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Audit Names Loans

A senior manager of a Fijian Holdings Limited subsidiary had increased the valuation of two properties it bought by over $1 million without proper independent valuation. This has been highlighted in
02 Aug 2016 11:28
Audit Names Loans

A senior manager of a Fijian Holdings Limited subsidiary had increased the valuation of two properties it bought by over $1 million without proper independent valuation.

This has been highlighted in the independent audit report by a chartered accounting firm which was tasked with auditing the financial institution.

The report, one of two done, also highlights a number of discrepancies in loans given by the subsidiary.

FHL and its subsidiary came under scrutiny over alleged questionable practices.

Permanent Secretary for iTaukei Affairs Naipote Katonitabua wrote to Fijian Holdings chairman Iowane Naiveli over what was described as unsatisfactory performance by some FHL directors. His letter alleged abuse of power and raised questions over loans.

Following these allegations, two chartered accounting firms were hired to audit the subsidiary and possible collusion between some FHL directors and the management of its subsidiary.

The reports highlighted a number of issues.

Some included:

  • Two properties in Laucala Bay Road in Suva were purchased by the subsidiary. The purchase price based on independent valuation was $1.08 million. However, the senior manager increased the valuation by $1.03 million.

He did this to account for frontage view of the properties and access into Flagstaff in Suva. The subsidiary paid             $2.11million for a property valued $1.08million. The properties were bought in April 2016.

  •  It was also noted that for the two properties, the seller’s real estate agent had initially put up a selling price of $2.5 million, which was later brought down to $2.35 million. The subsidiary had offered $2 million which was refused by the agent since his commission from the sale would be less. The senior manager then got the FHL Board’s approval to pay the agent for the loss in his commission. This showed a level of collusion between the Board and management.
  •  The subsidiary also bought two more properties and paid a deposit of $52,268 for each piece of land. The audit report noted that the deposit was done without any valuation being given.
  •  It has also been highlighted that despite having a panel of valuers, the management engaged the same valuer for valuations of the three mentioned properties. It recommended that a rotation of valuers be appointed from the panel whenever a new valuation is obtained.

In terms of loans that the subsidiary gave over the last 18 months, which were above $1million, a number of issues were also highlighted.

In one case, a company was given a loan despite having a working capital deficiency of $3.4 million.

This deficiency in working capital was not picked up because trade facility, which should have been classified as current, was instead classified as non-current.

The report has been sent to Prime Minister Voreqe Bainimarama, as chair of the iTaukei Land Trust Board.

It is likely to be the first case whereby a company is taken to task under the new Companies Act.

Government is a majority shareholder in FHL. Fijian Holdings was set up to develop iTaukei participation in business. It has become one of the country’s biggest companies.

FHL chairman Naiveli and chief executive officer Nouzab Fareed declined to comment on the audit findings.

Edited by Naisa Koroi

Feedback:  jyotip@fijisun.com.fj

 

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