to the demand for materials needed to furnish the project,” according to the report.

“Also note the increase in fixed assets at the end of the period.

“The C.C.A. report in 2006 accounts stated that SPA is not liable to pay income tax. “There is a letter from the Attorney General’s Office to support the issue.

“S.P.A. is currently in progress of filing a return for reimbursement.”

Looking now to the 2010 Financial Year, Fuimaono reports the Authority’s financial performance improved with an increase in net profit from $87,039 in the prior year, to $205,553 in the current financial year.

“This was due to an increase in revenue from the Apia Marina, salvage income as well as Government assistance for operations affected by the tsunami,” his report reads.

Despite this increase, the Chief Auditor reported to Parliament that again the Authority’s financial position showed that the Authority was not able to pay its short- term obligations with its short-term assets.

“V.A.G.S.T. was not reconciled properly to supporting documents and returns filed with the Ministry for Revenue,” he reports.

“There was also no assessment by the Ministry for Revenue to confirm any V.A.G.S.T. liability that the Authority may be obligated to pay.

“Withholding taxes on directors’ allowances were not deducted from the gross allowance before payment was made to the directors.

“As a result the Authority will bear this additional cost. Furthermore the Authority had not paid any tax due to the Ministry for Revenue regarding withholding tax.

“There were travel allowances paid to the General Manager that were not approved by Cabinet.”

In response the Authority said that when using the quick ratio, the Authority has the surplus to meet its bank overdraft, creditors and V.A.G.S.T. payable.

“All reconciliations are in place for future sighting and proper procedures are in place, providing that all directors are earning primary income,” the Authority says.

“Therefore, S.P.A. needs a list from the Treasury (M.O.F.) of S.P.A. appointed directors with their tax filing status.”

The report is republished in full below:

Samoa Ports Authority Financial year: 30 June 2009 Audit opinion: Unqualified Auditor: Audit Office Summary of audit findings:

1. The Authority’s financial performance declined with a 16% decrease in net profit from $104,205 in the prior year to $87,039 in the current financial year. The decrease in net profit was due mainly to a decrease in total income by 11%.

There was a reduction in income from interest, sand, equipment hire and Community Service Obligation (CSO) reimbursement.

2. The Authority’s financial position showed that the Authority was not able to pay its short- term obligations with its short-term assets.

3. The status of the recoverability of an income tax refund of $441,966 disclosed in the financial statements was not fully assured.

4. VAGST account and VAGST returns were not reconciled properly.

5. There was no documented policy to regulate payments made from the petty cash and the limit of payments that could be made from the petty cash.

6. Internal control procedures for processing payments were not implemented properly. This resulted in either missing vouchers, incomplete supporting documents for payments or some payments not certified by the proper authorising officer.

7. Personal files for some employees were not updated to reflect the current status and salary rate of the employees.

8. There was no independent review of the internal auditor’s reports to strengthen any matters considered in these reports. Furthermore the internal auditor’s reports were not discussed in the Board of Directors’ meetings.

9. The Authority responded as follows: Issue 1 - Income for year 2009 was duly affected from sand earning due to development work at Aleipata wharf. The dredge was shifted to Aleipata for the purpose of deepening and widening of the channel and basin. There was also no community service provided during the period.

This kind of revenue is not steady and was never included in the Authority’s anticipated revenue, only if there was an application and approval from Cabinet, then, SPA is liable to provide this service and accrual of revenue is booked. The Insurance claim that was collected in financial year 2008 was one of the reasons why 2008 revenue was higher than 2009;

• Issue 2 - This was mainly due to operational cash that were used to fund some of the unforeseen cost due to the project being under estimated. At the same time creditors were accumulated due to the demand for materials needed to furnish the project. Also note the increase in fixed assets at the end of the period;

• Issue 3 - The CCA report in 2006 accounts stated that SPA is not liable to pay income tax. There is a letter from the Attorney General’s Office to support the issue. SPA is currently in progress of filing a return for reimbursement;

• Issue 4 - Noted and reconciliation were done after the audit period;

• Issue 5 - Due to the nature of SPA portfolio, the petty cash was used to fund payments of materials and services that were urgently needed at the time;

• Issues 7 and 8 - Noted, and improvement procedures were implemented accordingly.

Financial year: 30 June 2010 Audit opinion: Unqualified Auditor: Audit Office Summary of audit findings:

1. The Authority’s financial performance improved with an increase in net profit from $87,039 in the prior year, to $205,553 in the current financial year. This was due to an increase in revenue from the Apia Marina, salvage income as well as Government assistance for operations affected by the tsunami.

2. The Authority’s financial position showed that the Authority was not able to pay its short- term obligations with its short-term assets.

3. VAGST was not reconciled properly to supporting documents and returns filed with the Ministry for Revenue. There was also no assessment by the Ministry for Revenue to confirm any VAGST liability that the Authority may be obligated to pay.

4. Withholding taxes on directors’ allowances were not deducted from the gross allowance before payment was made to the directors. As a result the Authority will bear this additional cost. Furthermore the Authority had not paid any tax due to the Ministry for Revenue regarding withholding tax.

5. There were travel allowances paid to the General Manager that were not approved by Cabinet. 6. Daily collections were sometimes used to pay for office expenses instead of being banked intact.

7. The following matters were discovered relating to the preparation and processing of the payroll:

• Payroll officer ceased deductions without proper authorization from the relevant financial institution entitled to this payment;

• Management did not check the payroll before and after processing;

• Supporting documents for payroll deductions were not filed properly;

• Leave cards were not updated;

• Changes to salary rates and allowance entitlements were effected without prior approval by the Board of Directors;

• Other important documents that confirm the legal employment status of employees were missing from the personal files.

8. There were no formal policies and procedures to regulate payments made from the petty cash. As a result any payment of any amount was paid through petty cash. It was discovered that petty cash was used in one instance to purchase liquor. This in effect breached the Cabinet Directive FK(52) 92 which prohibited the purchase of liquor using Government funds.

9. The following weaknesses were noted in the processing of payments:

Payment procedures documented in the Authority’s manual were not fully complied with;

Supporting documents and payment vouchers were missing for some payments. 10. The Authority responded as follows:

• Issue 1 – Noted;

• Issue 2 - When using the quick ratio, the Authority has the surplus to meet its bank overdraft, creditors and VAGST payable;

• Issue 3 - Noted, all reconciliations are in place for future sighting;

• Issue 4 - Proper procedures are in place. Providing that all directors are earning primary income. Therefore, SPA needs a list from the Treasury (MOF) of SPA appointed directors with their tax filing status;

• Issue 5 - Noted and proper procedures are in place;

• Issue 6 - The mentioned issue was elaborated to the senior staffs and proper procedures are in place;

• Issue 7 - raised regarding Preparation and Processing of Payroll:

• Sub-issue 1 - This was done on very rare occasions by the Payroll Officer, on compassionate ground, when requested by employees. She has since been instructed to ensure that this does not reoccur and that deductions only be ceased upon receipt of proper authorization from financial institutions concerned;

• Sub-issue 2 - Checks have been carried out on the payroll;

• Sub-issue 3 - These are in order, issues raised however, are noted;

• Sub-issue 4 - This is due to shortage of staff at the time.

Efforts have since been taken to update all leave records;

• Sub-issue 5 - This was done at the discretion of the former General Manager based on 5% for a single increment and 10% for double increment;

• Sub-issue 6 -

Comments noted. Employment of new staff is now looked at more closely to ensure proper procedures are complied with and that all paperwork is in order.

• Issue 8 - Guidelines for the petty cash use are now being looked at. Liquor purchased, as mentioned was for a consultant working at the Slipway at the time;

• Issue 9 - Weaknesses noted in the processing of payments:

Sub-issue 1 - In many circumstances, goods acquired were urgently needed, hence, proper procedures were not complied with.

Point raised is, however, taken into consideration for action, under normal circumstances and wherever possible; Sub-issue 2 - Noted for action.