May 20, 2016 News
In the wake of a damning forensic audit report into the National Insurance Scheme (NIS), Former President
Bharrat Jagdeo is denying that his administration has had a hand in the way the outfit handled its money and invested in projects.
The forensic audit which was conducted by H.L.B.R. Seebarran & Co. highlighted instances where critical decisions were made in NIS operations. The supposedly autonomous Board of Directors was bypassed. Former Cabinet Secretary Dr. Roger Luncheon had served as Chairman of that board.
During a press conference on Wednesday, Jagdeo, President from 1999-2011, stated that as far as he could recollect, Cabinet had nothing to do with investments of NIS resources, that is to say it made no decisions.
Jagdeo acknowledged that such decisions were rightfully within the remit of the board. He stated that Cabinet did have dealings with NIS on several occasions, but that this had more to do with looking at the future of NIS and its sustainability from an actuarial review perspective. He added that another issue which was discussed was the Colonial Life Insurance Company (CLICO).
“So we (Cabinet) dealt with NIS many times, but never about where NIS should invest its money. The only time that came up was when they made some investment in the (Berbice) bridge. But subsequent to that, no.”
“I remember years ago, NIS had made some investment into Laparkan at that time. And they came to me and you had some other people (who) wanted to access NIS money. As Minister of Finance I did not approve it at that time. That was a long time ago. But Cabinet did not discuss the investment of NIS funds.”
The “some investment” into a bridge which Jagdeo referenced is the investment of $2.59B in the Berbice Bridge, commissioned in 2008. The bridge has reportedly racked up $1.5B in accumulated losses, based on the 2014 audited financial statements and had controversial engagements with the current Government when attempts were first made to get the bridge toll lowered.
“Some of the decisions, including the purchase of shares in the Berbice Bridge Company Inc. (BBCI), are continuing to severely impact the scheme’s cash flows and the recoverability of the investments,” the auditor had reported.
In another case, the report flagged that in a meeting of the board held on July 30, 2012, the General Manager informed the Board that Cabinet made a decision for the scheme to purchase a property in Paramaribo, Suriname, for €535,000.
“There was no evidence that the Board had deliberated before agreeing on this investment nor was there any evidence that a feasibility study was done to determine whether the price paid was consistent with the value of the property,” the report disclosed.
“In fact, many of the members had served on the Board for many years, but when the minutes of the Board of Directors (BOD) for the last four years were reviewed, they confirmed that critical decisions, in particular those for investments, were made by Cabinet and not the BOD. This is not what the NIS Act intended, as it provides guidance on how the Board of Directors should be appointed and regulates its proceedings.”
In the audit’s findings, a 2011 construction of a new office at Corriverton, Berbice, was also flagged as being too costly. In fact, a valuation two years after the office was built had placed the cost at only $38M.
The Corriverton branch had featured negatively under the previous administration, after documents relating to the construction revealed what appeared to be high costs for the building.
It was an embarrassment for NIS, which was also facing tough financial times as its expenses outstripped its income.
The report noted that the NIS board took it upon itself not to have the contract handled by the National Board for Procurement and Tender Administration. Rather, the bids were handled by the Tender Evaluation Committee. The reasons given were because of delays in the procurement at the National Tender Board.
NIS was already facing problems, with little returns on its investments. It had lost almost $5B in the bankrupt CLICO and the Berbice Bridge would be its second biggest investment.
It was found that under Dr. Luncheon, NIS had little say with the operation of the bridge despite its massive investments. The forensic auditor however recommended that the current ‘Concession Agreement’ be restructured to allow NIS to have a more dominant role in view of its shareholdings.
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