Government asked to consider offering discounts to recuperate money owned by debtors |03 December 2020

Mr Herath (Photo: Anel Robert)

Auditor General Gamini Herath has called on government to seek ways and strategies, such as offering discounts, to retrieve the R729,451,063 owned by clients to its various entities.

On a positive note he claimed the country spent less than budgeted for 2019.

Mr Herath made these statements during a briefing yesterday morning in relation to the annual report produced by the Auditor General for 2019 which includes the financial statements of government. The briefing was held at the office of the Auditor General, Unity House, Victoria.

The outstanding revenue from clients to the government through its various entities ‒ ministries, departments and agencies ‒ goes as far back as 1997. Following a review of the system of management of debtors in selected entities to examine their trend during past years, through a special audit, it was found that as of the end of 2018, six entities ‒ Seychelles Revenue Commission (SRC) Tax Division, Agency for National Human Resource Development (ANHRD), Landscape and Waste Management Agency (LWMA), department of lands under the previous Ministry of Habitat, Infrastructure and Land Transport (MHILT), Health Care Agency (HCA) and Industrial Estate Authority (IEA) ‒ had accumulated over the past years a debt of R729,451,063 altogether.

“My advice to the government is to look at this figure closely and talk to the organisations concerned and in turn come up with a strategy which will result in collection of as much debt as possible,” Mr Herath said, proposing that a discount might help to collect as much revenue debt as possible as by paying less will encourage client to pay back their debts.

In the six entities with outstanding revenue debtors to the government under the report’s special review, SRC has to collect R589,131,826, ANHRD R93,495,694, MHILT R15,183,885, LWMA R14,753,595 and HCA R10,382,608 from their owing clients.

The IEA has submitted an outstanding sum of R6 million owed to government but Mr Herath said the figure might not be correct and needs to be further analysed as it was reconstructed only from some records available after a system crash.

“If the government considers to give discounts, let us say 25%, the sum to be collected will be a significant amount. If it can be collected in 2021, that will be a big source of revenue for the government in this time of crisis. So it is up to the government to analyse this issue and also come up with a strategy in consultation with the agencies concerned,” he added.

Mr Herath noted that government in 2019 collected some R8.5 billion as revenue which was far less than in 2018 when it brought in R8.6 billion into the coffers, a shortfall of some R0.1 billion (some R100 million) against the forecasted R8.9 billion as collection revenue.

He stated that the original revenue budget for 2019 totalled R9.0 billion and with a downward revision of the estimates for fees and charges, other non-tax and a reduction of R64.2 million in grants, the total expected revenue became R8.9 billion, against which R8.5 billion has been actually collected.

With regard to expenses for 2019, Mr Herath said the government, through better budget management, spent R8.3 billion as compared to nearly R8.7 billion in 2018.

“For the overall fiscal balance, government collected R8.5 billion in revenue in total and has spent R8.3 billion. So the result is a surplus of R0.2 billion (R118.7 million) in revenue,” Mr Herath said, noting that government has been making surpluses in the primary balance every year as from 2009.

Speaking on public debts, he said that at the end of 2019, Seychelles has accumulated a total of R7,113.9 million as domestic and external debts, through long-term borrowings, as compared to R6,978 million in 2018.

He claimed that a contraction of treasury bills in issue in 2019 underlies the overall decrease in short term domestic borrowing of R135.3 million.

On repayment of existing loans, Mr Herath said the total actual public debt servicing cost, comprising debt repayment and interest payments, increased to R1,212.6 million as compared to R1,060.4 million in 2018 due to larger debt repayments of R765.7 million but reduced interest payments of R446.9 million.

He also highlighted the need for government to also recuperate an outstanding stamp duty of US $2.5 million from a foreign company. He explained that in 2016, a foreign company which owes $16.5 million as stamp duty to government passed on the payment obligation to a local company in 2019 which has already paid US $14.0 million, while the agreement states that the US $2.5 million was to have been paid through a transfer of two parcels of land, V5325 (US $2.0 million) and C3003 (US $0.5 million).

Mr Herath claimed that in most of the other ministries, departments and agencies audited, the results were more or less the same as in previous years where in some instances regulations were not followed and essential records not available, among other issues which they need to address through remedial actions.

He said most are not in line with procurement procedures which are preventing them to manage their budgets properly and to cut cost.

The 2019 annual report was recently submitted by Mr Herath to the Speaker of the National Assembly Roger Mancienne, as required under Article 158 of the Constitution, for oversight.

He said the report usually comes out during the months of September to October but Covid-19 had had it coming out later in November 2020.

In all, the Office of the Auditor General is mandated to audit some 150 public entities including ministries, departments and agencies.

Patrick Joubert