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No cap on credit granted by asphalt plant- audit report

Jan 03, 2021 News

Kaieteur News – Details from the recently released audit report on the Garden of Eden Asphalt Plant, shows that the handling of credit for customers was poor.
In fact, according to the report, due to the no-cap credit given, coupled with the lack of a credit policy, the plant was exposed to the risk of credit being granted and not being paid on time.
“Management did not manage the risk and cost attached to granting of credit. This has resulted in the granting of large sums of credit for a long period of time, giving rise to the risk of high cost associated with receivables,” the team highlighted in their report.
Special mention was made of Courtney Benn Contracting Services Limited (CBCSL), a company that had been consistently granted credit but failed on paying those debts.
To this, the report mentioned: “Minutes of the meeting of the Board of Directors dated 29th November, 2016, revealed that the directors were concerned over credit being granted to CBCSL when there was no existing policy for providing credit for such a large amount.”
The team also noted that with this construction company, credit was granted without a credit review process.
In fact, credit is still being granted to CBCSL despite the decision of the directors to discontinue selling asphalt on credit to this client until all monies owed are collected, the report said.
As at December 18th, 2020, the balance owed by Courtney Benn was $12,031,153.
As part of their recommendations, the team advised that management should make all efforts to ensure that monies outstanding are collected on time and that they should ensure that the policies of the plant are adhered to at all times.
Also in their report, the team highlighted the need for a credit policy, which would outline credit and payment terms for customers, and would establish a clear course of action for late payments. This lack of credit policy, the report states, resulted in all credit sales being approved by the General Manager (GM) without any evidence of a credit review process being carried out and credit limits set for the various customers.
The absence of this policy had also exposed the Asphalt Plant to a high risk of clients failing to pay on time, as previously mentioned.
To this, the report said: “An analysis of receivables revealed that an average 75% of debts owed beyond 90 days. We were unable to determine whether there was consistency in management’s decisions.”
The auditors were unable to determine whether selling asphalt on credit is economically beneficial to the plant.
Surprisingly, when the special team reached out for a response from the asphalt plant’s management on this issue, management stated that it has an “active and engaged” credit policy approval system in place.
To this the team made it explicitly clear that: “There is no credit policy. We have noted that as of 2019, the asphalt plant instituted a system which gathers information on the customer applying for credit and not assessing the credit worthiness of the customer.”
The audit was ordered by Minister of Public Works, Juan Edghill, after independent contractors and others filed complaints of rackets being run at the plant.

 

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