Terms of Reference of Special Audit not adhered to

Sep 09, 2022 Letters

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Dear Editor,

 Please permit me to give my analysis based on the article captioned, ‘Rose Hall Estate overpaid close to $5M to two contractors last year’ in the Stabroek News dated 29^thAugust, 2022.

This recent missive has gained public attention and the Special Audit Report is now in the public domain. As an ex-employee of the Corporation, I have paid keen attention to the various articles and the controversies surrounding the entity. I have received a copy of the said Report and did an analysis and wish to state the following.

Firstly, the Terms of Reference stated that “the Chief Internal Auditor of GUYSUCO via a letter express concerns relating to overpayments to contractors that were due to incorrect methodology (rates) applied for payments (paid as per actual operational hour of machines, instead of completed hectares and/or equivalent operational hours, as stipulated in the contracts and approved rates schedule’. However, from the Special Audit Report, it can be seen that there was some misunderstanding of this TOR since it has been repeatedly mentioned that there was a deviation from $7,500 to $8,500 which was not the case. The inference drawn from the TOR is that contractors were paid for actual hours worked rather than the number of hectares tilled.

This Special Audit Report is riddled with numerous inaccuracies and inconsistencies which should be brought to the attention of the public domain since these were used as the basis for the conclusion and the recommendations arrived at in the said Report.

These anomalies can be listed as follows:

1. Page 3 Sub-para 15 stated that, ‘The rates applicable based on the tractors includes the front-end loader at $7,500 per hour’. The tractors in question were heavy duty tractors which were paid at $8,500 as per the approved rate sheet (Appendix A). This was explained by the Estate Manager in his letter to this publication on August 31.
2. Page 4 sub-para 20 stated that Sukhlall and Ramnarine were paid at the rate of $7,500 per hours but this was for Dondi drains. These are medium tractors and the rate was correctly applied but the two Contractors in question used 180Hp and 140HP for tillage operations.
3. Page 4 sub-para 26 wrongly attributed one of the tractors as a 90 HP machine. This is a 180HP tractor and the conclusion that, more time being spent on tillage since a smaller tractor was used, is wrong.
4. Page 5 sub-para 29 stated that, ‘these payments were made using the proposed rate of $8,500 instead of the current rate of $7,500 is erroneous since $8,500 is the approved rate for 2021 for the types of machines used (Appendix A).
5. Page 6 sub-para 11 stated that, ‘Payments should have been made at a rate of $7,500 per hour at 2.25 hours per hectare was used by Audit Office’. This is again wrong.
6. Page 7 sub-para 33 stated that, ‘the rate used by the Internal Auditor was $8,500 whilst $7,500 was used by the Audit Office’. This is erroneous since Tables on pages 6 and 10 submitted in the Special Report indicated that the Audit Office indeed used the rate of $8,500 to calculate the ‘overpayments’. This finding is replicated on page 10 sub-para 48.
7. Page 15 sub-para 68 (iv) stated that, ‘Tractors used by the contractors namely D. Teajman and C. Nathoo did not have the required specifications as per contracts’. This is only applicable to Nathoo who used 140 HP tractors with 4 disc ploughs. The 140 HP tractor is regarded as heavy duty and this contract was awarded by the Head Office.
8. Page 16 sub-para 68 (vi) stated that, no certificate of Insurance and Registration were seen for tractors used by Nathoo. This was awarded by Head Office and approved by the Chief Executive. The Procurement rules were breached.
9. Page 16 sub-para 68(vii) stated again that ‘payments totalling $12.258 were made to the two contractors, namely D. Teajman and C. Nathoo using the proposed rate of $8,500 instead of the current rate of $7,500. No approval was seen for the increase’. The rate of $8,500 was approved since November 2020. This information is readily available.
10. Page 16 sub-para 68(ix) stated that, ‘the new rate should have been effective from 1^st December 1, 2021 and not from the commencement of the contractual period. In addition, the payments were retroactive. Further all payments were made before the 1 of December to the contractors.’ The rate of $8,500 was effective since November 2020. It cannot be retroactive since the rate of $8,500 was applied since January 2021. On page 11, sub-para 51 an email dated November 10^th, 2021 sent by the Chief Executive was referred to (Appendix 3) and the rate per hectare is $19,125 and if this is divided by 2.25 hours the result is the approved rate of $8,500 which the Estate paid.
11. If the main contention is the wrong application of the rate, then the overpayment should have been $235,000 and $686,000 (difference of $1,000 multiplied by the hours worked which is 235 and 686).

In conclusion, the main thrust of the Special Audit Report is the payment of $8,500 as against $7,500 per hour. However, as was evidenced by the CEO’s email the rate of $8,500 was approved since November 2020. This is a material error which greatly influenced the conclusion and the recommendations stated therein. Furthermore, it is normal practice for External Auditors to discuss findings with the Chief Internal Auditor of any Corporation and if this were done then the anomalies mentioned above would not have arisen.

Additionally, the Special Audit did not consider the context or the ‘story’ behind the ‘overpayments’ and this was highlighted by the Estate staff in their response seen in the Special Audit Report. Context must be applied to audit findings to better communicate ‘the story’ of the findings.

As it is, there is a conflict between the Internal Audit findings and the State Audit findings as it relates to the rates used by the Estate and the reason for the overpayment. This is a material error and greatly influenced the recommendations which must now be quashed and declared null and void.

Yours sincerely,
Narendra Lall

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