March 28, 2016 Source
The Guyana Sugar Corporation (GuySuCo) owes the Sugar Industry Labour Welfare Fund (SILWF) over $2.7 billion and the Fund has not been following good governance practices in some areas and should tighten up its processes, the forensic audit into the Fund has recommended.
Covering the period January 2012 to May 2015, the report made available by the Ministry of Finance outlines a number of areas of concern and makes several recommendations. The SILWF is funded by levies payable by GuySuCo to a special fund which is operated and controlled by the Finance Secretary of the Ministry of Finance as the Trustee. The levy presently is $500 per ton of sugar manufactured and exported.
According to the report, of $2,305,120,114 in levies, only 32.2% was paid to SILWF, hence 67.8% was outstanding at the end of May last year. The last payment of a levy was over five years ago in May 2010.
“Our review revealed that the last written request to GuySuCo from SILWF for payment of arrears of levies was on 28 July, 2009. Since then to the present time, there were no other written requests made by the SILWF for payment of the arrears,” the report says.
It urged the SILWF Committee to ascertain promptly from GuySuCo when the outstanding amount of $1.563B for the period from January 1995 to May 2015 will be paid, since non-payment of the levies may severely affect, among others, budgeted development works in the respective areas/estates where sugar workers live.
On a monthly basis, the Administrative Manager of SILWF -on behalf of the Finance Secretary – should in writing, request payment of all levies accrued in the period as well as for all arrears of levies, and follow up with telephone calls /personal visits, etc. to accelerate payments, the report said.
It noted that the law requires the amount to be paid by GuySuCo shall be levied and collected within 90 days after the date of exportation. In default of payment when due, interest at an annual rate of 6 percent from the date the payment became due, shall be recovered by the Finance Secretary as required by Section 5(3) of the Act.
“There were no requests by the Finance Secretary and/or the Secretary of the Committee for the payment of interest by GuySuCo for the period 01-01-12 to 31-05-15, since levy payments were in serious arrears, with no further payment of levies after 14-05-10,” the report said.
It said that it is the duty of the Finance Secretary through the Secretary of the Committee to compute and collect interest payments from GuySuCo, but this apparently was never done. The Auditor brought this to the attention of the Management of SILWF who has since computed interest due and payable up to May 2015 to be $1,139,953,413.
This means that GuySuCo owes the SILWF over $2.703 billion, the report noted.
The report said that action should be in train for the Finance Secretary through the Secretary of SILWF to determine the true amount of interest due and payable and to collect same from GuySuCo. “It is recommended that at regular intervals the Administrative Manager/ Secretary of SILWF representing the Finance Secretary compute interest due and requests payment in writing from GuySuCo with follow up actions as necessary,” it said.
Generally, the report said, the findings have indicated that the Committee/Management of SILWF, the Finance Secretary who is the Trustee of the Fund, and the Management of GuySuCo have not been complying with the Sugar Industry Special Funds Act and its Regulations.
Imperative
It is imperative that these entities be familiar with the operations of this Fund, and the audit findings require their early attention and action be taken accordingly, the report said.
“Although these findings indicated breakdown in the system of internal controls, governance and inefficiencies, we found no evidence of malfeasance/improprieties in our examination on the operations of the Fund.
However, greater vision and alacrity need to be displayed by the Committee/Management in carrying out their responsibilities (as enumerated in the very clear mandate given under the Act) to provide a wide range of services to sugar workers and their families,” the report emphasised.
“With the current serious financial position of Guysuco, this presents a unique opportunity to expand such services,” it said.
Meantime, the report also highlighted that the last audited Financial Statements were for 2009 and while the audit of the Financial Statements of 2010 is complete and awaiting the Committee’s approval and the draft Financial Statements for 2011 have been prepared, no Financial Statements for the period 1 January 2012 to 31 May 2015 were prepared and presented for the forensic audit.
“Failure to prepare the annual Financial Statements on a timely basis is a critical breach of good governance …” the report said.
It also highlighted that development/ rehabilitation works undertaken by the Fund were minimal.
“The Committee has not been pro-active in spending a greater amount of monies available for development/rehabilitation works for the benefit and welfare of sugar workers. A Fund of over $1 billion, the Committee should at least be disbursing approximately 40% of its annual revenue for developmental works/housing loans and not 6%,” the report said.
“In conformity with the mandate given to the Committee under the Act and there being ample funds available at SILWF/Bank of Guyana accounts, and in the present day volatile and stressful financial position of GuySuCo, the Committee of the SILWF should carefully consider expanding development/ rehabilitation works to improve and maintain roads, bridges and recreational facilities that require attention,” it urged.
The report also highlighted that cash balances in the SILWF account which amounted to well over $1 billion was not earning interest and said that over time, a substantial amount of interest was lost due to the omission. It recommended that the committee/management should request and follow up with the Finance Secretary to invest a portion of the Fund’s idle cash to earn interest income as provided under the law.
Misappropriation
With regards to the misappropriation of $35 million since 2004, the report said that the latest information from the police is that the investigation can no longer be pursued since the original documents apparently cannot be traced, compounded by the fact that the officer(s) who dealt with the case has/have since retired. It recommended that the Committee should obtain authorisation from the Finance Secretary of the Ministry of Finance to write off the misappropriated amount from the records of SILWF so that the overstated bank balance would be corrected.
The report also pointed out that SILWF acquired the ACCPAC accounting software comprising of four modules from New Technologies Enterprise at a cost of $5.164 million, but after 3 and a half years, it is yet to be operational, with a high volume of accounting work still to be completed for years 2012 to 2014. At present, the manual accounting system is still in use.
It was recommended that a server be purchased to have the software operational and staff trained but this is yet to be done after approximately 15 months.
Further, the report said that of a total of 1256 borrowers, there were 271 (21.6%) defaulters on loan repayments by sugar workers which totaled $33.4 million. Of those defaulters, 85 or 31% are in default for approximately 115 months at the end of May 2015.
“Management should investigate these delinquencies, more so since 52% are over 6 years, and should take the appropriate action as it deems necessary to recover the amounts outstanding. Also, a provision for uncollectible/doubtful loans is required to be made in the Financial Statements,” the report recommended.
In terms of home loans, the report also said that the present limits of $1 million for construction and $0.5 million for repairs and extensions are very inadequate to meet the needs of sugar workers in the present environment. It said that the Committee of SILWF should urgently consider increasing the limits.
“An upward review of housing loans to sugar workers for new homes and for repairs and extension should be considered and implemented at the earliest opportunity by SILWF due to the gradual increases in costs of materials and labour over time. The excessive liquidity of SILWF is available to meet the increases and as can be seen from a review…repayment of the loan can be supported,” the report said.
It highlighted several other areas of concern and made recommendations.
“This audit has revealed that the Committee/Management of this Fund, the Finance Secretary as the Trustee, and the management GuySuCo are required to be working together so as to meet the mission of this Fund, which in sum is to provide improvements of social and public health activities for sugar workers. From the findings mentioned herein, the parties are apparently not aware of the legal and other requirements in administering this Fund, hence there is the urgent need to take corrective action accordingly,” the report said.
