Jan 08, 2017 News
-Auditor says LINMINE debacle is further evidence that NICIL was used as a parallel treasury
By Kiana Wilburg
By holding the position of Officer in Charge of the National Industrial and Commercial Investments Limited (NICIL) and head of one of NICIL’s subsidiaries; LINMINE, Horace James, is obviously caught in a conflict of interest.
This viewpoint was expressed by Chartered Accountant, Anand Goolsarran.
Goolsarran, who also prepared a forensic audit report on NICIL, said that James should not hold both positions. He added, “It is either one or the other. In fact, it is inappropriate for the head of LINMINE to also be the Officer-in-charge of NICIL. This can pose a serious conflict of interest.”
The forensic auditor was also concerned about recent statements by James to the effect that LINMINE has become a department of NICIL. Goolsarran strongly contradicted this. He explained that NICIL was incorporated under the Companies Act 1991. He stressed that it is a Government company since the Government is only a shareholder.
In the case of LINMINE, the former auditor general said that this entity was incorporated under the Companies Act 1991. According the notes to the financial statements for year ended December 31, 2012 (the latest audited financial statements), Goolsarran said that it is a wholly-owned subsidiary of NICIL by Order No. 45 of 2003. The auditor said however, that this Order relates to the dissolution of BIDCO and the transfer of assets to NICIL.
Goolsarran said, “I have found no evidence of LINMINE becoming a department of NICIL. For this to happen, LINMINE had to be dissolved in the same way that BIDCO was dissolved, i.e. an order had to be issued and assets transferred to NICIL. I have found no such Order. The fact that LINMINE continues to produce audited financial statements, the latest being for the year ended December 31, 2012, substantiates that LINMINE could not have been a department of NICIL.”
Additionally, the Chartered Accountant expressed that NICIL cannot claim holding company-subsidiary company status by virtue of Order No. 45 of 2003.
He said, “Even if this were so, for example, through the transfer of Government shares, the integrity of both companies remains intact in terms of assets/liabilities and income/expenditures. Nor can NICIL cross legal boundaries by integrating LINMINE into its operations since there is no provision under the Companies Act for this to happen.”
Speaking to the expenditure incurred by NICIL on LINMINE’s behalf, Goolsarran said that the circumstances expose once again, how NICIL was used as a “parallel treasury.”
During the period 2002-2014, Goolsarran said that NICIL incurred expenditure totaling $1.260 billion on behalf of LINMINE. He said that this relates to the payment of salaries of 75 staff members ($983.319 million) and rates and taxes ($122.342 million). Instead of showing the expenditure as receivable from LINMINE, Goolsarran found that NICIL treated it as its own expenditure.
Similarly, he found that NICIL incurred expenditure totaling $590.839 million on behalf of LINMINE, comprising privatization expenses ($75.378 million), maintenance ($84.197 million), fuel ($53.543 million), payments to contractors ($111.903 million), and other expenses ($265.818 million).
The Chartered Accountant said that these were absorbed in the accounts of NICIL as Administrative Costs. It therefore means that total expenditure incurred by NICIL on behalf of LIMNIME for the two categories of expenditure was $1.851 billion. As a result, NICIL’s accounts over the period 2002-2014 have been overstated by the latter amount.
In relation to the aforementioned, NICIL offered the following explanation: “LINMINE represented a loss on the NICIL side with the expenses relating to securing the many assets that were still being held, pending a sale or lease in a transparent manner. In fact, by virtue of this being a NICIL department, the Treasury was insulated from supporting these operations.”
Goolsarran said, “This is an extra-ordinary statement coming from NICIL and is further evidence of NICIL’s de facto status as a ‘parallel’ Treasury. NICIL cannot usurp the role of the Treasury by meeting the losses of another State-owned company.”
The Chartered Accountant said that the logical course of action should have been for the Government to provide a subsidy to LINMINE through the National Budget. In addition, as indicated above, Goolsarran said that LINMINE is not a branch of NICIL since it has its own corporate existence and identity, quite distinct and apart from those of NICIL.
As regards financial reporting and audit of LINMINE, according to NICIL’s website, the last set of audited accounts was in respect of 2012. Goolsarran said that therefore, LINMINE is three years in arrears in terms of financial reporting and audit.
The forensic auditor said that this is a violation of the Companies Act. He pointed out that both the 2002 and 2003 audited accounts, which were issued in June 2004 and August 2006 respectively, reflected disclaimers of opinion because of matters of a fundamental nature which affected the Auditor General’s ability to express an opinion on them.
He said, “The accounts for the years 2004-2011, that is, eight years of accounts, were not approved by LINMINE’s board until 20 September 2012. Reminiscent of NICIL’s accounts, the Auditor General issued his opinion on them on 25 September 2012. Needless to mention, he gave an unqualified opinion i.e. a clean bill of health on these accounts, notwithstanding that they did not reflect any assets/current liabilities and income/expenditure.”
Goolsarran continued, “In addition, the 2012 audited accounts reflected long-term liabilities totaling $17.780 billion of which amounts of $11.609 billion and $6.172 billion represented loans from the Ministry of Finance and SYSMIN (a foreign company), both of which were shown as having been guaranteed by the Government of Guyana.
“However, the Public Accounts for that year as well as subsequent years do not reflect these amounts in the Statement of Loans granted by the Government nor in the Statement of Loans guaranteed by the Government.”
On a final note, Goolsarran said that a year ago, the Cabinet took the decision for the Auditor General to conduct a transaction audit of NICIL, following through on the forensic audit that was conducted. He said that to date, the public is yet to hear of the results of this audit.
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