…Company books reflect more than $215M outstanding
All is not well at the state-owned National Communications Network Inc (NCN) and based on the most recent audited reports for the company, all has not been well for a while now.
Minister of Finance, Dr Ashni Singh, on Thursday last, laid in the National Assembly the company’s audited financial reports for 2007 and 2008.
The 2008 report for the now embattled company, illustrates several glaring financial discrepancies uncovered by the Auditor General who provided a qualified opinion on NCN (a qualified audit opinion is not a good thing, it informs the reader of the report that the audit was either incomplete or that questionable accounting method was used.)
These include the overstating of the company’s profit, huge amounts of money outstanding and record keeping that disallows the efficient examination of the financial records wanting for authenticity.
According to Auditor General (ag) Deodat Sharma’s, qualified opinion: “Included in the Balance Sheet is the amount of $733.753M which represents Fixed Assets.” Pointing to the absence of an asset register and noting that “NCN Inc. did not implement and maintain a master and sectional inventory during the year of audit.” The Auditor General’s opinion means that the asset base of NCN Inc was baseless. This can have serious repercussions for viewers of the accounts since the company is showing an asset base that was not verified and may have budgeted moneys for repairs, maintenance and replacement of non-existent assets.
During the past week, this publication reported on the purchase of a multi-million- dollar Outside Broadcast vehicle, which is currently lying unused in the compound following its acquisition several months ago.
This newspaper was reliably informed that the vehicle which is to be used for outside radio broadcast is down for the want of several components. While this publication was unable to verify the cost and life of this vehicle, the state of the accounts, questionable asset base and the poor state of some of the assets point to gross mismanagement of the company. It is the efficient use of assets and other resources that contributes to a company’s success.
Meanwhile, the old radio Outside Broadcast vehicle is gathering moss in another section of the NCN compound.
“This is just a waste of money and then the management is protesting against the budget cuts,” one NCN source told this publication.
Another bone of contention for the Auditor General (ag) during his audit of NCN in 2008, centered on some $215M reflected on the company’s balance sheet as ‘Accounts Receivable.’
‘Accounts Receivable’ is defined to mean, “Money which is owed to a company by a customer for products and services provided on credit.” The AG’s report questions $86.7 as inactive.
While there isn’t an age-analysis to verify the age of these debts, the AG’s qualification leaves questions as to what percentage of this money owed to NCN is serviceable versus what percentage may be doubtful or bad debts – at the very least, the $86.7million may be doubtful.
On the point of bad debt, the AG report also mentions the lack of a board policy while pointing out 862 debtors owing a total of $24M.
The revelation of more than $200M being reflected in the company’s books as moneys to be received has been flagged by some as a matter that needs further scrutiny.
An economist asked to comment on the audited accounts for the company says that the poor state of its assets, the questionable asset base and large debt base reflect a company that would have been mismanaged while state subventions continued to pour into it.
It was pointed out that only recently one of NCN’s senior officials, Martin Goolsaran admitted to depositing monies meant to be for the company in his personal account.
Sources say that the CEO approved this transaction. NCN’s management therefore ensured that it allowed a system which kept revenues outside of its legal books, meaning that untold volumes of revenues and expenditure for NCN would have been transacted outside of the company’s accounting system.
The critical 2008 Auditor General report on the State owned NCN falls under the aegis of the now controversial National Industrial and Commercial Investments Limited (NICIL) also pointed to the sum of $42M in the income statement as depreciation charges for the year.
The Auditor General uncovered that the amount stated as depreciation is understated and “the amounts stated as fixed assets and net profit are overstated.”
Accusation of overstatement of assets and profits coupled with high levels of debt can suggest a cash-strapped company that is constantly bailed out by the government.
“One would need to reflect on the Income statement and cash flow to determine whether the company made good use of its asset base to compete with other stations in the sector…based on what we have seen, the company uses state funds to build asset base yet runs up large debts…A full review of NCN current performance is needed.”
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