State Forensic Audits

Although the preliminary audit report into the National Industrial and Commercial Investments Limited (NICIL) remains unreleased, the organisation was forced to disclose the contents of the documents following a Kaieteur News article which stated that criminal charges were recommended against NICIL Chairman Winston Brassington.

Winston Brassington

Anand Goolsarran

In its October 18 edition, the Kaieteur News alleged that Junior Finance Minister Jaipaul Sharma said that the preliminary report, which was not yet shared with the Government, recommended criminal charges against NICIL’s Chairman.

In response, NICIL released the contents of the draft document, asserting that the facts contained in the document clearly showed that there was no evidence of illegality, fraud or corruption at the hands of the organisation.

In fact, it was firstly pointed out that NICIL received a draft preliminary audit report from Auditor Anand Goolsarran on the company’s operations over 13 years. This document is yet to be responded to, NICIL stated. According to the organisation, Goolsarran is awaiting its response which will then enable him to finalise his draft. Then, this formal draft will be submitted to Finance Minister Winston Jordan. Subsequent to being reviewed by the Minister, NICIL will once again be afforded the opportunity to respond to the final version of the report. Then the final audit report will be completed – with all the recommendations.

Even so, NICIL clarifies that the preliminary report did not allege any personal enrichment of any of the officers of directors of NICIL, therefore contending that the Kaieteur News article was wholly spurious and misleading.

With respect to wrongdoings, Goolsarran’s main contention in the report is that the organisation is subject to Articles 216 and 217 of the Constitution and by extension, the Financial Management and Accountability Act (FMAA) where he is claiming that the organisation was in breach.

Jaipaul Sharma

This section in the report reads “Institute disciplinary action against all those who were complicit in the violation of Article 216 and 217 of the Constitution, including the Board of Directors of NICIL, the former Minister of Finance and the previous Cabinet, as provided for under the following sections of the FMAA Act: (a) Section 48 – Misuse of public monies; (b) Section 49 – Liability for Loss of public monies; and (c) Section 85 – Liability of Official.”

Article 216 of the Constitution reads, “All revenues or other moneys raised or received by Guyana (not being revenues or other moneys that are payable, by or under an Act of Parliament, into some other fund established for any specific purpose or that may, by or under such an Act, be retained by the authority that received them for the purpose of defraying the expenses of that authority) shall be paid into and form one Consolidated Fund.”

Against this backdrop, NICIL makes the point that Goolsarran recognised in the report that from 1991 to 2001, it transferred $3.415 billion to the Consolidated Fund. Between 2002 and 2012, over $12 billion was paid as dividends from NICIL to the Consolidated Fund. NICIL also stated that Goolsarran stated in the report that the accounts of NICIL prior to 2002, were qualified “audit opinions but for every year since, NICIL has received “unqualified” or “clean bill of health” audit opinions.

“Goolsarran’s broad positions in his Preliminary Report about actions prior to 2002 when he was the Auditor of NICIL is repeated numerous times. Similarly, his publicly expressed objection to NICIL’s operations from 2002 is also reiterated in the Preliminary Report,” the organisation said.

It went on to add that “notwithstanding these facts recognised in the Preliminary Report, Goolsarran states that NICIL violated Articles 216 and 217 of the Constitution when it retained all funds and invested these funds. This argument, which contradicts the facts as stated by Goolsarran, is the basis of the above recommendation by Goolsarran.”

In adding to its argument, NICIL said it has substantial legal advice indicating that Articles 216 and 217 were not applicable to NICIL. Further, it stated that the application of Article 216 and Article 217, would cause NICIL to be in violation of the Companies Act and NICIL’s own Articles of Incorporation and Bylaws.

“Specifically, ‘NICIL does not fall within the definition of ‘Guyana’ as set out in Article 232(1) of the Constitution and Section 5 of the Interpretation and General Clauses Act, Cap. 2:01. As a consequence, Article 216 of the Constitution is NOT applicable to NICIL.’”

The organisation further contended that its “clean” audit opinions for 2002 to 2013 is one form of evidence that the current Auditor, who audits all of Government, does not consider NICIL to be in violation of Articles 216 and 217.

Thirdly, NICIL said its advice in 2001 from private accounting firm Ram and McRae that clearly showed that NICIL prior to 2002, violated the Companies Act and its financial statements were not prepared in accordance with applicable accounting standards. Ram and McRae assisted NICIL is preparing its accounts in proper accounting form, after which it received a clean audit opinion. At no time, did NICIL receive advice that it had to deposit all of its revenue into the Consolidated Fund.

Fourthly, NICIL said it operated like any other State-owned entity, incorporated under the Companies Act.  If it operates in violation of Article 216 and 217 of the Constitution, then all State-owned entities would be similarly guilty.  Further, this would defeat the very purpose of having Government conduct commercial business via companies.

And lastly, it emphasised that there was no legal precedent or court ruling that suggested that NICIL was obliged to deposit its revenues into the Consolidated Fund or that Articles 216 and 217 were applicable to NICIL.

The organisation noted that it was extremely unfortunate that the protocols for addressing the forensic audit were not being followed.

“Incendiary accusations without specificity as to wrongdoings lack any semblance of objectivity and is one form of prejudicing a fair and balanced audit process. Such actions are more akin to a “witch hunt” than to a fair, independent, impartial, professional, and objective audit process,” it concluded.