Finance ministry: Licogi yet to maintain State capital in enterprises

Photo: VietnamPlus

Hanoi (VNA) - According to the Ministry of Finance, Licogi Corporation has lost a great deal of State capital. The total short-term debt of the company has surpassed short-term assets by more than 1.2 trillion VND (52.1 million USD).

The information was revealed by the finance ministry in a document sent to the Ministry of Construction and State capital representative at Licogi Corporation.

Flat business result

The ministry reported the total revenue of the construction firm surpassed 2.721 trillion VND, down more than 200 billion VND compared to 2016, equivalent to a 7 percent decrease.

Of the figure, the total revenue of the parent company - Licogi Corporation topped 450 billion VND, down more than 88 billion VND compared to 2016, equivalent to a 16.4 percent decrease. Accordingly, post-tax accounting profit was 102 billion VND.

Its total revenue from sales and services fell by 122 billion VND compared to a year earlier, a 24.6 percent reduction, mostly due to falling real estate revenue from about 159 billion VND in 2016 to 16.7 billion VND in 2017.

Business loss results in 2017 led to the parent company’s respective capital preservation ratio and level of 0.83 and 0.56, according to the ministry’s statistics.

The ministry said the above results show the corporation is losing State capital in its subsidiaries.

In the first half of 2018, the parent company earned more than 157 billion VND in revenue, down more than 77 billion VND year-on-year, equivalent to a 33 percent reduction. Before-tax accounting profit was a mere 2.6 billion VND.

The finance ministry asked the construction ministry to direct State capital representatives to report on the falling revenue and adopt measures to fix the situation.

Receivables, inventories worth up to trillions VND

According to the finance ministry, the parent company's debt to equity ratio as of December 31, 2017 and June 30, 2018 was 4.48 times. Net cash flow from business activities of the parent company was minus nearly 97 billion VND in the first half of the year.

The ministry said Licogi Corporation has had difficulties in paying debts, especially those with a term of less than three months, mainly because its short-term assets are mostly receivables and inventories.

"On December 31, 2017, total short-term debt of the parent company exceeded its short-term assets by more than 1.231 trillion VND," the finance ministry reported.

For the whole corporation, the debt to equity ratio was 9.02 times and 9.19 times as of December 31, 2017 and June 30, 2018, respectively.

In late 2017, the short-term assets of the whole company hit 2.353 trillion VND, of which receivables and inventories were 2,156 trillion VND, accounting for about 92 percent of the total.

In the middle of 2018, while short-term assets were 2.302 trillion VND, receivables and inventories amounted to over 2.102 trillion, or some 91 percent of the total.

"Based on the debt and short-term asset structure as mentioned above, it can be seen that the solvency of the corporation as well as the parent company depends heavily on the sale of inventories and receivables,” the Ministry of Finance commented.

Therefore, it urged the Ministry of Construction to direct the State capital representative in Licogi to boost sales, reduce inventories and speed up debt collection.

The report said the parent company’s total value of long-term financial investment as of December 31, 2017 was 1.734 trillion VND, of which 53 billion VND was in dividends and profits. The return on total capital investment was low, reaching 3.06 percent.

After reviewing financial statements, the finance ministry found the corporation has yet to earmark provisions as prescribed.

"The Finance Ministry requests the Construction Ministry direct State capital representative to review investment portfolio, improve business efficiency in units, and earmark provisions as regulated, ensuring that financial statements fully reflect the corporate financial situation", it said.

State Auditor General Ho Duc Phoc suggested issuing sanctions on information supply denial and audit-hindering behaviours. He said the State Audit Office of Vietnam (SAV) should supplement the rights to verification to make clear signs of corruption.

He made the suggestion at a seminar on February 20 to collect agencies and organisations’ feedback on the draft Law on amendments and supplements to several articles of the State Audit Law 2015.

Could auditors summon and seal?

According to State Auditor General Ho Duc Phoc, Anti-Corruption Law rules the SAV is now one of the agencies responsible for detecting and dealing with corruption.

However, he also suggested adding the right to verification to clarify cases showing signs of corruption.

He said international experience showed the granting of the function of checking and verification in other countries, especially in the Republic of Korea, to State auditors, has improved the efficiency of their audit activities.

Some verification methods include summoning people to explain and present accounting reports, answer and explain related documents.

The Auditor General also proposed adding audit decision into the law if any corruption case is found.

According to the State Audit Law, there are three grounds for the Auditor General to issue audit decision, including the SAV’s annual audit plan; requests by the National Assembly, the NA Standing Committee, the President, the Government, the Prime Minister; and agencies approved by the SAV.

Deputy head of the National Assembly’s Committee for Judicial Affairs Nguyen Manh Cuong said the Law on Corruption Prevention and Control regulates agencies and organisations’ accountability in public service, especially when requested by units, agencies and individuals and uncovered by the media.

Meanwhile, the existing State Audit Law rules that the SAV is accountable to the legislature and its units.

He said it is necessary to amend and supplement the above regulation to ensure synchronous terms.

“Null and void” due to lack of penalties

Phoc said several audited units failed to provide information and documents or provided insufficient ones, and even concealed legal violations in finances.

In 2017 alone, there were up to 121 cases of failing to provide documents, making it hard for audit teams to do their job.

He said the implementation of auditors’ recommendation remains poor. In 2017, the amount of money included in auditing proposals was more than 91 trillion VND, more than 66 trillion VND of which was dealt with, or over 73 percent. Years ago, the implementation of auditors’ recommendations was about 76-78 percent.

This has partly causes State budget losses due to the lack of penalties to handle the above violations.

Using only warnings has reduced the efficiency of State audit activities.

Phoc cited experience from Russia, China, Cambodia and Germany that their State audit offices are empowered to handle administrative violations.

Dang Thanh Son, head of the Justice Ministry’s Department of Administrative Violation and Law Enforcement Management,said violations in auditing are common but there is a lack of penalties against them in the legal system.

He added that several have suggested building a decree on administrative fines based on feedback from the NA Standing Committee.

However, he said the suggestion lacks a legal foundation. It is possible once the Law on Handling of Administrative Violations and the State Audit Law are revised and supplemented.-VNA