Auditor General questions valuation of assets of state-owned enterprises

The Auditor General’s Office has questioned the valuation of assets of the Thilafushi Corporation Ltd (TCL) and State Electricity Company (STELCO) in audit reports of the state-owned enterprises for 2013.

The TCL audit report released last week explained that the Finance Ministry transferred land and buildings on Thilafushi Industrial Island to the corporation at a value of MVR12 billion (US$778 million).

“The consideration for such transfer had been made by the issue of 150,000,000 equity shares of MVR10 each issued at a premium of MVR74.13 to Ministry of Finance and Treasury,” the report stated.

Following valuation of the island and property therein by a professionally qualified party “on the basis of capitalised lease rentals to perpetuity,” the leased land was valued at MVR5,725 (US$371) per square foot.

Additionally, “land pending reclamation and lease at the time” was valued at MVR1,200 per square foot, “the reasonableness of which cannot be readily established.”

The report noted that the transaction took place between TCL and the Finance Ministry, “its sole shareholder.”

Moreover, in the “absence of a valuation adopting alternative approaches in the context that this is the first purchase of land transaction at Thilafushi,” the Auditor General’s Office was “unable to conclude whether the rates per square foot derived above are reasonable.”

The report stated that auditors were “unable to satisfy ourselves whether the land and buildings thereon and share premium shown in the balance at MVR12,618, 789,042 and MVR11,118,789,042 [US$713 million] respectively are fairly stated.”

Work in progress

The report also noted that MVR33 million (US$2 million) was paid to Heavy Load Maldives for land reclamation, which was stated in the balance sheet as capital work in progress.

However, in 2011, the company incurred a further MVR23 million (US$1.4 million) for the project, increasing the total capital work-in-progress amount to MVR61 million (US$3.9 million).

Auditors found that the MVR23 million had been “capitalised by transferring the amount from capital work-in-progress to land towards the industrial zone reclamation,” while the remaining amount had not been capitalised.

“In the absence of evidences supporting the work done for the remaining amount of MVR38,889,767, we are unable to conclude whether the company has received value for the amount paid and therefore whether the capital work-in-progress has been fairly stated,” the report concluded.

In January 2013, local media reported that TCL incurred MVR650 million (US$42 million) worth of losses as a result of Heavy Load not reclaiming the agreed 152 hectares of land within the granted six month period.

As a result of the issues flagged in the report, the audit office was “unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion,” and subsequently did not express an opinion on TCL’s financial statement.


In the audit report of STELCO for 2013, the audit office noted that while the company’s financial statements gave “a true and fair view” of its financial position, performance and cash flow as of December 31, 2013, Auditor General Niyaz Ibrahim qualified his opinion due to questions over the valuation of assets.

The report explained that the government-owned company’s property, plant and equipment were revalued by an external valuer during 2011.

“Accordingly, the assets having net book value of MVR434,455,893 [US$28 million] as at 31 December 2011 were revalued for MVR847,932,997 [US$54 million] and a revaluation surplus of MVR413,477,104 was recognised in the books of account,” the report revealed.

However, it added, assets worth MVR26 million (US$1.6 million) were excluded from the revaluation report and “the company accounted these assets at their respective net book values based on historical cost,” which was in violation of international accounting standards.

Consequently, “in the absence of valuation of these assets,” auditors were unable to conclude that MVR15 million (US$972,762) included in the property, plant and equipment of MVR1.5 billion (US97 million) as well as a revaluation reserve of MVR314 million (US$20 million) in the balance sheet was “fairly stated.”

Meanwhile, the audit report of the Maldives Ports Ltd (MPL) for 2013 noted that the company was owed MVR13 million (US$8 million) from the dissolved Maldives National Shipping Ltd, which was a receivable that has been “outstanding for more than four years and therefore, doubtful of recovery.”

As a result, the report noted, auditors were unable to conclude “whether the amount shown under related party receivables in the statement of financial position is recoverable and [whether] the results for the year and receivables were are fairly stated.”

Auditors also found that MVR24 million (US$1.5 million) was “incurred on the construction of a tug boat for harbour operations.”

However, the construction had been discontinued since 2010 “due to a dispute with the constructor,” auditors found.

“Further, we were not allowed to access the premises of the tug boat. Hence, we are unable to satisfy ourselves regarding the physical existence and recoverability of the asset,” the report stated.


Thilafushi Corporation’s MD and board members dismissed

Thilafushi Corporation Limited (TLC) Managing Director Ilham Idrees and four other members of its board have been dismissed from their positions.

A statement released by the Privatization and Corporatization Board stated that Idrees has been replaced with Abdulla Saleeh Jaleel as TLC’s Managing Director. The Board did not provide a reason for the dismissal of any of the board members.

Ilham Idrees was appointed to the post by former President Mohamed Waheed Hassan during his term in office.

It further stated that board members Ahmed Rasheed Hussain, Adam Thaufeeq, Ali Rasheed Ibrahim and Ahmed Musthafa have also been dismissed.

The Privatization and Corporatization board – mandated with privatizing and corporatizing state enterprises, and monitoring and evaluating them – is compiled of seven members appointed by the President.


Livestock import ban following anthrax scare in Tamil Nadu

The Health Protection Agency (HPA) has enforced a ban on importing live animals and meat to the Maldives from Tamil Nadu in India following an anthrax outbreak, local media reports.

A statement from the HPA read that two towns in Tamil Nadu had reported an outbreak of anthrax, and as a precautionary measure the agency had banned live animal and meal imports from any state within Tamil Nadu.

The HPA has urged against using live animals and meat produced after December 31, 2012 imported from India.

“Normally anthrax affects animals such as goats and cows. However, humans can get the disease from animals. Humans contract the disease by coming in contact with infected animals, airborne germs and consuming meat of infected animals,” the HPA stated.

Anthrax is an acute disease caused by the bacterium Bacillus anthracis, according to the agency.

Orf virus found in Thilafushi goat

Prior to being abolished, the Centre for Community Health and Disease Control (CCHDC) reported that a goat in Thilafushi had tested positive for the Orf virus earlier this month.

Despite the Ministry of Agriculture earlier stating that Orf is a dangerous virus, as reported by local media, the CCHDC said it does not pose a great risk to humans.

Epidemiologist at CCHDC Dr Aishath Aruna said that a human can only contract the virus by coming into direct contact with an infected goat, Sun Online reported.

“Humans can contract the disease from goats, by coming into direct contact with an infected goat. It’s not a dangerous disease. Only people who tend and rear goats are at risk,” Aruna was quoted as saying by local media.

In regard to goats being reared in Thilafushi – otherwise known as “garbage island” – Dr Aruna told Sun Online that eating the meat from these goats could pose a risk to humans.

The Thilafushi Corporation said the island is used for industrial purposes, and that people who rear goats in the island do so without obtaining the necessary permits.

The CDHDC was abolished by President Mohamed Waheed Hassan Manik earlier this month. The President’s Office confirmed that functions and responsibilities of the CCHDC were to be transferred to the HPA.

The CCHDC had been working to identify diseases prevalent in the Maldives, and to prevent disease and increase health awareness.


ACC forwards cases against senior officials of Thilafushi Corporation for prosecution

The Anti-Corruption Commission (ACC) has concluded its investigation into alleged corruption committed by the Thilafushi Corporation Ltd (TCL) in awarding a land reclamation project to Heavy Load Maldives – a family business of ruling Maldivian Democratic Party (MDP) Chairman ‘Reeko’ Moosa Manik – and sent cases against three senior TCL officials for prosecution.

The three members of the bid evaluation committee facing corruption charges are Managing Director Mohamed Wafir, Director Mohamed Adhil Rasheed and former Acting Manager Ibrahim Riyaz.

A statement put out by the ACC yesterday noted that the US$21 million project was not awarded with the advice of the TCL board and in violation of the government-owned company’s operating procedures.

The ACC investigation found that TCL provided US$3 million to Heavy Load as a mobilisation payment without the approval of either the engineer or the board’s majority.

Moreover, TCL accepted three vessels worth US$1.8 million as advance payment security without a valuation of the vessels. The security document was signed by a director of Heavy Load Maldives while a board resolution from the company authorising the director to sell or mortgage assets was not submitted.

Based on its finding, the ACC concluded that the three evaluation committee members tried to “illegally benefit a particular party” in the awarding of the project.

In addition, the ACC found that TCL was in the process of revising the project and replacing its engineer, Abdulla Ziyad, as the contractor appeared unlikely to complete the project on time.

The dredging was part of TCL’s development of a new port catering to 15,000 ton cargo ships and container terminal, on 3.8 million square foot of land. The industrial zone development project is partly intended to free up land currently occupied by the port in Male’, one of the most densely populated cities in the world at over 100,000 people per square kilometre.

Meanwhile, in a second statement put out today, the ACC revealed that it had also requested the Prosecutor General’s Office (PGO) to prosecute TCL’s Corporate and Legal Affairs Manager Mohamed Latheef as he had failed to provide a copy of a board resolution approving the decision to sue the ACC after it ordered the project to be halted.

Latheef had assured the ACC on August 21 that he would send a copy to the commission, the statement noted.

TCL sued the ACC on April 21 claiming the commission’s order to stop work on the US$21 million Thilafushi reclamation project was not legally justifiable.

In April, TCL lawyer Mazlan Rasheed argued at the Civil Court that the ACC did not have legal authority to order the government corporation to scrap the project, which was was both “irresponsible” and “unlawful” as the order was made before the commission completed its investigation process.

TCL therefore requested that the Civil Court declare the ACC order unlawful, he said.

ACC lawyer Areef Ahmed Naseer however denied the claims, insisting that the commission acted within legal bounds.

Heavy Load Maldives was awarded the US$21 million project on September 30 last year, and inaugurated the project on February 4, 2011.

MP Moosa Manik told Minivan News in February this year that the commission’s order was politically motivated, claiming that “there is a part of the ACC that is not free and fair.”

“PA’s Deputy Leader [Ahmed] Nazim is very close with one of the commission members, [Abdulla] Hilmy, which needs closer investigation,” Moosa claimed. “I am a strong part of this government and I think this is a political trick. I haven’t even been into the Heavy Load office in one and a half months because of my campaigning [in the local council elections]. It is run by my family, my children.”

In an audio clip of a leaked phone call between Nazim and MP Abdulla Yameen that emerged in July 2010, the Deputy Speaker is heard to say that he has “given warnings” to ACC members to issue a press release, presumably regarding dismissed Auditor General Ibrahim Naeem.


Thilafushi lagoon cleared of floating garbage

The lagoon of industrial island Thilafushi has been cleared of floating garbage to allow vessels to enter and dock at the harbour without difficulty, reports Haveeru.

According to a statement by the Thilafushi Corporation yesterday, the cleaning effort was proceeding apace and the corporation expected the lagoon to be completely cleared this week.

The corporation explained that garbage was floating freely because of spillage from barges discharging garbage at the island.

The Male’ City Council’s waste management section has informed the corporation that it would be monitoring garbage disposal at Thilafushi, the press statement revealed.