Mar 27, 2016 News
-$millions paid for software but never put in use
When it came to the running of the state-owned Guyana Oil Company (GuyOil), under Managing Director,
Badrie Persaud, almost all the rules were being systematically broken.
Not only did Persaud take unilateral decisions, without seeking permission for contracts from the then nine-year-old Board of Directors, but he oversaw the spending of monies and even loaning of fuel as if they were his personal business.
He promoted staffers who were not qualified and on vacancies that were never advertised and even played a role in back-dating a contract that was for his nephew, also a staffer of GuyOil.
According to a shocking forensic audit report by Nigel Hinds Financial Services, released last week by the government, the losses overtime for GuyOil and by extension the people of Guyana would have amounted to hundreds of millions of dollars.
The problem is that the audit only covered just over three years– the period November 1, 2011, to May 31, 2015. The audit would not be enough to determine the true extent of damage done to GuyOil.
Persaud, who was candidate of the People’s Progressive Party/Civic (PPP/C), for the May 2015 elections, was sacked in late February by GuyOil’s new Board of Directors. The Board in a short statement said it reviewed the audit report and concluded that it no longer has confidence in Persaud.
There were several glaring cases highlighted by the auditors. One of them had to do with millions of dollars.
GuyOil’s Operations Assistant, Robert Lynch, was supposed to perform a number of duties including preparation of engineering cost estimates, designs, specifications and monitoring of contracts.
However, during the period being audited, it was discovered that GuyOil paid out over $77M to Marcel Gaskin and Associates to do Lynch’s job.
“The forgoing indicates that the internal capacity of GuyOil to prepare cost estimates, design and monitor contracts was invariably outsourced to Marcel Gaskin & Associates Ltd by the Operations Department led by Mr. Reggie Bhagwandin, Operations Manager.”
This, the audit report said, unnecessarily hurt GuyOil’s operations, financially. Another transaction that would have raised eyebrows about the GuyOil Chief’s sincerity when it comes to transparency and accountability was the purchasing of special software Project Job Costing and Purchase Orders.
GuyOil procured the modules in 2013 but to date had not been utilized, resulting in a waste of financial resources.
Auditors examining the transaction, found that GuyOil was using a specific company, Powercompu. That company had no other competitor as GuyOil was single-sourcing the services, in breach of procurement processes.
“There was no breakdown in each year of licensing to determine the costs of used and unused modules. Discussions with the Marketing Department revealed that no staff was ever trained to use the Customer Relation Management (CRM) module.”
Three modules related to procurement of goods, services and construction were purchased at a cost of $10.5 Million over the period March 2013 to March 2015; these modules have never been used by GuyOil.
What made matters worse was that every year, GuyOil was paying over $3M for licence to use some of the programmes, or in this case, its non-use.
Powercompu is owned by contractor Manesh Seeram who is also GuyOil’s accounting local solutions provider for ACCPAC.
The procuring was handled by the IT Control Officer, Network Administrator, Finance Manager and Managing Director.
It was discovered that between November 1, 2011 to May 31, 2015, GuyOil paid over $90.8M to Seeram, who was chosen under questionable circumstances.
Below is a table detailing some of the purchases made from Powercompu:
Meanwhile, GuyOil and its Managing Director were also not paying much attention when it comes to dealing with fuel, which is the lifeblood of the entity.
In 2010, Persaud loaned the Bauxite Company Guyana Inc. (BCGI/RUSAL) $12.1M in fuel. That same year, almost $2.6M went to the Guyana Power and Light Inc. In 2014, SOL, a competitor, was loaned $16.7M in fuel.
There was no loan agreement for the $31M in fuel, the auditors said.
“The loaned fuel was still owed to GOCL as at May 31, 2015. In addition, the timing of the return of the fuel during a period of low fuel prices could cause significant losses to GuyOil.” There was no documented policy or loan agreement governing fuel loaned to various agencies totalling $31,434,041 for years 2010, 2012 and 2014 that were shown as a reduction in inventories and disclosed.
It is unclear from the audit report what relationship Rusal shared with GuyOil that would warrant fuel being delivered to that bauxite company without an agreement.
On Friday, Kaieteur News reported that auditors found evidence of contract splitting.
Between November 1, 2011 and May 31, 2015, GuyOil purchased fuel totaling $94.5M from one Deodat Dhanrajh.
Dhanrajh was a major shipper of fuel contracted by GuyOil. It is unclear why the Managing Director turned to Dhanrajh.
What is clear is that a week before the May 11, 2015 elections, GuyOil purchased from Rubis, one of the major sellers in Guyana, some 238,481 litres for $47.4M. The transaction was for $199 per litre.
GuyOil then turned to Dhanrajh, the transporter, two days later taking an order from him at the same price.
The auditors in flagging the transaction believed it was a clear case of staggering and splitting of a full order to facilitate Dhanrajh in the transaction.
Two days later, GuyOil changed the wholesale price to $198. It amounted to millions of dollars in losses for GuyOil.
Persaud, from the report, gave out contracts and benefits without any control to family and friends.
During the audit review period, Persaud awarded transportation contracts worth $62M to his brother, Indarjeet Persaud, and a construction contract for $860,000 to his nephew, Avinash Persaud.
The audit found that the brother continued to provide transportation services with the fuel tankers although the contract period had expired.
The report recommended that Persaud be disciplined for non-disclosure of conflicts of interest, awarding of contract to his nephew and multiple breaches of GuyOil’s procurement policies.
The report also flagged Persaud’s decision to become a candidate for the People’s Progressive Party/Civic national list for the May 11, 2015 General Elections.
GuyOil also breached its own agreement with dealers allowing them to get credit on fuel supplied without a bank guarantee or security bond— in other words, GuyOil had no protection against a customer who refused to pay.
As a matter of fact, the report said, GuyOil was not concerned about its inaction to manage the collection of monies from customers.
“There was and continues to be major irregularities in the charge system used for fuel sales to customers with charge accounts.
“A 10% sample of 758 charge customers was conducted and our findings revealed that over fifty percent were irreconcilable and improperly managed.”
In one case, a GuyOil staffer even signed a guarantee that a customer, Mohamed Bacchus, would get a $5M credit limit. The guarantee was signed by Leonard Khan, then Manager of the Castrol brand and the brother-in-law of Bacchus.
With regard to how GuyOil went about procuring services and supplies, Persaud overlooked a system where he invariably went to a single person or company.
The audit report explained that GuyOil does not have a credit card facility and in order to obtain goods from overseas; monies for purchases from GuyOil were transferred to the account of employee Azaad Hassan, the IT Network Administrator.
Government said it has launched a probe into its fuel purchases that were transacted by GuyOil and the regulatory agency, Guyana Energy Agency, amidst allegations of vast corruption that cost the country billions of dollars in the last decades.
GEA’s Head, Mahender Sharma, is facing pressure to step down after an audit of that entity raised troubling questions about his management.
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