Alleged Misappropriation of Funds by the President of Shefa Province and Maladministration of Shefa Provincial Council [1996] VUOM 1; 1996.02 (23 July 1996)

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PRESIDENT OF SHEFA PROVINCE AND MALADMINISTRATION OF SHEFA PROVINCIAL COUNCIL

10. TOTAL AMOUNT WHICH IS OWED BY THE PRESIDENT,
MR CHARLIE KALMET TO SHEFA PROVINCE

18. PRELIMINARY FINDINGS OF WRONG CONDUCT AND DEFECTIVE
ADMINISTRATIVE PRACTICES

APPENDIX B
Reply Comments from Mr William HALLING, Secretary General of SHEFA Provincial Council.

APPENDIX D
Translation of Mr Charlie Kalmet’s reply to Ombudsman (Bichelamar to English).

". . . Those who want to be rich fall into temptation and snares and many foolish harmful desires which plunge only into ruin and perdition. The love of money is the root of all evil things, and there are some who in reaching for it have wandered from the faith and spiked themselves on many thorny griefs . . ." Timothy 6 v 9.

This report regarding the administration of public resources by the official representatives of Shefa Province is of great importance and significance. The intention behind the setting-up of the Provincial Councils was to ensure a just and balanced use of public money under the responsibility of the people in each locality.

The reality in respect of Shefa province affairs, as exposed by the Ombudsman’s investigation, is a sad and shameful catalogue of greed and arrogance, for which no possible justification has emerged. The people’s representatives have not simply closed their eyes to the possibility of illegal and dishonest behaviour. They have in many cases aided and abetted the leading figures to defy the Laws of the country of Vanuatu despite specific instruction to desist from their violations.

Scarce public funds have been misappropriated and directed to private gain. Illegal transactions have been approved by institutions and people who are entrusted with the public’s funds as well as the public’s good interests.

The most alarming and disappointing realisation that has emerged from this investigation (as well as from others currently proceeding) is the indifference on the part of many leaders to what the law actually permits or forbids.

It is increasingly clear that many people are appointed to leading responsible positions without a clear grasp of how their duties require them to act. There appears to be a prevalent assumption that being appointed to a position of power means that license has been given to give rein to any action which suits the interests of the official concerned.

While it may be possible to make allowance for some ignorance of the Constitution or the Law by people who have been promoted from humble circumstances and limited training or education, it is difficult to excuse anyone brought up under such religious influences as prevail in Vanuatu for an apparent ignorance of, or indifference to, the basic laws of honesty and morality.

Therefore while we are confronted with a great lack of sophistication and skilled experience in management and administrative skills, there is no scarcity whatever of the ability to see and exploit the most sophisticated opportunities for deceit, theft, partiality, promotion of friends and many other actions which are specifically condemned in the Church teachings of all denominations in Vanuatu.

Yet another misconception is prevalent among leaders - that is, that the policies of their particular political party (in this case the M.P.P.) has some authority over laws previously voted by Parliament. It must be noted that Parliament alone makes laws not political parties. No matter how much some parties may wish it, party policy is not law.

Public money, some of it donated by foreign countries to aid the people of Vanuatu, is being manipulated into private hands either by criminal intent or carelessness. It is to be hoped that appropriate investigation of these activities will lead to greater accountability to vows of service.

1.1 In the 1980’s eleven Local Government Councils were set up by the Government. These Councils continued to function from this time until 1994 when they were dissolved. The numbers were then reduced from eleven down to six Provincial Government Councils as some of the Local Government Councils were amalgamated and formed into new Provincial Government Councils.

1.1.1 In November 1994, after the Provincial elections, the new Provincial Governments were set up, one of which was the Shefa Province. It is made up of the Shepherd Islands, Epi and Efate. The Head Office of this new Province was based on Efate in the former Efate Local Government Council headquarters.

1.1.2. In April 1995 the Executive Officer of the Shefa Province, Mr Joe Bomal Carlo submitted a report to the Minister of Home Affairs on various administrative problems affecting the Shefa Provincial Council. The report included recommendations to help sort things out.

The Ombudsman decided to conduct an investigation on the problems outlined in this report as it appeared to indicate serious breaches of several of the Laws of Vanuatu, namely;

The Decentralisation and Local Government Regions Act No. 1 of 1994, (The Decentralisation Act),

During the course of my investigation I uncovered a number of irregularities arising from the actions of the President of Shefa Province, Mr Charlie Kalmet, namely:

It appeared that the Decentralisation Act was breached by the members of the Shefa Provincial Council by approving a salary to the President thirteen times greater than the rate specified in the Decentralisation Act. The Council and the President himself have chosen to ignore an Act of Parliament for the President’s own benefit.

The primary failure of the Council’s officers to comply with the Decentralisation Act was apparently due to fear of the President, Mr Charlie Kalmet. This applied also to the illegal advances which have been paid to the President.

I have taken the view that Acts of Parliament, orders, regulations and instructions issued by the Minister of Home Affairs, Honourable Charlie Nako must be strictly complied with, to safeguard the interests of the public of the Shefa Province.

If the Shefa Province continues to function in its present form under the current President, illegal salaries, misappropriation, misuse of powers and position, will inevitably continue. The result will be that the financial resources invested in Provincial Governments to provide growth and development for the grassroots people of the Province will be used to enrich a few "Big Men". The people of the Province will once again fail to receive any real benefit from the decentralisation policy despite the promises of the Central Government.
Administration costs already consume more than 62% of the Provincial budget leaving very little for development.

The people of Shefa Province should be made aware that it appears that the President, Mr Charlie Kalmet, has misappropriated over Vt.8.000.000 of Provincial Government funds for his own benefit as at 31/12/95. This represents over 12% of the Provincial Governments total 1995 budget.

This does not include the cost of the luxury car purchased by the Province and used only by the President.

When we include the value of this vehicle the total share of the 1995 Provincial budget used by the President reached 19%.

For the 1996 year he has already allegedly misappropriated a further amount of Vt. 1.550.000 as at April 12th 1996.

Charlie Kalmet has not refunded any amount of these advances, and because of the considerable amount concerned, it appears that during the remaining amount of his 2 years mandate ending in December 1996, he cannot possibly refund this total amount.

"The Ombudsman may enquire into the conduct of any person or body to which this Article applies:

a) upon receiving a complaint from a member of the public (or, if for reasons of incapacity, from his representative or a member of his family) who claims to have been the victim of an injustice as a result of particular conduct;

b) at the request of a Minister, a member of Parliament, of the National Council of Chiefs or of a Local Government Council; or

2.1.1. Section 14 of the Ombudsman Act states, inter-alia; that the Ombudsman may also:

"a) enquire into, either on complaint of a person or body referred to in Article 62(1) (a) and (b) of the Constitution or on his own initiative, any conduct on the part of:

(B) all of, or the majority of the members of the controlling authority of which are appointed by the President, the Council of Ministers or a Minister, or an officer or employee of any such body."

- Establish the legality of paying allowances and monthly salaries to the President of the Shefa Province, in excess of the limits set out in the Decentralisation Act.

- Establish if the salaries and advances paid to the President are in compliance with the provisions of the Decentralisation Act.

- Establish that, where any excess or illegal payments have been made to the President, the necessary steps have been taken to recover the funds.

- Determine the validity of the purchase and use of vehicles purchased by the Provincial Government.

For the purpose of this investigation the following relevant Laws were referred to:

2. The Local Government Council’s (Financial Instructions) Order No.55 of 1982;

In these sections the Ombudsman states the findings of fact on which he has based his findings of wrong conduct.

5.2 The new Decentralization Act was gazetted in July 1994 in the Government Official Gazette. It contains the various rules which the newly elected Provinces, established after the election in November 1994, were to follow. The election of the new Provinces took place on 15.11.94.

5.3 On 08.12.94 the newly elected Shefa Province met for the first time and elected Mr Charlie Kalmet as its first President. All elected members were present.

5.4 At its meeting on 09.12.94 the members of the Council discussed Part VI (Allowances) of the new Decentralization Act. Some Councillors were concerned about the fact that the allowances mentioned in Section 1, 2 and 3 of the Act were insufficient and questions were raised by members at the time.
The following is quoted from the minutes of the meeting:

"Long past ia seksen 1, 2, mo 3 emi wan long ol seksen we plenti long ol Kaonselas oli sherem concern blong olgeta long hem. Sam Kaonselas oli tink se Allowance ia i no naf mo i kat ol kwestens we oli bin raisemap".

[A number of Councillors have expressed concern, over the past year, about Sections 1, 2, and 3. Some councillors felt that the Allowance was insufficient and some questions were raised on the matter].

At the time, the Director of Provincial Affairs Mr Tom Bakeo who was present in the meeting gave replies to the questions raised on the issue. He made it clear that the Act provided the ceiling figures and that the Council could only approve figures below these limits.

5.5 On 12.12.94 the President of Shefa Province proposed that the Council create a new Head, to take care of the President’s allowances. After discussions the Council approved the creation of a new Head. (Head 200.30.09 - President’s Allowance). It was agreed by 23 votes. This is an extract from the Council Meeting:

"President Mr Charlie Kalmet hem i putum wan proposal blong createm wan new Head follem responsibility blong hem olsem Chief Executive Officer blong Provincial Council".

[The President, Mr. Charlie Kalmet, made a proposal to create a new Head following his responsibility as the Chief Executive Officer of the Provincial Council].

At the same meeting the Director of the Provincial Affairs, Mr T Bakeo, again advised that it was not possible to pay amounts in excess of those specified in the Decentralisation Act:

(1) "Hemi no possible blong kat increase long allowance from amount blong allowance i fixed long new Decentralization Act No.1 blong 1994.

(2) Decentralisation Act ia i true blong sendem ol figure ia, but tu hemi kat provision blong Council i save disaed, even though hemi no treatem olsem salaries from hemi no Council Staff".

[(1) It is not possible to increase the allowance as the amount provided for under the Decentralisation Act N0. 1 of 1994 is a fixed amount.

(2) Although these figures are stated in the Decentralisation Act, it also includes a provision whereby the Council may make the decision. It would not, however, be treated as salaries as it does not involve a member of the Council staff].

5.6 On its meeting from 13.02.95 to 21.02.95 the Financial Committee of the Council again discussed the issue of allowances as set out in Part VI, Section 23 of the Decentralization Act and recommended increases in excess of the Act.

5.7 On 04.04.95 the Executive Officer of Shefa Province, Mr Joe B. Carlo presented a brief report on the administration of the Province to the Minister of Home Affairs, Mr Charlie Nako.

A. In his report he pointed out that the Shefa Province Finance Committee gave its approval to a new scale for the President, Elected Members and Nominated Members. They were as follows:

He further stated that the allowance scales followed the MPP party policy and not the law. He further pointed out that under Section 23 of the Decentralization Act the allowances were:

B. Attached to the report was a copy of payments which have been made to the President of the Province in 1995. The total payments were Vt.1.037.245, covering the period from January to March 1995 compared to his legal entitlement of Vt.45.000 for the same period.

5.8 On 05.04.95 the Minister of Home Affairs, Mr Charlie Nako issued a circular to all the Presidents of Provincial Governments drawing their attention to Section 23 of the Decentralization Act. In the circular the Minister stated, inter-alia, the following:

- sabseksen 1 se kaonselas mo memba blong eni komiti blong Province oli entaetel long wan maximum sitting allaons blong 2.500vt blong wan dei blong miting;

- sabseksen 2 (i) se kaonselas mo memba blong eni komiti blong Province oli save claim refan blong eni expense long transport mo akomodesen we oli mekem taem oli kam attendem miting;

- sabseksen 3 (i) kaonselas oli entaetel long monthly alaoens we ino ova long 10.000vt;

(ii) President hemi entaetel long extra 5.000vt wetem alaoens we i fix long (1).

Therefore from desisen blong tekem bigfala monthly salari hemi go akensem Lo, mi askem strong long President mo Kaonselas blong refandem illegal salari we oli bin resivim so far i go back long Provincial Gavman. Mi mekem toktok ia from Sentrol Gavman i bin givim ova 250 million Vatu i go long 6 Provinciol Gavman blong helpem developement blong olgeta aelan bat i no blong pem bigfala salari.

Wetem copi blong Memo ia mi askem Director blong Dipatmen blong Lokol Otorities mo olgeta Provincial Executive Offisas oli foloap mo informem mi, personali, se Presidents mo Kaonselas oli respektem decision blong mi o no. Sapos oli fel blong complae wetem desisen blong mi, bae mi luk blong tekem wan appropriate aksen long situesen ia long fiuja."

[1. The President and Councillors have decided to raise their monthly salaries

- Subsection 1 stipulates that, Members of Local Government Councils and the members of any committees set up by the Local Government Councils are entitled to an allowance the amount of which shall be determined by the council but shall not exceed the maximum amount of 2,500VT per days’ sitting;

- Subsection 2 states that, Members of the Council and the members of any committees set up by the Local Government Councils are entitled to a refund of their travelling and accommodation expenses when travelling to attend Council or committee meetings as the case may be;

- Subsection 3 (I) provides that, there shall be paid to elected and appointed members of the Local Government Councils, a monthly allowance not exceeding 10,000VT;

- Subsection 3 (ii) also stipulates that, the Chairman of each Local Government Council shall be paid in addition to the allowance specified in paragraph (I) a monthly allowance of 5,000VT;

Therefore, as it is illegal to receive such a large amount of money in salary, the President and Councillors are strongly advised to refund the illegal salary they have been receiving so far, to the Provincial Council. I say this because the 6 Provincial Councils received over 250 million Vatu from the Central Government for development purposes and not to cover huge salaries.

With copies of this Memo, I asked the Director of the Local Government Department and Provincial Executive Officers to follow up the matter and inform me personally whether the President and Councillors have complied with my decision. If they have failed to comply with this decision, I shall see to it that appropriate action is taken accordingly].

On 4 May 1995 the Council approved sitting allowances of Vt.5.000 per member, in breach of Section 23 of the Decentralisation Act.

On 08.05.95 the Council discussed the budget, especially the adjustments on three heads necessary to provide funds for the President’s salary of Vt.2.400.000 per annum.

At the time the President of the Council, Mr Charlie Kalmet stated that following the policy of the party which is running the Province, the President is entitled to a salary of Vt 200.000 per month.

"Mr Charlie Kalmet hemi kohed blong talem se folem policy blong party we i ranem Kaonsel President hemi entitle blong karem two hundred thousand long wan manis".

[Mr. Charlie Kalmet went on to say that according to the policy of the party that runs the Councils, the President is entitled to two hundred thousand Vatu (200,000 VT) per month].

On the same day the Council made adjustments to the Council’s 1995 budget by decreasing the following heads:

The reasons for decreasing the two Heads was to transfer the respective amounts to the new Head (200.30.09) to cater for the President’s salary. Part of the approved Council Minutes reads:

"President blong Kaonsel mo semtaem Chairman hemi askem blong Kaonsel hemi lukluk bak long finance we hemi stap long Agenda 3. Hemi kohed blong talem se hemi important blong full Kaonsel hemi pasem ol ajasmen blong budget long Head 200.40.07 mo 200.40.08 we tufala i decrease long 2 million mo 3 million mo Head 200.30.09 we naoia hemi 5 million".

(The President of the Councill who is also the Chairman asked the Council to look back into the financial issue on Agenda 3. He stressed the importance of the Council’s approval of the budget adjustments made in Heads 200.40.07 and 200.40.08 which had decreased by 2 million and 3 million VT respectively and Head 200.30.09, currently at 5 million VT)

The adjustments were put to vote. Sixteen (16) members voted in favour of the adjustments while four (4) members voted against it. The names of those sixteen members who voted for and the four who voted against the adjustments were not recorded in the minutes.

5.10 After the above vote, the President Mr Charlie Kalmet introduced the sitting allowances matter. The minutes extract states:

"Sitting Allowance: President, Mr Charlie Kalmet taem hemi introducim hed ia hemi talem se folem pepa Namba 2 blong hem hemi talem se bambae ol elected members oli kasem wan monthly allowance blong 50.000 Vt mo ol nominated memba bambae oli kasem 30.000 Vt".

(Sitting Allowance: The President, Mr. Charlie Kalmet, when introducing this Head, said that following Memo N0. 2 issued by him, elected members were entitled to a monthly allowance of 50,000 VT and nominated members, 30,000 VT)

After numerous discussions by the Council Members the President decided to postpone the issue to be looked into at the end of the meeting.

5.11 On 10 May 95 the issue was discussed again however the President deferred the issue saying that this would be discussed later.

6.1 Records extracted from the Shefa Province cash book for the period 1 January to 31 December 1995 showed that the total of all payments made to the President of Shefa Province, Mr Charlie Kalmet stood at Vt. 8.087.845 (refer Appendix A). It is made up as follows:

6.2. When a payment was made and entered in the cash book, the Treasurer gave a certain code for each type of expenditure. This is in line with Chapter 2 of the Local Government Council’s Financial Instruction Order No.55 of 1992.
Chapter 2(2) (c) of these Regulations states:

- to bring promptly to account under the proper heads and subheads all money paid to or by the Council or any of its officers."

6.3. From the cash book records, the following amounts were paid to the President of Shefa Province, Mr Charlie Kalmet as from 1 January to 31 December 1995 and were allocated to the following codes.

An examination of the details on the cheques which were cashed at the bank showed a total lack of basic financial controls on the part of the Treasurer in respect of payments to Mr Kalmet. The following were most noticeable:

A. Some cheques were made out to cash and were cashed at the bank by Mr Charlie Kalmet.

B. There were cash cheques cashed at the bank without any details of the payee being recorded.

C. There were cheques made out to Mr Kalmet cashed by different persons. Some had the authorisation from Mr Kalmet noted on the reverse of the cheques while some had no such notation.

D. There were cheques made out to Mr Kalmet and were cashed without signatures on the reverse of the cheques.

Under Chapter 2 of the Local Government Council’s (Financial Instructions) the Treasurer is responsible for the general management and supervision of all the accounting operations of the Council. This responsibility includes entering details on the cheques themselves, in that the details on the payment voucher must correspond to the details on the actual cheque. It is impossible to maintain this control when cash cheques are issued.

The details in the payment vouchers as entered by the Treasurer when preparing the payment were lacking. Numerous payment vouchers did not have the signature of the person collecting the cheques or cash.

For some payment vouchers, there were no supporting documentation to support the particular payments.

In some cases there were written requests from Mr Kalmet for advances however for many payment vouchers there were no such requests attached. There were indications in the payment vouchers that some of the requests made by Mr Kalmet were just verbal requests or instructions from the President.

Section 34(d) of the Local Government Councils (Financial Instructions) Order No.55 of 1982 states:

"All payment vouchers will contain full particulars of the payment such as a description of the goods or services, dates, numbers, quantities, distances and rates to enable them to be checked without reference to any other document; and where necessary, they will be supported by the originals of any relevant documents".

It is one of the important internal controls in an organisation that all payments made must be supported by relevant documents.

Under Section 56 of the Financial Instructions (Order No.55 of 1982) all cheques issued by a Provincial Council must be signed by either the President or the Vice President along with one other signature of either the Secretary or the Treasurer.

From the copies of cheques acquired by the Ombudsman it is clear that the majority of the cheques issued by the Shefa Province were signed by the President Mr Charlie Kalmet and the Treasurer Mrs Wendy Sope. Some cheques were signed by Charlie Kalmet and the Acting Secretary General Mr William Halling.

The requirement for two signatures on cheques is to ensure that the proper controls are exercised before any payment is made. It is clear that in the case of Shefa Province, these controls have not existed in respect of payments to the President as he has forced the administration staff to sign cheques for him even when they believed that the payment was wrong.

10. TOTAL AMOUNT WHICH IS OWED BY THE PRESIDENT, MR CHARLIE KALMET TO SHEFA PROVINCE

11.1 I set out below the total amount which the President, Mr Charlie Kalmet, owed to the Shefa Province as at 31.12.95, after taking into account his entitlements under Section 23 (3) (i) and (ii) of the Decentralisation Act.

The above amount does not include the sitting allowances of Vt. 2.500 per sitting of which the President is entitled to under Section 23 (1) of the Decentralisation Act. These have been paid separately.

In addition to the illegal salary and advances taken during 1995 I am most concerned to find that Mr Kalmet has continued to demand advance payment of the illegal salary during 1996, and has taken another Vt.1.550.000 as at the 12th of April 1996.

These advances have continued to be taken without regard to the instructions of the Minister of Home Affairs. It appears that the President of Shefa continues to treat the Shefa Province budget as his own private bank, without any regard for the requirements of the Decentralisation Act, or the Councils own regulations.

The continued drawing of the illegal salary, despite repeated warnings, must represent a clear case of misappropriation by Mr Kalmet and as such is a criminal offence under S123 and S125 of the Penal Code.

11.1 From 24 to 28 April 1995 the Attorney General, Mr Patrick Ellum made a visit to the Malampa and Sanma Provinces. He met with the President and the Executive Officer of Malampa Province and also the Vice President and some members of the Office of Sanma Province. On return from his tour, a report was submitted to the Director of Local Government Department, copied to the Ministry of Home Affairs, on 15 May 1995. Among other matters contained in the report, the following comments were made on the President’s salary:

"Section 23 of the Act provides that the President may only receive a monthly allowance of Vt. 15.000 and a sitting allowance of Vt. 2.500 per meeting. Section 8(8) provides that he is the Chief Executive Officer. On the face of it he cannot receive more than Section 23 provision which could give him a maximum monthly income of Vt. 92.500 if his Council appointed him to sit on a committee which decided to sit every day of the month. The Province’s complain that it is unreasonable for the salary of the Chief Executive of an organisation representing a large electorate to be so limited. This seems to be true.

In the circumstances, I suggest that the Provinces should pass by-laws dealing with remuneration of the Chief Executive. If the Minister feels the remuneration is excessive, he should challenge it in court under Section 18. If the remuneration is reasonable, he should gazette it so that it takes effect under Section 16(1)".

From the above comments one can see that the President of a Province is only entitled to a monthly allowance of only Vt. 15.000

11.2 The monthly salary of Vt. 200.000 paid to the President of Shefa Province, as shown in Appendix 2, is not within the Act. The Minister has never approved any by-law authorising the payment of salaries to the President.

12.1 After the Provincial Election on 15 November 1994, the MPP assumed control of Shefa Province as decided by the leaders of the Unity Front. According to Mr Kalmet, following this decision, the MPP was to introduce the MPP policies, especially its development policies.

12.2. One of its policies was that the members of the Council must approve salaries scales for the Cabinet of the President of the Province as set out below.

a). President salary (allowance)	Vt. 200.000 per month
b). Councillors (allowance)	Vt. 50.000 per month
c). Private Secretary	Vt. 120.000 per month
d). Drivers salaries	Vt. 30.000 per month
e). Child allowance	Vt. 1.000 per month per child
f). Vice President (allowance)	Vt. 30.000 per month
g). 2nd Vice President (allowance)	Vt. 15.000 per month
h). 3rd Vice President(allowance)	Vt. 10.000 per month.

"The Local Government Regions shall be legal entities and shall possess their own fields of jurisdiction which shall permit its agencies to freely run their affairs under the control of the Government and the judicial authority and in compliance with the Constitution and Laws of the Republic of Vanuatu."

12.4. Regardless of whichever political party is administering the Province, by-laws must be subordinate to the Decentralisation Act. Part 1 subsection 1 states;

"... the term by-laws means a by-law approved by the Council of each local government region. The by-law shall be subordinate to the Constitution and to an Act of Parliament. A by-law contradicting the essence of an Act or the Constitution shall be ruled null and void. The validity or otherwise of a by-law shall be determined by the Supreme Court."

From the above, it is evident the Shefa Provincial Council has endorsed MPP policy as being above the law. They have chosen to deliberately ignore the Laws of Vanuatu.

13.1 The control and management rules of the Provincial affairs of the local government Councils and duties of accounting officers are set out in the Local Government Councils Financial Instructions Order No.55 of 1982. This Order is still effective as to this date and has not been amended.

a) to Council officers (but not public officers posted or seconded to Councils) for such purposes and under such terms and conditions as may be provided for from time to time in Council Staff Instructions;

b) to meet expenditure for which finance has definitely been obtained in anticipation of it becoming available;

The term "Council Officers" means any person appointed to the service of a Council and it includes Secretary, Treasurer and Accountable Officer as per the Interpretation in Local Government Councils (Financial Instructions) Order No.55 of 1982. Position of the "Secretary" means the officer appointed to the Chief Executive Officer of the Council with overall responsibility for the operation of the Council.

13.1.2. The Financial Instructions do not provide for advances to Councillors or elected members of the Council. The various advances paid as set out in Appendix 4 of this report to the President of Shefa Province are a misuse of the Province’s funds.

The President is not a Council officer appointed by the Council as per the interpretation given in Chapter 1 of the Local Government Council Order No.55 of 1982, but an elected member being elected in accordance with the provisions of Section 6(1) of the Decentralization Act. Section 6(1) states:

"Election of the members of the Local Government Council shall be on the basis of direct universal franchise which shall include an element of proportional representation".

14.1 In September 1990 the National Audit Office issued an audit report to the First Secretary of the Ministry of Home Affairs following an audit of the Efate Local Government Council. An extract of this report states:

"Personal advances were made to three members of the Council .......The amount of Vt.824.950 is still owed by the President."

At the time Mr Charlie Kalmet was the President of Efate local Government Council.

14.2 Not only has the President of Shefa made no attempt to repay this long outstanding advance, but a police enquiry into a complaint by the Department of Local Government about this matter has stopped for no discernable reason.

14.3 The Ombudsman intends to enquire into the circumstances surrounding the failure of the appropriate authorities to investigate this earlier case of misappropriation by Mr Kalmet as this lack of action has allowed him to take a position of responsibility and use this position to further misappropriate large sums of Government funds.

15.1 On 03.03.95 the Shefa Provincial Council purchased a luxury Deluxe Royal Saloon car (Shefa 1) from Asco Motors. The car was purchased on a leased agreement basis with the National Bank of Vanuatu at a cost of Vt.4.076.081. The car is being used exclusively by the President, Mr Charlie Kalmet.

15.2. From information gathered by the Ombudsman, the decision to buy the car was made by the President, Mr Charlie Kalmet without the consent and approval of the Shefa Provincial Council. This is confirmed by the fact that there is nothing in the Council Minutes about the purchase of a car for the President.

The only record available where the trucks of the Council were mentioned is in the Council Minutes of 06.05.95. The word "trucks" was used for the car (Shefa 1) and a Toyota Land Cruiser now on Epi. This was two months after the purchase was completed.

"Tufala trucks ia Kaonsel hemi pem olgeta long hed ia tru long wan deposit iko long National Bank mo karem wan loan. Amount we i stap hemi smol be bae imas kat wan virement blong kavremap payment blong loan blong tufala truck".

[The Council obtained these two vehicles by making a deposit in and obtaining a loan from the National Bank. The existing amount is small and a virement needs to be made in order to cover the loan payment].

"Naoia Kaonsel hemi karem finis tufala truck blong President mo Office. Long Shepherd bae i kat truck mo baot mo long Epi bae i kat wan truck".

[The Council has already obtained two vehicles for the President and office. One truck and boat will be obtained for the Shepherds region and one truck for Epi].

It is surprising to note that no members of the Council had questioned the Council at the time of the meeting about the authority for the purchasing of the trucks.

16.1 On 10.05.95 the Council discussed the usage of the Council trucks. This was because there were times when staff of the Council and other people were using the truck on non official matters. The Minute of the Council reads:

"President Mr Charlie Kalmet hemi askem long Acting Secretary General blong toktok long hem. Mr Halling hemi talem se agenda i kam from ikat taem we ol staff mo ol narafala pipol oli usum truck blong Kaonsel be hemi no wan official use. Hemi kohed blong talem se ikud blong Kaonsel hemi putum wan rate we oli usum.

Afta plante toktok, President hemi rulumaot agenda mo hemi talem se responsibilities ia i stap long hem".

[The President, Mr. Charlie Kalmet, asked the Secretary General to speak on the matter. Mr. Halling explained that this issue was brought up as a result of staff and other people using the Council truck for purposes outside of official use. He went on to propose that the Council specify a limit to its rate of use.

After much discussion, the President ruled out this point of the agenda stating that this was his responsibility].

16.2. In evidence given in answer to a summons from the Ombudsman on 14.02.96, Mr Charlie Kalmet confirmed that he sometimes took the car (Shefa 1) home during week-ends, used it privately and also used it to come to the Office.

In April 1995 the Executive Officer of the Shefa Province submitted a report to the Minister of Home Affairs saying that two vehicles for the Province were kept over night at the President’s House at Erakor and week-ends. They were not kept at the Shefa Province Headquarters and also that there was evidence of gross misuse of the vehicles.

16.3. On 26.03.96 the President, Mr Charlie Kalmet wrote to the Ombudsman with the following comments in regard to the car -Shefa 1:

"(a) States blong wan President as Jif Administreita, Jif Executif mo President blong Province;

(b) Ius blong car hemi blong tekem President i kam long wok mo ko bak long home from ino kat wan Presidential house yet. President hemi yusum car ia blong ko long ol miting mo ol inviteisen aotsaed long Provinsel Hedkwota long ol woking haoas, afta woking haoas mo iven long sam wiken.

(c) President hemi yusum car ia tu semak long ol Minista’s car. President mo Kaonsel nomo i save disaed long wanem taep blong car oli wantem pem".

[(a) The status of the President as the Chief Administrator, Chief Executive and President of the Province

(b) The car is to be used to transport the President to work and back to his home as there is still no official house. The President may also use the car to attend meetings and invitations outside the Provincial Headquarters during and outside working hours and even in the weekend

(c) The President may also use the car in the same way as ministerial cars. The President and Council shall decide on the type of official car they would like to purchase].

All the above matters are clearly in breach of the provisions of Section 4 of The Local Government (Staff Regulations) Regulation No. 1 of 1994 relating to the use of Council vehicles.

We would expect that the President would set a good example for all staff rather than blatantly breach the regulations for his own benefit.

The President clearly went ahead and committed the Shefa Province to buy a car for his own use and benefit.

17.1 In February 1995 the President of Shefa and the Secretary General Mr Beleai Kalotiti signed a lease agreement with the National Bank for the purchase of a Toyota Cresida (Shefa 1). The total cost of the car (purchase cost plus financing costs) was Vt. 4.076.081 with the loan from the National Bank of Vanuatu amounting to Vt. 2.708.172.

17.2 In March 1995 the President, Mr Charlie Kalmet, and the Acting Secretary General, Mr William Halling, entered into another lease agreement with the National Bank for the purchase of a Toyota Hi-Lux (Shefa 2). The total cost of the car was Vt. 3.185.008 and the amount of the loan from the National Bank of Vanuatu plus interest at ten percent per annum was Vt. 2.096.208.

"The decision to proceed with a loan shall be recorded in a Local Government Council order of which terms and conditions are provided for in Section 9 to 17 of this Act. This order shall not be executed until it is expressly approved by an order issued by the Minister after consultation with the Minister of Finance."

In my opinion a lease is a form of commercial loan in respect of which approval is required. The National Bank of Vanuatu has objected to my findings on this matter and I have accordingly withdrawn my comments on the basis that I will be issuing a separate report on this matter in the near future.

17.4 At the date of this report, I am not aware of any order being made by the Council or forwarded to the Minister of Home Affairs for approval of the leases.

17.5 In the absence of any order by the Minister under Section 28 of the Decentralisation Act, the two loans amounting to Vt. 4.804.380 borrowed by Shefa to purchase vehicles are illegal.

17.6 Mr C Kalmet, Mr B Kalotiti and Mr W Halling clearly breached the provisions of Section 28 of the Decentralisation Act by signing a loan agreement without the authority to do so.

18. PRELIMINARY FINDINGS OF WRONG CONDUCT AND DEFECTIVE ADMINISTRATIVE PRACTICES.

The President of SHEFA, Mr Charlie Kalmet, has continued to draw since January 1995, an illegal salary of Vt.200, 000 per month. As at 31/12/95 this amounted to Vt.2.398.250.

During 1996 Mr Kalmet has taken a further Vt.1.550.000 as salary and advances as at 15/5/96 making a total of Vt.3.948.250.

The President has continued to draw this illegal salary even though he is aware that he has never submitted a by-law to the Minister for approval and gazetting as required by S.15 of the Decentralisation Act. This represents a deliberate and intentional breach of the Laws of Vanuatu by Mr Kalmet.

Mr Kalmet deliberately ignored an instruction from the Minister of Home Affairs regarding the continued payment of illegal salaries and allowances.

The Minister of Home Affairs issued clear instructions on 05.04.95 to all Provincial Councils that any salaries or allowances paid to Councillors in excess of the amounts set out in Section 23 (3) of the Decentralisation Act were illegal and had to be refunded.

MR KALMET HAS BREACHED THE PROVISIONS OF CHAPTER 11 OF THE LOCAL GOVERNMENT COUNCILS (FINANCIAL INSTRUCTIONS) ORDER NO 55 OF 1982.

As at 31/12/95 Mr Charlie Kalmet has taken illegal "advances of salary" amounting to Vt.5.703.497. No attempt to repay any of these advances has been made.

The above order restricts the payment of advances to Council officers. As an elected member of the Provincial Council Mr Kalmet is not a Council officer and is therefore not entitled to draw advances.

Furthermore, given that the salary taken by the President is illegal (refer 18.1 above) then the taking of "advances of salary" must also constitute a breach of Section 23 (3) of the Decentralisation Act.

In addition to this the President has breached his own instruction to the staff of the Provincial Council that no advances were to be paid.

My greatest concern remains that Mr Kalmet has made no attempt to repay the advances taken to date and has continued drawing "salary advances" in 1996.

MR KALMET HAS PREVIOUSLY MISAPPROPRIATED FUNDS DURING HIS TERM AS PRESIDENT OF THE EFATE LOCAL GOVERNMENT COUNCIL.

Mr Charlie Kalmet has unpaid advances amounting to Vt. 824.590 outstanding from his time as President of the Efate Local Government Council.

Despite being outstanding since 1988, he has made no attempt to repay this debt. Instead he has taken advances from the SHEFA Provincial Council to a level that will be almost impossible to repay, even if he ever intended to attempt to make any repayment.

From his past actions it is highly unlikely that Mr Kalmet ever intends to repay any advances taken by him.

MR KALMET HAS BREACHED SECTION 19 OF THE LOCAL GOVERNMENT COUNCILS (FINANCIAL INSTRUCTIONS) ORDER NO 55 OF 1982 BY DIVERTING MORE THAN 20% (Vt. 5.000.000) OF THE DEVELOPMENT FUNDS FROM THE PROVINCIAL BUDGET TO PAY FOR HIS ILLEGAL SALARY.

As President of Shefa, Mr Charlie Kalmet has transferred Vt. 5.000.000 out of funds provided for the development of the Province to pay for his illegal salary and allowances.

The Government of Vanuatu provides an annual grant to each Province to be used for development projects in the Province. This is in addition to funds provided for the administration of the Provinces.

The actions of Mr Kalmet have resulted in a reduction of Vt.5.000.000 in the available development funds for Shefa Province.

It is difficult to understand the reason for Councillors supporting a 20% reduction in development expenditure when these funds are urgently needed for development in the Province.

Even before this transfer the administration costs of the Province amounted to nearly 63% of the total budget. This is unacceptable.

MR KALMET BREACHED THE PROVISIONS OF SECTION 30 OF THE DECENTRALISATION ACT BY AUTHORISING THE PURCHASE OF VEHICLES WITHOUT PROPER BUDGETARY APPROVAL.

Mr Charlie Kalmet proceeded with the purchase of a luxury vehicle, primarily for his own personal use, without the proper consent or approval of the Shefa Provincial Council.

Mr Kalmet had no authority to expend Provincial Council funds on the purchase of a vehicle without the authority of the full Council.

Section 30 referred to above, prohibits expenditure over and above the approved budget unless there are offsetting cuts to other budget heads. The Provincial Council never met to debate or approve such budget amendments before Mr Kalmet purchased the two vehicles.

MR KALMET BREACHED THE PROVISIONS OF SECTION 28 OF THE DECENTRALISATION ACT BY AUTHORISING LOANS WITHOUT THE APPROVAL OF THE MINISTER OF HOME AFFAIRS.

The leases totalling Vt. 4.804.380 from the National Bank of Vanuatu used to finance the purchase of vehicles are illegal.

The President has breached the requirements of Section 28 of the Decentralisation Act in that he has committed the Province to borrowings without first preparing a Local Government Council Order to be approved by the Minister.

Given that the loans are illegal the question arises as to whether the signatories to the illegal loans are personally responsible for the loan.

MR KALMET HAS BREACHED THE PROVISIONS OF CHAPTER 4 OF THE LOCAL GOVERNMENT COUNCIL (STAFF REGULATIONS) REGULATION NO 1 OF 1994.

Mr Kalmet has breached every section of Chapter 4 of the above Regulation relating to the use of Council vehicles.

In particular, the use of the vehicle ‘Shefa 1’ as the presidents personal vehicle is a blatant misuse of power and breach of sections 4.1, 4.4, 4.5, 4.6 and 4.7 of the above regulations.

Mr Kalmet, as President of Shefa Province, has consistently enacted by-laws without waiting for the approval of the Minister or the gazetting of the by-law as required by S16 (1) of the Decentralisation Act.

The failure of Mr Kalmet to ensure that the by-laws passed by the Provincial Council were properly authorised is not only a serious administrative defect, but in the case of by-laws relating to his personal payments it would seem to be a deliberate breach of the law for his own personal gain.

MR KALMET BREACHED SECTIONS 123 AND 125 OF THE PENAL CODE (CAP.135.) AND ALLEGEDLY COMMITTED THEFT, MISAPPROPRIATION AND FALSE PRETENCES

"123. A person commits misappropriation of property who destroys, wastes, or converts any property capable of being taken which has been entrusted to him for custody, return, accounting or any particular manner of dealing (not being a loan of money or of monies for consumption).

The monies that Mr Kalmet has taken from the Council were taken without the Council’s approval and can therefore be held to constitute an act of theft and misappropriation as the money he took was property entrusted to him.

Mr Charlie Kalmet has breached the provisions of Article 66 of the Constitution, (the Leadership Code) by committing all the above listed breaches, in particular the alleged criminal action under Sections 123 and 125 of the Penal Code.

In many of his actions, the President has breached the Leadership Code which requires the following of all leaders:

"66. (1) Any leader ... has a duty to conduct himself in such a way both in public and private life so as not to-

d) endanger or diminish respect for and confidence in the integrity of the Government of Vanuatu.

(2) In particular a leader shall not use his office for personal gain, or enter into any transaction or engage in any activity that might be expected to give rise to doubt in the public mind as to whether he is carrying out or has carried out the duty imposed by sub article (1)."

The President of Shefa Province, Mr Charlie Kalmet has failed to comply with the requirements of Article 66 of the Constitution regarding the conduct of a leader.

Regarding to the actions and behaviour of the Shefa Province President, the following were most noticeable.

1. He has misappropriated moneys belonging to the Provincial Council and its people.

As indicated above, the President has abused his position and used this position and office for personal gain by:

1) not repaid his loans from the Efate Local Government Vt. 824.950 as outstanding in 1988;

2) not repaid all moneys of the Council of the Shefa Province being advanced to him;

3) acted for his own gain and advantage when he decided to purchase the truck Shefa 1.

Approximately 19% of the budget of the Shefa Province was spent directly or indirectly for the personal gain and advantage of one man: Mr Charlie Kalmet.

2. Charlie Kalmet acted against the Law in many instances as outlined above.

3. Charlie Kalmet has not behaved like a leader by demeaning his office, allowing his integrity to be called into question and endangering and diminishing respect and confidence in the integrity of the Government of Vanuatu.

1) Charlie Kalmet claims that he is the ‘boss’ of the Shefa Province and, as such, has unlimited authority within the Provincial Council;

2) He shouted at and intimidated Council staff if they refused to sign cheques illegally payable to himself;

3) Because of his attitude the Council staff were scared of him and therefore did whatever he asked;

4) He requested cash at odd hours when the office had already closed; e.g. at night;

5) C. Kalmet initiated most of the illegal decisions of the Council (i.e. his illegal salary of Vt. 200.000 per month and allowances).

Charlie Kalmet certainly breached all the clauses of Article 66 of the Constitution by his actions and without any doubt obtained great personal gain from his illegal actions, and caused a lot of damage to the Shefa Province.

THE TREASURER (MS WENDY SOPE), PREVIOUS SECRETARY GENERAL (MR BELAEI KALOTITI) AND THE ACTING SECRETARY GENERAL OF SHEFA PROVINCE (MR WILLIAM HALLING) HAVE ALL BREACHED THEIR DUTIES AS PERMANENT STAFF MEMBERS OF THE PROVINCIAL COUNCIL. IN DOING SO THEY HAVE ACTIVELY ASSISTED THE PRESIDENT TO MISAPPROPRIATE SHEFA PROVINCE FUNDS.

The permanent staff of the Provincial Council failed to carry out their duties as required under the provisions of the Local Government Councils (Financial Instructions) Order No.55 of 1992.

In particular the Treasurer, Ms Wendy Sope failed to adequately protect the assets of the Council by allowing the President to take money at will from the Council.

The previous Secretary General, Mr Belaei Kalotiti signed the first illegal loan agreement with the National Bank.

In addition, the Acting Secretary General, Mr William Halling, was co-signatory to the second illegal loan agreement as well as allowing many of the illegal payments and loans to be taken by the President.

Fear of a superior can never be an acceptable excuse for allowing illegal activities to occur. It is the duty of every staff member of the Provincial Council to ensure that the laws of the Council are upheld at all times.

The President of Shefa was only able to misappropriate money from the Council with the assistance of staff who signed payment vouchers that they knew to be wrong.

PROBLEMS WITH DEFECTIVE LEGISLATION HAVE NOT BEEN ADDRESSED BY THE MINISTER OF HOME AFFAIRS ON A TIMELY BASIS.

The Decentralisation Act appears to be very poorly drafted and in need of a major review to overcome the many problems arising from its implementation. I note that it appears not to have been drawn in the Attorney General’s Chambers. The Act lacks proper form, definitions, statements of procedures, correct wording in respect of applications to the Court, loose financial definitions and controls. No real thought appears to have been given to fundamental constitutional issues in the establishment of Provincial Councils. The Act, in fact, needs to be re-written.

Despite recommendations from many different sources, including the Attorney General and various officers of the Department of Home Affairs, regarding the need to review the Decentralisation Act, no timely action was taken.
This failure to act ensured that a state of confusion continued to exist within the Department of Provincial Affairs about the powers of the Provincial Presidents and their Councils. This confusion allowed the President of Shefa Province to continue to misappropriate money from the Province.

I understand that only now, in the middle of 1996, has an Act been drafted to amend this highly defective act.

The Minister of Home Affairs appears to have unreasonably delayed taking action to remedy the problems of Shefa Province.

The Minister was informed as early as April 1995 (over 12 months ago) of the serious problems existing in Shefa Province, however no real action has been taken to date to prevent the situation deteriorating. The Police should have been notified in May 1995 of the illegal taking of money from the Council and the Minister should have dissolved the Council pursuant to Section 14(1) of the Act as the normal running of the Council was impeded by the actions of it’s President and by the Council itself expending more than 60% of it’s budget on overheads and administration expenses.

This represents a serious case of defective administration in that the lack of positive action has resulted in continuing material losses to the Shefa Province.

THE SHEFA PROVINCIAL COUNCILLORS HAVE BREACHED THE LEADERSHIP CODE, AND HAVE COMMITTED MALADMINISTRATION BY KNOWINGLY ALLOWING AND PERMITTING THE PRESIDENT TO ACT IN SUCH A MANNER;

Charlie Kalmet	President
Dick Poilapa	1st Vice President
Michel Lukai	2nd Vice President
John Robert	3rd Vice President
Karis Taiwia	Elected Member
Sope Kalsrap	Elected Member
Daniel Kaltapau	Elected Member
Charlie Malasikoto	Elected Member
Kerk Kalmaire	Elected Member
Jerry Daniel	Elected Member
Mercy Marongoe	Elected Member
Morris Archie	Elected Member
Felix Morrison	Elected Member
James Tasale	Elected Member
Esau Kalsuak	Elected Member
Dick Jacob	Elected Member
Peter Kaluas	Elected Member
Daniel Obed	Elected Member
K. Matariliu	Elected Member
Harry Kalo	Elected Member
David Roy	Elected Member
John Yonah	Elected Member
Taso Pulebe	Elected Member
Makali Kalo	Elected Member
Thelma Frank	Nominated Member (Women)
Leah William	Nominated Member (Women)
Kaltavara Malapa	Nominated Member (Church)
Harry Daniel	Nominated Member (Church)
Celestin Tari	Nominated Member (Church)
Eric Moses	Nominated Member (Youth)
Ann Calo	Nominated Member (Youth)
Thompson Roy M.	Nominated Member (Chiefs)
Mowa Kora	Nominated Member (Chiefs)
Metak Faleawia	Nominated Member (Chiefs)
Kalorana Taripoamara	Nominated Member (Chiefs).

The Councillors have failed to observe the requirements of Section 66 of the Constitution (The Leadership Code).

They have assisted in the President’s breaches which is akin to aiding and abetting in the President’s misappropriation and maladministration which matter should be examined by the public prosecution under the Penal Code as it might constitute a criminal offence. I will thus forward a copy of this Report and supporting documentation to the Public Prosecutor for his consideration. As at all times, they have known or are taken to have known that breaches of the laws were occurring.

They have failed to ensure that the President of the Council did not abuse his position for personal gain.

They have placed the internal MPP policy above the provisions of the Decentralisation Act acting illegally by authorising and approving in Council the payment of a monthly salary of Vt. 200.000 to the President, and illegal allowances.

They have had a clear conflict of interest by voting themselves increased allowances in breach of the provisions of the Decentralisation Act. They have shown themselves to be more interested in their own financial gain and the President’s gain rather than the development of the Shefa Province.

They have committed general maladministration by failing to exercise due care and diligence in the execution of their duties as Councillors, responsible for representing the people of the Province:

- they have allowed the Province to borrow without the appropriate authorisations;

- they have taken measures to stop the illegal actions of the President, his misappropriation and maladministration;

- they have allowed the situation of the President’ loans and advances to deteriorate beyond any possibility of recovery because of the importance of the amounts involved;

- they have authorised the purchase of a luxury vehicle for the President’s personal use;

- they have failed as an elected councillor to exercise with good care their overall responsibility over the local government as indicated in the Decentralisation and Local Government Regions Act no 1 of 1994;

- they have failed to ensure that the Finance Regulations have been complied with and that there were proper administration systems and checks to ensure that the laws of Vanuatu were complied with.

Following the numerous findings of wrong conduct, defective laws and defective administrative practice outlined above, I find it necessary to make a number of formal recommendations.

19.1 I am asking the Police to finalise my investigation into the alleged misappropriation of Shefa Provincial Council funds by Charlie Kalmet and to refer it to the Public Prosecutor, and alleged aiding and abetting or misfeasance by the Councillors.

This investigation must specifically look at breaches of the Penal Code (CAP 135), and move to immediate prosecution if sufficient evidence of misappropriation is found.

19.2 The Commissioner of Police must determine by way of an internal police investigation why the previous case of misappropriation against Mr C Kalmet was not proceeded with.
The Commissioner must ensure that this case is immediately transferred to the Public Prosecutor.

19.3 The Minister of Home Affairs must ensure that the bill to amend the Decentralisation Act is finalised and presented to Parliament for approval without delay. I understand that such a project is underway for the next Parliamentary session.

19.4 Until such time as the amendments to the Act can be finalised, the Minister of Home Affairs must issue adequate regulations under Section 35 to make the Act workable in the interim period.
These regulations should define more clearly the conditions under which the Prime Minister, on the advice of the Minister of Home Affairs, can dissolve a local Government Council.

19.5 The Minister of Home Affairs must dissolve the Shefa Provincial Council as soon as possible given their complete failure to properly administer the affairs of the council. The list of their failures is extensive and, in particular, their failure to control the actions of C Kalmet has been directly resulted in substantial losses to the people of Shefa Province.

Attached please finem ol answers mo comments and views blong mi olsem wan Kaonsela.
Please tritem olsem wan confidential documents blong mi.
Thank you for co-operation.

THIS IS MY ANSWER, COUNCILLOR KALOSAVA MATARILIU - STATEMENT OF ANSWER TO THE " O M B U D S M A N " - MONDAY 01.04.96

1. Ans. Yes it is true the purchase of the luxury "SHEFA 1" is only for the use of the President and does not represent any advantage for any one else in the Province.

2. The monthly salary of Vt. 200.000 for the President was made or approve by the Executive and Finance Committee which President himself was the Chairman and his Executive Members were only UF Members and no Opposition Member was in. The President said it follow the Policy of the Party who ran the Council.

I was the one who spoke against that it does not apply to the Decentralisation Act. I was one of the 4 who vote against. Please refer to our minutes of No. 8 May 1995. President's report of Finance on page 23, also during discussion, President claimed that because he is a Jif Executive and Jif Administrator of the Council. He is entitle to receive that salary follow his Party Policy.

3. I was surprise and shocked to see the President's loans which are continuing. I would therefore request "Urgent Action" to put him to Court immediately or ask him to step down as a President, and let Vice President to take over, while he goes to jail or find ways to repay the Province.

4. Yes, the level of allowances paid to Members is 10.000VT per monthly actually 9.700VT 3% Provident Fund. (Elected & Nominated Members). President 15.000VT (Plus all other salaries & loans) or any other expenses.

5. To tell the truth, I only received 2.500VT per sitting since I become a Member of The Council plus any refund on any travelling expenses, I give receipt to treasurer plus weekend allowance of 500VT in Vi la.

The 5.000VT was agreed upon by the Finance Committee that only Finance Committee to receive 5.000'VT per day on their sitting but on the Budget and Administration Meeting or sitting. We all receive 2.500VT per sitting plus 1.000VT for housing allowance, because we are no longer using Province House. We live with families who rented houses.

6. The Council approve or endorse the Purchase of 2 vehicles that has been agreed upon by the Executive "SHEFA 1" be paid by the Councils Budget and Hi-lux was sent to Epi to run taxi service and pay back its own loan. I personally did spoke out against them that if Efate Island has 2 trucks and Epi one, why can't Tongoa too have one? Because the truck used by previous Council is now out of order. Their answer was that they will supply Tongoa shepherds with one or two speed boats to service all the islands.

7. Yes, I and my members of the opposition always spoke out against the management of the Province by the President. e.g. When we spoke on the uses of Councils Truck. I put a motion about private use of the truck President himself rule out the agenda and said all responsibilities he will look to it. Please refer minutes Wednesday 10.05.95 - No. 4. I also spoke strongly against the information of Legislation Committee that it does not represent the true representation of the different political parties depend on the party who ran the province. Please refer minutes Tuesday 2.05.95. Kalosava Matsriliu.

Taem yu lukluk long Province since hemi establish, Province I no wok. Even Council oli pasem plande project but i never work or carryout. From President hemi traem blong ranem mo controlem ol responsibilities blong olketa narafala oficers. President i never elaborate wetem General Secretary mo Vice President. Any serious decesion long Council, President i never consoltem Secretary General, or Vice President before i tekem decesion. Cooperation blong hem wetem ol staff blong hem ino kut. President istap tekem decesion folem own tingting blong hem nomo mo folem party Policy blons hem.

Plande decesion we council oli tekem mo taem opposition oli tok againsem hemi talem se oli save bendem low folem policy blong party we i ranem council. Long side blong council vehicles "SHEFA 1" council i pem blong office use nomo mo hemi stap pem loan blong hem yet kase tede. But President hemi usim olsem blong hem nomo. Hemi usim olsem transport blong hem igo long home blong hem mo come long wok everyday, mo usim long ol official meeting mo plande long Poloticik meeting. MPP/ UF meetings and complaine.

Hi-lux truck council i pem truck ia anda long loan mo oli sandem igo long Epi blong ron olsem taxi mo pem back loan every months. But at the moment i never kat any reports or payment long truch ia by Epi Council. Head office i stil pem A/C blong Hi-lux mo SHEFA 1 kasem tede. President mo Secretary Generel tufala i agree long aidea ia from one hemi man Efate narafala i blong Epi. So at the moment ikat 2 truck long Vila mo wan long Epi. We Provience istap pem A/C blong trifala truck ia. No.3 truck ia hemi luk olsem truck blong MPP nomo we most taem long last year oli usim long politik activities, transportem families, use long private activities blong al, driver hemi usim long own business blong hem, even long weekends. Plande time secretary General mo Treasurer imas pem taxi blong go out long Province office blong mekem Council duties.eg. Secretary General imas go out long hotels blong perform marrage. Hemi mas tekem taxi from truck igo long Erakor or tekem some man even mifala ol councillors taem mifala ikam long aelan from miting sappose long weekend. Treasure imas tekem taxi blong kam pickimap mifala long Airport from truck party hemi usim or istap long Erakor wetem driver.

Law hemi no allow se President i work fulltime long Office but hemi stap come wok everyday from hemi talem se hemi Jif Administrator mo Jif Executive Officer mo folem advise long party blong hem hemi mas kam wok evridei mo usim "SHEFA 1" blong kam long ofis.

Development Committee, wetem Finance Committee oli no mekem wok blong olketa. Kaonsel istap lukluk nomo long Efate Region mainly taon area. But inever mekem any Development long rural areas mo aoter aelans. Ol millions vatu we istap kam long Province through long ol taxes mo Licences iblong servem ol man Efate nomo especially MPP/UF member. Development Komiti oli no lukluk tumas long aoter aelans blong Province. Nao ia ikat Vice President too iwok klosap evri morning long week mo kaonsel truck iko stap tekem mo ko livim hem long vilij.

Plande staff oli no stap glad long some decesion we President istap tekem long kaonsel mo fasin blong wok we oli stap carryout. President ino save lisen long some advise blong some staff. Hemi should kat gudfala koperesen wetem General Secretary mo Vice blong hem blong mekem development iko head gud long every erea blong SHEFA Province. Nao ia imas kat some kontrol long saed blong salary blong President mo Vice President tufala ikat tumas advandages long salaries or allowances. Mi personally lukluk blong President long No.28th March hemi ko tekem 97 000VT mo mi findem too vice President hemi bin tekem 30.000VT long N.27 March mi think, se tufala inomo think heavy long ol Kaonselas. Extra ordinary meeting we mifala ishould holem last week President i stopem mo i luk olsem bambae kaonsel i tes sitaon long May nomo long administration meting. Serious case we hemi causem inside long Province, hemi no tingting hard long hem. Hemi tekem se hemi no wan serious matter long Province, we mifala all kaonselas ikat worry long letter blong ombustman we i accusem mifala long salary blong President. Hemi never say any good toktok long mifala ol kaonselas. Ating hemia nomo tok save blong mi ikam long Yufala Long ombudsmtman.

REPLY COMMENTS FROM MR WILLIAM HALLING
SECRETARY GENERAL OF SHEFA PROVINCIAL COUNCIL

Mrs Marie-Noëlle Ferrieux Patterson
Ombudsman of the Republic of Vanuatu
Office of the Ombudsman
P O. Box 126
PORT VILA

Thank you for your Preliminary Reports concerning the Alleged Misappropriation of funds by the Shefa Provincial Council Administration.

I wished to make few clarifications about myself (Secretary ) and the Treasurer.

Section 18: 2 and 1 refer in March 1995 the President and the Acting General Secretary entered into another agreement with the National Bank for the purchase of a Toyota Hi-Lux Shefa II also on a Leasing Basis. Please be informed that I was on a tour to Shepherd and Epi when the truck was negotiated between the President and Ex-General Secretary, Mr. B. Kalotiti. The truck was taken to the Council just before Mr. Kalotiti tender his resignation and left immediately and did not want to sign the agreement. On returning from the tour in April, the Officer in Charge of the Loan (National Bank) requested that I'll countersign it for the Council. I had refused to sign but seeing that there was no alternation, I signed it in mid April 1995.

Having signed as mentioned above I referred it to the full council meeting in May see Agenda 10 and obtained their approval. This I believe l had follow the financial instruction.

The second part concerning myself and the Treasurer about releasing money to the President. Please note that the Decentralisation Act Number 1 of 1994 and the first standing order of the Council were not corresponding together. This has created a lot of confusion and every body was looking to the President as the Chief Administrator.

As a result it was really hard to convenced him. For example when I delivered the Audit reports to your Office, I was terminated without warning. We have no security at all.

Having said the above should you have any queries please do not hesitate to contact the undersigned.

1. The Acting Secretary General Mr William Halling should have taken a stand and inform the President of Shefa Province in a letter voicing his concern about the Leasing Agreement.

I cannot find evidence that the purchasing of the truck was an urgent matter. The Acting Secretary General should have advised the President and defer the signing of the Lease Agreement until the matter was discussed in the full Council meeting.

2. The matter should have also gone to the Minister of Home Affairs for approval as required by Section 28 of the Decentralisation Act.

3. It is clear that the President of Shefa Mr Charlie Kalmet is someone who wants things done to suit himself, therefore it was quite difficult to convince such a person. The Council should consider changing the President for the best running of the Council.

4. Signing a document under instructions and knowing full well that it is not proper and in breach of the law is not a valid excuse.

5. The Acting Secretary General and the Treasurer have a duty to safeguard the assets of the Shefa Province as per Chapter 2 of the Local Government Councils (Financial Instruction) Order No.55 of 1982. They have a duty to ensure that expenditures are incurred with proper authority.

6. It is true that confusion existed in the various Sections of the Decentralisation Act and the Local Government Councils (Financial Instructions) Order No.55 of 1982. This however does not prevent the two Council Officers making sure that proper authority is sought before making payments or committing the Council. They have a duty to comply to the rules not instructions from politically elected personnel.

In replying to the Preliminary findings of the Ombudsman the Shefa Province Council advised as follows. My comments follow each relevant point.

Section 4. The full Council understood that there is conflicting instructions between the Decentralisation Act N0. 1 of 1994 and the Local Government Councils’ Financial Instructions N0 55 of 1982.

Comments. Although the full Council was aware of this, it took no initiative to seek legal advice nor refer the matter to the Minister of Home Affairs, but instead continued to support the conflicting instructions.

The full Council was not aware of the Local Government Councils (Financial Instructions) Order No. 55 of 1982, the Penal Code (Cap 135), the Constitution (Leadership Code) and the Ombudsman Act N0. 14 of 1995.

Comments. This reason is totally unacceptable and is not a valid excuse. As members of the Council who have a duty to decide on the best administration of the Council, they should be aware of the various rules concerning the administration of the Council and their roles as elected Councillors.

Ignorance of the Law and the Constitution is not a valid or acceptable excuse.

A. That the VT 200.000 which has been paid to the President is regarded as a monthly salary not an allowance.

B. Although the President is entitle to 1.500 VT per sitting when the Council meets. The President has never been paid this entitlement.

C. The elected members monthly allowance of VT 50.000 and VT 1.500 sitting allowance have never been paid.

D. The nominated members monthly allowance of VT 30.000 and sitting allowance of VT 2.000 have never been paid.

Comments. It does not make any difference whether the monthly payment is regarded as an allowance or a salary, it is an illegal payment until such time as the Minister of Home Affairs gazettes a by law authorising the payment. The President, Mr Charlie Kalmet, is only entitled to VT 15.000 a month under the Decentralisation and Local Government Regions Act N0. 1 of 1994.

Under Section 23 (1) of the Decentralisation and Local Government Regions Act, Local Government Councillors are entitled to a days sitting of VT 2.500 when the Council meets.

The claim made by the Council that the President Mr Charlie Kalmet has never been paid sitting allowances is untrue. He has been paid on separate vouchers along with other councillors at VT 2.500 per days sitting.

It was claimed that the elected members and nominated members have also not been paid their sitting allowances.

This again is untrue, all sitting allowances have been paid. Whenever the full council and the various committees met, the members were paid their entitlement of VT 2.500. The members allowances for elected and nominated members of VT 50.000 and VT 30.000 have never been paid. Although the Council had approved these rates, these are well above the maximum amount specified in Section 23 (3) (1) of the Decentralisation Act which is VT 10.000. As the figures were over the maximum entitlement, they should not be paid. Had they been paid this would again be an illegal payment.

The rates are the Melanesian Progressive Party's (MPP) proposed rates from the MPP's Platform.

Section 6.8 The full Council was aware of the circular from the Minister of Home Affairs to Presidents of the Provinces.

Comments. If they were aware of the Ministers instructions the Councillors have failed their duties to raise the matter in the Council meetings. This is a total failure on the side of the Councillors. Had they stopped the illegal advances and salaries, the Shefa Province would have not come to this stage today.

Section 7,8,9,10&11 The full council resolved that the President Mr Charlie Kalmet take the responsibility and refund the full amount under his name. Starting from October 1996 for a period of 10 months.

Comments: Mr Charlie Kalmet does not have the financial means at all to refund the total amount of VT 9.554.845.

His entitlement is only VT 15.000 per month. If he is to refund this amount at VT 15.000 per month it would take him 637 months which is approximately 53 years.

Under Section 6 of the Decentralisation and Local Government Regions Act elected members are elected for a period of only 4 years. Mr Charlie Kalmet was elected in 1994, he has only 2 more years to go.

The full council made the above decision because some of the vouchers were not signed by the President and also that the President did not agree to some of the signed vouchers. That is he claimed that he did not sign some of the vouchers.

Comments; The council should refer the matter to the Police for further enquiries. They should also interview the Treasurer for further information and the Driver who usually collected the cash and cheques on behalf of the President.

TRANSLATION OF MR CHARLIE KALMET’S REPLY TO OMBUDSMAN (Bichelamar to English)

I am responding to the preliminary report letter forwarded to me and dated 1 March 1996 regarding the above subject.

a) For the status of the President as Chief Administrator, Chief Executive and President of the Local Government Region.

b) The vehicle is used to transport the President to and from his home and work as he does not yet have a Presidential Residence. The President uses the car to attend meetings and functions held outside the Local Government Headquarters both during and after business hours and even on some weekends.

The President and Council alone can decide on the type of vehicle to be purchased.

With regard to this matter, l am aware that I drew some advances which I refunded, but the officer responsible at the time did not carry out his duties properly.

With regard to this matter, I am aware that I have drawn salary advances, as have other Councillors and staff members, but I also know that my personal advance does not amount to the figure stated in the report.

With regard to me as Chief Administrator, I requested the Treasurer to provide me with monthly financial reports, which I never received between January and December 1995, except at the Full Council Meeting in November 1995, when a financial report was produced without any details by the Acting General Secretary, Mr Halling William.

With regard to cheques, I know that I signed a large number for stationery, the two vehicles, telephone and electricity charges, member allowances, salaries and advances etc. I also signed some blank cheques at the Treasurer and Acting General Secretary's request, but I am unaware of the amounts concerned, as they were never shown to me.

Concerning my personal advance, I drew this on my annual salary of VT 2,400,000 under 1995 budget head 200.30.09. Dick Poilapa, the Vice President, also drew advances and his monthly allowance from this head. I am not entitled to draw salary advances from any other budget head.

Before the report concerning the Shefa Local Government Council forwarded to the Office of the Ombudsman was prepared, the Acting General Secretary, Halling William, performed the duties of Treasurer, which he did single-handedly. When he finished performing these duties, he requested Morrison Bule to provide the report on his own initiative, instead of asking the Local Government Department to prepare it in conjunction with the Treasurer. A few days after Morrison Bule had completed Halling William's report, he was paid VT 90,000 unbeknown to either the Treasurer or me. Mr Halling William made this decision on his own initiative. The report prepared by these two persons reached the Ombudsman's Office before me, the Council's Chief Administrator.

I had asked the Acting General Secretary to submit a copy of his report to me and to brief me in accordance with normal procedure, before meeting the Ombudsman on 14/2/93 l, which he failed to do. When these two gentlemen had completed their report, Morrison Bule returned to his post in the Health Department and Halling William took 4 days' sick leave as from 1412196, leaving a copy of the report with the Treasurer to pass on to me. I received it the same day, i.e. the day I was to meet with the Ombudsman (2pm on 1412196).

As far as I am concerned, the Halling William and Morrison Bule report did not follow the correct procedure and was prepared by a person who was not a qualified accountant. It is, moreover, a slanderous report.

I would also like to point out that I have had contact with the Acting Director, Local Government Department, and his staff, who have indicated that both Halling William and Morrison Bule have a questionable record with regard to the handling of Local Government funds in the past.

This was set by a Council decision following a major Council meeting. Before the decision was made, questions were raised and advice was provided by the Director of the Local Government Department, who at the time was Tom Bakeo. The Director indicated that, apart from Section 23 of the Decentralisation Act, the Law was silent with regard to the Chief Administrator and the Council therefore had room for manoeuvre in this area.

a) The President is the Chief Administrator and Chief Executive and has to work full-time.

b) The policy of the ruling party in Shefa Local Government Region, MPP, is that full-time workers should draw a salary and the head of an organisation should be paid more than any of his staff.

The Shefa Local Government Region was set up in December 1994 and, as it was a new institution, the Council decided, in accordance with my view as Chief Administrator, that 1995 would be a year of total restoration throughout its islands and, even though the work is not yet finished, the Council has already introduced development.

In the same vein, the Council decided that 1996 would be the year to introduce development.

This was a discretionary decision made solely by the Council and no outside person has the right make decisions on behalf of the Council which was duly elected for the purpose of developing its Region.

I would like to point out here that the 1995 Budget was not prepared by the President or Council staff, as required by the Act, but passed by the Council.

cc: Director, Local Govt Dept
Shefa Executive Officer
Finance Ministry
All Councillors (23)
File

Head 200.40.07	Capital Budget decreased by 2 Million Vt.
Head 200.40.08	Transfer Extra Ordinary Project (EOP) decreased by 3 Million Vt.

Cash payments	Vt. 3.781.600
Cheque payments	Vt. 4.306.245.

Code-	30.09	Vt. 2.398.250 (Appendix 2) - Monthly Salary
	30.04	Vt. 149.100 (Appendix 3) - Monthly Allowance
	060C	Vt. 5.703.495 (Appendix 4) - Advances

Total payments made in 1995 to Mr Charlie Kalmet (i.e. salary and advances)	Vt. 8.184.845
Less Allowance entitlements as per Section 23 of the Decentralisation Act (15.000 x 12)	Vt. 180.000
Amount of Illegal Salary & Advances	Vt. 8.004.845

President	200.000 vt. /month plus 1.500vt sitting allowance
Elected Members	50.000 vt. /month plus 1.500vt sitting allowance Members
Nominated Members	30.000 vt. /month plus 2.000vt sitting allowance Members.

President	15.000vt./month plus 2.500vt. sitting allowance
Members	10.000vt./month plus 2.500vt. sitting allowance.

Vanuatu Ombudsman's Reports

Alleged Misappropriation of Funds by the President of Shefa Province and Maladministration of Shefa Provincial Council [1996] VUOM 1; 1996.02 (23 July 1996)