Forensic audit finds…Former administration used GMC fertilizer account as slush fund

May 22, 2016 News

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A forensic audit conducted into the operations at the Guyana Marketing Corporation (GMC) from January 2012 to May 2015 has revealed troubling findings, including the fact that millions of dollars in unauthorized payments were made from the

Guyana Marketing Corporation’s (GMC) fertilizer account to other agencies.

According to the auditor, Saykar A. Boodhoo, the entire fertilizer programme appeared to have been formulated to dodge financial accountability laws and to provide funding to multiple agencies, in a manner similar to how a slush fund operates.
The auditor also reported that then GMC General Manager, Nizam Hassan, refused to provide the auditor with certain information, thus preventing him from properly auditing the fertilizer programme’s transactions.
Hassan was hired as General Manager at the Guyana Rice Development Board (GRDB) last year.
Based on a review of documents supplied by Owen Nestor, GMC’s accountant, however, it was found that millions of dollars were transferred in transactions which the auditor stated “were concluded without proper support or authority.”
For instance, the report lists a massive, interest free loan of $450M and a payment of $273.3M on a letter of credit arrangement, both to the Guyana Sugar Corporation (GUYSUCO). Also documented is an excess repayment of $120M to the Guyana National Co-Operative Bank (GNCB).
Nor is that all. The report documents that $35M in payments were made to the Guyana Rice Producers’ Association (GRPA), while $111.2M in payments to the Ministry of Agriculture for vertical pumps were made in November 2014.

GUYSUCO
In the case of GMC’s loan to GUYSUCO, not only was the loan interest free, the agreement had a special clause stating that only $87M was to be repaid to GMC. This represents a loss of over $360M, based on the agreement.
“Mr. Hassan has 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. The $86,994,711 balance is on GMC’s books as a receivable.”
Ministry of Agriculture
The report noted that in November 2014, the Permanent Secretary of the Ministry of Agriculture requested that GMC make a payment of $111.2M from the fertilizer programme to pay for vertical axial pumps.
According to the auditor, GMC “fraudulently recorded the payment as Fertilizer Expenses in the 2014 draft audited financial statements.”
The auditor said that had this been a proper transaction of GMC, the cost of the pumps should have been capitalized and depreciated over its useful life.

GNCB
The auditor reported that funds were provided by GNCB to GMC, but since GMC did not purchase any fertilizer, GNCB requested a refund of its funds. Instead of returning $553M to GNCB, GMC overpaid $673M to the bank.
“(Then) GMC’s General Manager, Mr. Hassan has refused to provide any answers or documentation to support this overpayment of $120M,” the auditor stated.

GRPA
The auditor stated that payments to GRPA 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.
“Except for the refund to GNCB, none of the payments appears to have been conducted in accordance to the instructions GMC received to manage the fertilizer account,” the auditor stated.
According to the forensic auditor, the main beneficiaries of the Fertilizer Programme appear to have been GUYSOCU and rice farmers; two groups the auditor added were not covered by GMC’s mandate.

Management response
GMC’s management was given a chance to respond. In its defence, GMC management stated that no overpayment of $120M was made to GNCB. It stated that a debit memo dated November 5, 2008 was sent to the General Manager of Scotia Bank requesting a transfer of $120 million from the Fertilizer Account to Guyana Sugar Corporation.
“This was reflected in the debit note that was received from Scotia Bank and was dated November 6, 2008.”
Management also stated that the decision to expend money on axial pumps was a Cabinet decision taken on October 07, 2014.
“In addition, the Permanent Secretary of the Ministry of Agriculture received a correspondence dated November 6, 2014 from the Secretary to the Cabinet regarding the procurement of the four vertical axial flow drainage pumps.”
“Importantly, the accounts to which the money should be sourced were also stated in the correspondence.”
However, the auditor responded that access was limited and even denied to crucial documents involved in both cases. The auditor stated for instance that on April 27, 2016, current General Manager of GMC, Ida Sealey-Adams, showed a one page document from then Office of the President and signed by Cabinet Secretary Dr. Roger Luncheon.
“The document was provided to the auditor for reviewing purposes only. Ms. Adams refused to have the auditor make a copy of the document. Also the document was included in an unmarked and unlabeled folder with other documents believed to be related to the GMC’s Fertilizer Account.”
“The auditor was not allowed to review the contents of the other documents in the folder. Permission was only granted by Ms. Adams to review the single page document.”
“The (then) GMC general manager, Nizam Hassan, refused to make available to the auditor full access to original documentation of the financial transactions of the Fertilizer Programme.”
“As such there was a scope limitation thus preventing the auditor from properly auditing the Fertilizer Program transactions. Copies of pieces of documents and information were made available by Mr. Owen Nestor GMC’s accountant to the auditor.”
“Based on review of these documents it appears that the (preceding) transactions were concluded without proper support or authority.”

Recommendations
The auditor made it clear that the government needs to determine what action should be taken against Mr. Hassan and the Permanent Secretary of the Ministry of Agriculture for “their alleged illegal involvement in the management of the Fertilizer Program.”
The fertilizer fund was started in 2008, when the then government acknowledged that there was a shortage of fertilizer available to farmers and funded a fertilizer program to be managed by GMC.

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