The Guyoil audit; Badrie Persaud responds

Apr 01, 2016 Letters

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Dear Editor,
I was appointed the Managing Director of Guyoil in July, 2006. Marcel Gaskin & Associates Ltd were engaged to work with Guyoil several years before that. The consultant reported in person and made submissions regularly to the management committee, the tender board committee and the Board of Directors on the progress of capital projects. During the review period there were capital project well in excess of $1.0B. All the projects were successfully completed in a timely manner. Both the Board and management were impressed with his professionalism and were satisfied that the company was getting value for money. Marcel Gaskin & Associates Ltd continues to provide consulting services to Guyoil in 2016.
IT – Computerisation of the company. The report found that purchases were frequently single-sourced from Powercompu, breaching the Tender Board requirement. Payment to Powercompu was $90M.
The accounting software installed at the company is ACCPAC. Powercompu is the local agent for ACCPAC. In order to harness the full benefits of ACCPAC and to network the company’s three terminal and eight service stations with the Head Office, Powercompu was requested to make an IT/MIS submission. The bound document outlined the company’s IT/MIS Strategy over a 3-year period at a cost of $90M.  A presentation was made to the Board of Directors and same was approved. The implementation process was not without hiccups but was largely successful. Monthly reports were submitted to the Board of Directors informing of progress made and constraints faced.
Today the company is fully computerized and networked compared to ten years ago when I became the Managing Director – great contribution to improved levels of accuracy, productivity and efficiency in doing business.
Conflict of interest : construction contract offered to nephew AvinashPersaud
Some years ago, through the initiative of the Managing Director about four acres of land were reclaimed from the river at the Providence terminal, EBD.The final works of levelling the reclaimed land was left to be done. Managers were asked to seek quotations from contractors to execute the work. Because the contract was not a large one contractors were not inclined to take it on. One contractor responded with a price of $4.5M. This was considered very unreasonable. At about the same time Avinash was mobilizing his equipment in Georgetown to go to the Linden Highway and I told him about the work we had at the terminal. He was asked to make contact with the terminal manager, visit the site and submit his price for the work. His price was $860,000. So management had two prices – $4.5M vs $860,000.
The auditor was intent on focusing on the contractor being a relative of the Managing Director rather than the cost saving of $3,640,000 to the company. For the ten years I have been the Managing Director of Guyoil the paramountcy of the interest of the company was always observed.
Conflict of interest :  transportation contract of $62M offered to brother Indarjeet Persaud
During the years of high oil prices on the world market Guyoil was selling fuel at very thin margins and sometimes at a loss, all because the government policy was to keep the price at the pump below $1000.00 per gallon. Given this scenario management decided to review all the cost centres in the company’s operations and seek ways and means to reduce same. Operating the company’s Road Tank Wagons (RTW) stood out as a high cost centre.
The unit cost to the company to truck one litre of fuel from the Providence terminal to Georgetown was calculated. This was below $2.00/L. Most contractors offered a price of $2.00/L and above. The price offered by Indarjeet Persaud was $1.11/L, significantly below the company’s unit cost.
Tenders for trucking fuel were again requested in September, 2015 and Indarjeet Persaud’s bid was competitive. Again, no explanation was sought by the auditor. The $62M at caption was for fuel trucked over a 4-year period.
Guyoil purchased from Rubis 238,481 L of fuel for $47,457,719 which was followed by the purchase from Dhanrajh on 05.06.2015 at the same price. Indicating the staggering and splitting of a full order to facilitate ordering from MrDeodat Dhanrajh which could have been sourced possibly at a lower negotiated price based on the volume of purchase from Rubis.
The auditor’s assumption is a typical textbook pontification and not the world of real business. At this particular time Guyoil was selling fuel at a price significantly below the competition. Very often our nominated volumes were reduced by the refinery and whatever limited volumes we had were sold out rapidly because of the lower price. Rubis and Sol were very reluctant to sell Guyoil fuel because when Guyoil is stocked out they do good business.
In this particular case Guyoil’d fuel stock was getting critical and we requested Rubis to sell us 2000 bbls fuel (1000 bbl = 238,481L) to keep us going till our vessel returned. They obliged us 1000 bbls claiming that their stock was low. We knew that they had fuel and were selling large volumes to peddlers, one of whom was Mr. Dhanrajh. A request was made to MrDhanrajh to sell us 1000 bbls of fuel at a price not above Rubis’ price.
So it was not splitting order, as the auditor would like to mislead us, but using initiative to get 1000 bbls fuel to keep our service stations going till our vessel returned.
Mr Deodat Dhanrajh enjoyed a special relationship with Guyoil.
Guyoil hired the vessels of Mr.Dhanrajh, Mr Amin and Rambarran Marine Services Ltd to freight fuel from Georgetown to the company’s fuel depot at Adventure, Essequibo Coast and to lighter the chartered oil tanker when required. Mr. Dhanrajh’s vessels were used more often than the others because his vessels are newer and his service is more reliable, and the rates charged by the three freighters are the same. The company suffered fuel contamination using vessels of Rambarran and Amin.
The company continues to use the freighting service of Mr. Dhanrajh in 2016. The auditor made reference to Dhanrajh’s freighting service but omitted that of Amin and Rambarran.
Credit management : The report pointed out a few deficiencies in credit management and concluded that  … “this is a major credit risk and may result in Guyoil being unable to recover monies owed to the company”.
Sales at Guyoil are over $40B annually. The company’s credit portfolio is rigorously managed by the Credit Controller. For several consecutive years prior to 2015 no bad debt was incurred at the company. This is highly commendable for a company with sales exceeding $40B.Infact, the Credit Controller was often commended at the Finance & Audit Committee meetings for doing an excellent job. And the service of the Finance Manager was extended beyond retirement age on March 18, 2016. Certainly his service would not have been extended if financial management at the company was poor.
Asset management : The auditor expressed concern that…” the Fixed Asset Unit is manned by one person managing net asset valued at $2.5B. The report said that the understaffing of this unit severely affects the monitoring, verification and tagging required to properly managed the company’s fixed assets”.
The Fixed Asset Register is computerised and captures all the fixed asset of the company with the necessary details. At any point in time any fixed asset in the company can be accounted for. This responsibility was manned by an asset clerk. He has done a very good job in inventorising and accounting for the company’s assets over the years and was promoted to Asset Officer.
The internal audit department also conducts annual fixed asset verification.
The auditor assumption that the fixed asset unit is understaffed appears to be a textbook one, relating the net asset value of $2.5B to manpower requirement.
One employee, Leonard Khan, was promoted to Castrol Brands Manager and then to Manager of Guyoil Aviation Services despite not having the requisite qualifications.
As an unwritten company policy management sought to promote employees internally who have performed well. Leonard Khan was employed at Guyoil more than ten years ago with a sound secondary education. Over the years he has developed good product knowledge with a proactive attitude to get work done. He was in the final stages of completing his MBA at Nations University when he was promoted.
Afro employees were also promoted over the years. Mark Adams was promoted from Credit Controller to Castrol Brands Manager and then to Procurement Manager. However, the auditor chose to single out the indian employee. Such racial bias was not expected in an audit.
Some of the major achievements at the company during my term as the Managing Director are as follow ;
·    Sales revenue increased from $20B to over $40B
·    Sales volume increased from 864,362 barrels to 1,242,158 barrels
·    Net profit after tax increased from about $800M and peaked at $1.4B
·    Daily bank balance increased from $0.5B to $7.0B
·    Some $2 B was expended on capital projects which included concrete wharf facilities, expanding and modernizing the company-owned service stations, food court at Diamond, computerization, increasing fuel storage capacities at the terminals from 67,000 barrels to over 80,000 barrels. All the funds used were self generated by the company.
·    Guyoil Aviation Services Inc, a subsidiary of Guyoil was successfully established in 2014 to handle aviation fuel business.
·    Reclaiming about four acres of land from the river for future expansion of Providence terminal.
Badrie Persaud

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