May 22, 2016 News
With pronouncements by former President Bharrat Jagdeo that his Cabinet had no input in the direction
in which the National Insurance Scheme (NIS) invested its money, except for the Berbice Bridge investment, some observers are not impressed.
One such observer is former Auditor General Anand Goolsarran, who questioned why the nation should take the former President’s pronouncements at face value. According to Goolsarran, the accumulated minutes of the NIS board meetings would have to be the point of reference, in order to ascertain the true level of cabinet’s interference beforehand.
“It’s a sad situation,” Goolsarran said in a recent interview with Kaieteur News. “If he said only one instance, how do we know that? We should see all the Board minutes, so you can (ascertain) all the decisions.”
Goolsarran stated that the Berbice Bridge investment has been shown to be a poor one, but with recent revelations about the Board’s susceptibility to being overridden, there could be other cases of undue influence.
“The money NIS gets comes from private and public contributions, employees and employers,” he said. “This money is set aside to take care of them so that when they are retired, they would have recourse.”
He said that while NIS has to invest its funds, it is not right for anyone to make reckless decisions with regards to investment. And yet, he said, almost all investment norms, including being cautious, were breached.
Goolsarran said that NIS money should not have gone into the bridge, because it was unlikely that the
bridge could return a profit. Pointing to the financial makeup of the bridge, Goolsarran noted that the bridge is saddled with debt that has to be paid off.
“You have to service the debt. The capital structure was weighted too much to debt versus equity. Plus you have to meet operating expenses.”
At a press conference last Wednesday, Jagdeo was adamant that the PPP Cabinet had not interfered in NIS operations with regards to how NIS invested its money, except for “some investment in the bridge.”
The “some investment” into a bridge to 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. It 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.
NIS was already facing problems, with little returns on its investments. It had lost almost $5B in the bankrupt CLICO. The Berbice Bridge would be its second biggest investment.
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. A valuation two years after the office was built 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.
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