K77m in rental arrears uncovered

SIGNIFICANT and persistent shortfalls have been discovered in the collections of revenue for the State by the Department of Lands and Physical Planning.
These include outstanding land rentals of K77 million between 2000 and 2005.
The Department of Lands and Physical Planning is responsible for the assessment, levying and collection of tender prices, reserve prices and land rentals for all State leases in Papua New Guinea.
The Public Accounts Committee followed the department’s performance during the periods 2000 and 2004 said  the outstanding rent: “By any measure this is a significant loss to the State.
“It is unacceptable.”
The committee found that for the 2000 period, there was a shortfall in total collection estimated for the year against the annual revenue budget of K21,144,500 by K2,124,197.
The committee found that:
* 3,468 lessee rental payees outstanding to a value of K7,853,342 did not have the correct address for billing purposes;
* Potential revenue to the State was lost as a result of 206 rental records with outstanding rents amounting to K92,507 were without a client. This indicates that land which was supposed to have been leased out to clients was not leased and remained unoccupied or under dispute;
* The Auditor-General noted consistent failures in updating the list of the land rentals and significant uncollected accumulated land rentals totalling K54,912,718.49.  
* Valuation fees were outstanding for the year ending Dec 31, 2000, for properties charged on debit notes in a sum of K138,831.  K91,303 of this amount was outstanding since 1986. The department had failed to make any follow-up on valuations;
* The Auditor-General finds “negligence of duty and lack of co-operation between line divisions concerned” which resulted in records maintained by the revenue division being unreliable and the State missing out on substantial amounts of revenue;
* Outstanding cheques in a sum of K905,508.81 – K893,470.18 of which were current to the year 2000 with no evidence to suggest follow up action – especially for the years 1998 and 1999; and
* The land acquisition trust account maintained two sets of cash books – manual and computerised cash books – which did not reconcile.  Cancelled cheques to a value of K311,150 were not entered in the manual cash book.
A similar story unfolded for the shortfalls of the other years examined.
The revenue statement from the Department of Finance totalled K23,015,000 for 2001 but there was a shortfall of K5,961,195. 
The budgeted revenue collection for 2002 was K25,010,000. 
The actual collection was K17,551,000 – yielding a shortfall of K7,459,000.
This represented 29.82% as opposed to 22.02% in 2001.
The net shortfall in revenue collection for 2003 totalled K4,919,423.
The committee further reported that the Department of Lands and Physical Planning has, for many years, failed to collect or enforce the payment of land rental to any acceptable standard.
The committee finds that during the period 2000-05, huge amounts of land rentals have not been collected by the department, to the considerable detriment of the State.
From the department’s own documents and records, the committee concluded that the following aggregated or accumulated amounts of land rental remained outstanding at time of filing the report:
2000 K54,912,718.49
2001 K57,692,508.37
2002 K63,765,757.39
2003 K65,835,960.58
2004 K73,505,636.99
2005 K77,445,204.11
This total does not include land rental owed by statutory corporations which was waived by the NEC.
The secretary, Pepi Kimas, blamed this state of affairs on the lack of resources, lack of funding, lack of records, lack of staff and lack of cooperation by the offices of the Solicitor-General and Attorney-General and his own staff.
The committee does not accept these excuses.
Said the committee: “To some extent, the department has manpower problems, but the statutory mechanism to forfeit leases over non-payment is simple and a readily available coercive device, which has not been used by the department, adequately or at all – to the considerable detriment of the State.
The committee recommended that the Government take urgent action to address this failure.
The recommendation remains outstanding three years on.