Audit raps government over delays, poor valuations

The National Audit Office has called on the Government Property Division and the Ministry of Finance to draw up a strategy to settle outstanding debts related to land acquired by the government from private owners.

Such a strategy, the office said, should address issues relating to budget allocations and the prioritisation of debts.

The division has estimated the debts to have amounted to Lm26 million at the end of 2002. But the audit office (NAO) said it considered this figure as unreliable as it did not include possible damages/interest payable in view of delayed settlement and potentially substantial increases in the value of land where prices were not determined by the issue of a notice to treat.

The audit office discussed the acquisition of property by the government in a report following a performance audit held by its Value for Money section. The audit involved a review of the acquisition process related to 30 government projects - a total of 226 acquisitions of property from private owners.

The audit office said it was concerned that government departments requesting land acquisition were not fully exploring ways to minimise land acquisition costs, such as by considering alternative sites. Guidelines to this effect were not in place.

In 107 of the acquisitions sampled by NAO, possession of land was taken by the departments before the legal acquisition process began, an action which may expose the government to avoidable risks.

There was no set procedure whereby, on completion of public projects, the government departments which acquired privately-owned land would inform the Government Property Division (GPD) of any land which remained surplus to their requirements.

The GPD was not in a position to maintain adequate management information to support the land acquisition process, including critical information such as the estimate of the funds owed to land owners by way of compensation. A major project to implement comprehensive IT facilities had fallen far behind schedule.

The process of land acquisitions was characterised by long delays. Of the 226 acquisitions sampled, 114 were not yet concluded; 76 had been outstanding for more than five years, including 40 that had been outstanding for 20 years, the oldest dating back to 1951. The main reason for delays was the identification of the land owners. The 226 sampled acquisitions included 80 cases where the owners had not yet been identified.

The audit office said that besides preventing owners from receiving timely compensation, the lengthy delays in the land acquisition process was proving to be financially burdensome to the government.

In such cases, the rate of appreciation of the value of land over time had a critical impact on the price that the government had to pay by way of compensation. An analysis of nine concluded acquisitions in the sample showed that the delays to issue the notice to treat meant the government incurred Lm165,000 more in a payment bill of Lm329,000 due to the delay in determining prices.

The office pointed out that following legislative amendments in March 2003, the price of expropriated land was now determined and ownership passed to the government, on publication of the President's declaration on the expropriation of land.

The NAO was also critical of the GPD's valuations of land. It said its own valuations (made by an independent architect) were generally between four and 156 per cent higher.

Owners, on average, claimed their property was worth three times as much as valuated by the GPD.

In its recommendations, the audit office called for appropriate time frames for all stages of the land acquisition process and the implementation of management information systems.