Matters to be addressed on GuySuCo’s operations

Nov 03, 2016 Letters

Dear Editor,
What motivated me to pen this letter was the result of statistics from the Ministry of Finance on a $2b subsidy for Guysuco in Kaieteur News of 28 October 2016.
It had quoted that “for the first half of the year, Guysuco recorded an operating surplus of $2.9b, down from an operating surplus of $3.0b for the same period last year. The surplus, it said, was inflated by a $9 billion transfer from the Central Government to finance operations.
Without this transfer, the Ministry of Finance noted that Guysuco’s true position would be a deficit of $6 billion.” Guysuco needs to understand that it should be complying with International Financial Reporting Standards in the preparation of its financial statements. In determining its income or loss from operations, Guysuco’s income is determined from the use of its assets, and I repeat the use of its assets to manufacture its sugar which is then marketed to earn income. Under no accounting standard can a subsidy be included as operating income.
Hence its Comprehensive Income Statement (CIS) should be showing its true income or loss from its operations, then record its subsidy as financing its operations in order to determine its net income or loss. Hence the CIS will show a two part statement, i.e. income or loss from operations, then its net income or loss after accounting for extraordinary transaction(s) such as a subsidy.
It is imperative that financial statements be prepared in compliance with IFRS since they are used to determine an organisation’s performance. One way of measuring performance is by way of using Key Performance Indicators (KPI). KPIs enable an organisation to define and measure its progress towards its goals. They are quantifiable measurements related to goals and objectives; for they to be of any value, they have to be accurately measured.
Back to Guysuco; if its Income Statement is flawed, then KPIs such as Net Operating Income Margin, Net Operating Expense Ratio, Payroll Expense Ratio would be incorrect and be misleading to the users of its financial statements.
Many leading companies in the private sector have been publishing in the media their audited and interim unaudited financial statements. I have not seen any financial statements of Guysuco published in the media. Taxpayers in Guyana need to know about its performance. The tendency is for a senior official of public corporations to mention in an interview or an announcement about the operations of their entities. However, in the absence of published audited financial statements there is no credibility in those pronouncements. And this applies not only to Guysuco but also to other public corporations such as Guyana Water Inc, Guyana Power and Light, Marriot Hotel, NICIL only to mention a few.
It is not for me to say who should be on Boards and I am not in possession of the names of members on the Boards of Public Corporations. If we are to follow the trend globally, the financial success of such entities is, among others, having competent, skilled and experienced finance/accounting oriented personnel on their boards. On the Guyana situation our Public Corporations’ Boards appear to need such personnel in order to analyse at the professional level their financial statements and advise accordingly on their performances.
Before I close, I need to mention another phase on Guysuco’s operations. Taking into consideration from what I have read in the media, Guysuco is apparently bankrupt but we need to keep this entity in operation due to the thousands of workers on their payroll. Is there a Turn Around Strategic Plan over a ten year period with the expectation that ‘down the road’, it will become a profitable entity again? If there is one, then it should be published, and its KPIs and the financial and non-financial benchmarks to be attained annually, among others, should be highlighted. On the other hand, if there isn’t one, then urgent action should be taken to have one. The Government cannot continue, year after year with the granting of subsidies. I say no more at this point of time.
John M. Seeram