Filladhoo Council disputes audit findings on tourism land leases

The Filladhoo Council has issued a rebuttal to an Audit Office report, arguing that adopting the Auditor's recommended method for determining lease prices for land zoned for tourism would result in a significantly greater financial loss to the council.

The audit report, which reviewed the council's 2024 budget expenditure against its approved budget, claimed that the Council's practices, including evaluating proposals contrary to the prepared leasing policy and drafting agreements that deviated from the original proposals, would result in a total projected loss of MVR 69.9 million over the duration of the agreements.

In its statement, the Council argued that the audit report failed to consider the information, comments, and publicly released policies provided by the Council.

The audit report noted that the plots could not be used because essential services had not been established prior to leasing.

The Council countered that the leased plots are not fixed assets to be owned by any party. They believe that when buildings are constructed and requests for electricity are made, Fenaka can provide the service after upgrading its network, which is currently underway in newly developing areas of the island.

"Legally, a sale and purchase transaction can only be conducted on one's own private property. We emphasize that this Council has not granted any party the opportunity to purchase any land from the tourism zone. Furthermore, this Council has not sold any land," the statement read.

"Given this fact, and since the amount of the Lease Transfer Fee is visible in the written agreements provided to the audit, we view the statement in the audit report, which suggests that a profit larger than that figure is believed to have been collected as a Lease Transfer Fee, as being written in a highly irresponsible manner, as there is no evidence to support that claim."

The audit report also suggested that the Council could face a total loss of MVR 55 million over the lease period due to the way they evaluated proposals, even when calculating a 25 percent increase in monthly rent every ten years for eight of the leased plots.

The Council stated that they evaluated over 600 bids submitted for the 99 tourism plots. They noted that only two parties proposed annual rent increases, and neither of those parties submitted any complaints regarding the evaluation process, suggesting that the public understood the policy. The Council claims the audit report interpreted the policy differently. Addressing an audit finding regarding plot BP-38, where the winning party's final agreement stipulated only MVR 115,000 in CSR over two years , compared to an initial proposal of MVR 115,000 annually, potentially causing a MVR 5 million loss, the Council gave its rationale.

The Council stated that bids that propose significantly higher rents only in later stages, a common practice in bidding for resorts and tourist hotels, are often submitted by parties who intend to abandon the lease before paying the higher rent. They believe that awarding marks based on an average rent or on rent that will not be received in the first few years would be an unfair advantage given to that party and an injustice to other bidders. Therefore, the Council noted that the current tourism zone leasing policy did not allow this loophole.

"Looking at the tables detailed above, when comparing the 20-year profit estimate (using the Council's method) with the estimate derived from the Council's principled evaluation, it is evident that the figures calculated in the audit, based on the auditors' own interpretation, result in a lower income benefit," the statement read.  

The Council concluded that the figures in the audit report, derived from the audit team's "personal interpretation" and without considering the project's full scope or consultations with the public and experts, result in a reduction of the projected income. However, the Council committed to correcting any issues highlighted for improvement in the report and seeking compensation where necessary.