Performance Audit report

Management of the Fuel Incentive Scheme

Seychelles Fishing Authority

The Office of the Auditor General (OAG) has laid its 9th performance audit report before the National Assembly in February 2020. The report examines the effectiveness of the Fuel Incentive Scheme as operated by the Seychelles Fishing Authority (SFA) for the period January 2015 to August 2019.

Since its initiation in 1991, the FIS has been under the management of SFA with the objective to reduce the operating costs of boat owners involved in commercial fishing activities and to improve the viability and profitability of their fishing operations. Under the scheme, boat owners are able to receive 100 percent Excise Tax exemption on the amount of fuel consumed by their vessels during their fishing operations. Presently, the commercial boat owners involved in Artisanal, Semi-industrial, Dropline and Sea Cucumber fishing activities are eligible to benefit from the scheme.

While artisanal fishers have to undergo a fuel refund process at the SFA and the Seychelles Revenue Commission (SRC) to obtain this benefit (refund), other types of boat owners obtain the rebate directly at the SFA fuel pumps where they pay SCR 8 less on each litre of fuel purchased.

 

The OAG found that the SFA did not have an effective system for the monitoring, reviewing and evaluating the scheme with a view to ensure that it is achieving its objectives and as to whether the scheme is still relevant today. Such a review is particularly important given the various changes that has taken place in the fishing industry since the initiation of the scheme over two decades ago. 

 

As of 2018, the FIS is being regulated by the Excise Tax (Fuel Exemption and Concession) Regulation, 2018. Under the regulation, boat owners are able to obtain 100 percent excise tax which is at a rate of SCR 8.50 per litre of fuel. The OAG observed that boat owners were receiving tax exemption at only SCR 8.00 per litre. We also noted that boat owners were benefiting from the scheme even though they did not provide relevant supporting documents and in some cases, did not meet the required conditions.  

 

The OAG also observed inconsistencies in the allocation of fuel under the scheme where artisanal fishing and sea cucumber fishing sectors had a fuel limit but it did not apply to semi industrial vessels.  Furthermore, the fuel limit grid used to allocate fuel limit to artisanal fishers did not contain all of the vessels’ details and engine type of all artisanal vessels in operation. For vessels not on the grid, their fuel allocation was estimated based on near values which led to irregularities and unfair allocation of fuel. Audit noted that in 16 percent of the fuel claims tested, the amount refunded differed from the amount indicated on the fuel receipt.

 

Undue delays in the processing of fuel claims refund was a significant concern expressed by boat owners. Audit noted that there were no written guidelines indicating a set timeframe for the processing of claims nor a mechanism in place to monitor and identify bottlenecks leading to delays. However, we noted some improvements in recent months whereby the time taken to process claims has reduced significantly.

 

Audit revealed that SFA was not maintaining proper records on the amount of the fuel sold at concessionary price at the SFA fuel pumps. Consequently, Audit could not ascertain the amount of sale of fuel at concessionary price. Further, a reconciliation of the fuel bought from SEYPEC and the amount sold at the pump was not carried out by the SFA.

Moreover, the daily revenue collection at the Providence Fuel Depot was not taken to head office on a daily basis for regular banking whereby increasing the risk of theft and fraud of cash and/ or fuel.

The report of abuse of the FIS was one of the motivation for the audit and from the interviews conducted, 70 percent of our respondents stated that abuse of the FIS was still taking place. The most common possible abuses, reportedly, taking place were manipulation of records, false declaration of fishing activities by boat owners and the use of fuel designated for fishing vessel for other purposes.  

The OAG noted that the SFA may be inadequately equipped to identify and efficiently address instances of abuse given that they were inconsistently applying the pre-fuel monitoring activity on fishing vessels to ascertain that vessels were undertaking commercial fishing activity before being allocated with fuel. Errors were also noted in the SFA monitoring activities data entry records which led to inactive vessels being refunded under the scheme. Furthermore, the current regulation that guides the FIS does not make provision for penalties on boat owners who abuse the system.

 

Notably, abuse of the scheme has been a matter of concern for all stakeholders. The Seychelles Fishing Authority (SFA) has taken certain measures to curb the abuses and operational shortcomings reported. However, in view of the numerous shortcomings highlighted in the Audit, it is evident that abuse of the scheme may still be persisting and no corrective or punitive actions are being taken against culprits. The Seychelles Fishing Authority has not monitored the scheme with a view to ensure that it is achieving its objectives and that the objectives are still relevant. The operational efficiency of the scheme is another matter of concern requiring urgent attention.

 

Going forward, the Authority is confident that the some of the issues raised in the report would be addressed through the measures being implemented under the new fisheries comprehensive plan issued by the Ministry of Fisheries and Agriculture.

 

Auditor General

Gamini Herath

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