Apr 05, 2016 News
An independent auditor has recommended sweeping changes at the Guyana Oil Company (GuyOil), including how that state-owned company should handle its dealers and creditors.
According to the recently released forensic audit report by Nigel Hinds Financial Services, GuyOil will have to implement tougher systems to ensure that dealers adhere to contracts with an annual revision on file.
The audit, ordered last year by the new administration of President David Granger, covered transactions for period November 1, 2011 to May 31, 2015.
It also recommended strong actions against former Managing Director, Badrie Persaud.
Persaud, who was sent on leave mid-last year, was sacked in February after GuyOil’s Board of Directors reviewed the audit report and decided to send him packing. They said he took unauthorised decisions during his time.
The report flagged several transactions including contracts to close relatives, like multi-million fuel transportation contract to his brother and a construction one to his nephew.
He also approved a gas station in Tuschen, East Bank Essequibo, for a brother-in-law.
The auditors also found a loose procurement system at GuyOil with questions over how companies and individuals were able to purchase fuel on credit.
In its recommendations, the auditors urged that a Marketing Manager should be appointed at the state-owned company with the Managing Director no longer performing those duties.
“The new Marketing Manager will be a healthy development to ensure controls over evaluation, recommendation and approval of dealers,” the report said.
GuyOil owns three bulk terminals placed at Providence, Georgetown; Heathburn, Berbice and Adventure, Essequibo, along with seven service stations.
According to the report, GuyOil has 36 dealers for its petrol and Castrol lubricants across the regions, employing over 300 personnel. The company also extends credit to over 700 customers.
The auditors want the dealers to be selected on a process that included competitive analysis, impact assessment and market share analysis.
There should also be “adherence to the dealer contract” with annual revision being carried out by the board.
It was also recommended that control tests should routinely be carried out on dealer contracts as part of the annual Internal Audit plan.
In the new system, calibration tables at the dealers’ stations should be established and monitored by GuyOil as is allowed in the dealer contract.
Meanwhile, with 758 creditors, auditors found that GuyOil had a loose system.
“An attempt by Forensic Audit to reconcile a sample of 77 of 758 credit customers for the period 01.01-10.15.2015 proved difficult since 54,458 transactions did not reconcile with the approved vehicles in customer files.”
The auditors recommended that police and procedural steps should be documented and approved by the Board of Directors.
“Policy and procedures for credit to customers should be clearly outlined and adhered to. A listing along with a memorandum should be submitted and updated where necessary, showing each credit customer, authorized vehicle/signatory/purchase order sequence/location, authorization date, remarks, prepayment amounts,” the report urged.
GuyOil’s management was also asked to review all credit limits and bank guarantees submitted by charge customers.
The audit report was a damning one on the former Managing Director.
It spoke of a one-man show by Persaud and a Board of Directors that was in place for nine years.
With billions of dollars handled annually by GuyOil, the audit report indicated a family affair being run there.
Persaud last week defended his tenure saying that the contracts to his relatives helped saved the state-owned company millions of dollars.
He did not address the obvious conflict of interest issue raised by the auditors.
According to the report, during the 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.
With regards to the 30-odd dealers under the Managing Director’s watch, they were poorly managed, auditors said. They could find no evidence on the files for critical documents like ID, Tax Identification Number (TIN), transport, lease, tenancy agreement, relevant Guyana Energy Agency licences and insurance coverage.
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.
Government has ordered several forensic audits and have released the reports. However, the administration has been coming under pressure to lay criminal charges.
Tens of millions of dollars have been paid for the audits.
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