May 22, 2016  Source

A forensic audit of the New Guyana Marketing Corporation (GMC) for the period January 1, 2012 to May 31, 2015 has uncovered financial improprieties, including fraud in the management of its fertilizer program and in the construction of its office building, for which a police probe has been recommended.

The audit report, which was dispatched to the Minister of Finance last month, also accused then General Manager Nizam Hassan as well as his successor, Ida Sealey-Adams, of frustrating the work of the auditor, Saykar Boodhoo.

The audit also found questionable payments to fund trips for the then Minister of Agriculture and payment for chartering of aircraft by the Ministry of Agriculture without invoice, date or passenger details. It described wasteful spending as purchasing alcoholic beverages and the acquisition of an overpowered standby generator. It also found that the embezzlement of over half a million by staff was not turned over to the police or the Auditor General and instead the offending party was given the opportunity to repay the embezzled amount.  

In terms of financial impropriety, the audit report said that there was fraudulent reporting of the fertilizer program funds. “During the period 2008 through 2014, it appears that GMC entered into a series of questionable and apparently fraudulent financial transactions in regards to the management of the fertilizer account,” the report said.

The audit was extended to cater for the period from the initiation of the GMC-managed fertilizer program, which was inaugurated in 2008 by the then PPP/C-led government due to a shortage of fertilizer available to farmers. The report noted that approval was granted via a Cabinet Memorandum, for the Ministry of Agriculture (MOA), through GMC, to purchase 12,500 tonnes of Urea, costing US$7,812,500, of which 3,500 tonnes was for GuySuCo and 9,000 tonnes to be sold to agencies of MOA. It said funding for the 9,000 tonnes Urea was provided via a Contingencies Fund Advance of $600,000,000 and a GNCB Advance of $553,000,000.

GMC was to sell the Urea at $7,000 per 50kg bag to stakeholders or resellers and the sales proceeds used to repay the advanced amounts in its entirety before December 31, 2008. A contract was awarded through a tender to a company named “Nova Scotia Manufacturing” but it was cancelled by Cabinet and a new tender was supposed to be done. But this never happened, the report noted.

Hassan, the auditor noted, refused to make available full access to original documentation of the financial transactions of the program, thereby preventing him from properly auditing it.

However, based on copies of pieces of documents and information provided by GMC’s accountant, the auditor found a number of transactions that were concluded without proper support or authority. These included payments to the RPA of $35,032,500; excess repayment to GNCB of $120,000,000 over funds provided to GMC; a $450,000,000 loan to GuySuCo; payment to GuySuCo for letter of credit arrangement in the sum of $273,363,030; and payments to the tune of $111,204,726 to the MOA for Vertical Pumps.

“It appeared that the entire fertilizer program was conceptualized to circumvent financial accountability laws and to provide funding to GuySuCo and others using sinister methods. The payments to RPA were approved by the GMC’s Board of Directors via a special Board Resolution. However the Resolution was signed by mainly the Government employees of the Board,” the report noted.

Since GMC did not purchase any fertilizer, the audit noted that GNCB requested a refund of its funds. Instead of returning $553,000,000 to GNCB, it said GMC paid $673,000,000 to GNCB and Hassan has refused to provide any answers or documentation to support the overpayment.

The report added that the interest free loan made to GuySuCo of $450,000,000 had a special clause stating that only $86,994,711 was to be repaid to GMC. Hassan, the report said, also refused to answer questions as to the concept of loaning $450 million but only being repaid $87 million. To date no repayment was made to GMC, it added.

In relation to the pumps, the report said in November, 2014, the Permanent Secretary of MOA requested that GMC make a payment of $111,204,726 from the fertilizer program to pay for the pumps. “GMC has fraudulently recorded the payment as “Fertilizer Expenses” in the 2014 draft audited financial statements,” it said.

While GMC management claimed the decision to expend money on the pumps was made by Cabinet, the auditor said a copy of the directive was requested but Sealey-Adams only showed him a one page document originating from the Office of the President and signed by Dr. Luncheon. The auditor noted that subsequently information was made available that shows that another MOA agency, the National Drainage and Irrigation Authority, may have recorded the vertical axial pumps as part of its fixed assets. So in brief, two MOA agencies may have recorded the same transaction on their books,” he noted.

Except for the refund to GNCB, none of the payments mentioned appears to have been conducted in accordance to the instructions GMC received to manage the fertilizer account, the report said, while noting that it appeared that the main beneficiaries of the program were GuySuCo and rice farmers.

The report further noted that the RPA purchased fertilizer and supposedly distributed same to rice farmers and then billed GMC for these.

As a result, the report recommended that government determine what action should be taken against Hassan and the PS of the Ministry of Agriculture for their mismanagement of the program.

Office building

The report also said there ought to be a police investigation into the substandard work done during the construction of the GMC headquarters by a Trinidad-based contracting company, whose principals should be charged for using substandard building and be barred from executing projects for this government.

Searches, according to the report, uncovered no trace of the existence of Constantine Engineering and Construction Services, located at of #55 Calcutta Road #2 Freeport, Carapichaima, Trinidad.

It said that the company won the bid for a contract, worth almost $24M, for the construction of a new building for GMC’s head office and the Guyana Shop. Later on February 10, 2012, the contract was amended to include an additional $7,620,984, for which there was no tender. The auditor was unable to review the bidding documents since the head of tender board said he could not find any information in his files that showed that it was involved in the tender process even though the contract indicated otherwise.

Shortly after the contract was amended, the contractor announced to GMC that he would be unable to complete the project and to date it is unclear how much funds were given to Constantine Engineering. Another contractor was called in to complete the electrical wiring and relevant works to the building.

The report said that within months of the handover, the entire roof was leaking and as such a contractor had to be brought in to effect repairs. It was discovered that “old lumber and old zinc sheets with euroband was used to construct the roof of the building,” the report said. It noted that the Bill of Quantities of the contract for the construction of the office building stipulates that Greenheart lumber for the floors, walls and frame and PVC for the two ceilings of the building. However it was later observed that mixed hardwood including “second quality lumber” for the walls and though plywood was used for contracting the ceiling the same $2,000 per square meter rate as that of PVC was used. Plywood is significantly cheaper than PVC panels.

It was stated that it was the MOA engineer who certified the payment vouchers for the plywood and the report noted that there was no amendment for this material to be used in the construction.

The auditor in this regard recommended that the police be called in “to investigate the fraud of using incorrect materials and fraudulent billing for the construction of the building.” It was recommended that since it was the engineer who certified the payments, “he should be charged criminally and brought before the courts for his participation in conducting fraud against the Government of Guyana.” Efforts should also be made to bring charges against the top officials of the construction company, the report added.