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– years of no audited financial statements – opportunities for investment squandered by managementBy Jarryl BryanThe forensic audit conducted into the Sugar Industry Welfare Fund (SILWF) for the period January 2012 to May 2015 has highlighted a number of worrying breaches including millions of dollars missing, neglected investment opportunities and a consistent failure to prepare financial statements.Dissatisfied sugar workers during a recent protest outside one of the Estates.It was noted that these breaches contravene regulations under the Sugar Industries Special Fund Act of 1947.First of all, the report has shown that for the year of 2008, the audit opinion was inadequate, due to the misappropriated amount of $35,128,182.The audit noted that the Criminal Investigation Department (CID) had become involved but could not pursue the investigation, since the original documents “cannot be traced”. In addition, this was compounded by the fact that the officer(s) who dealt with the case has/have since retired.“There was a meeting on this misappropriation between the management of SILWF and representatives of the Ministry of Finance on 07-03-14,” the auditor stated in the report. “This matter is in deadlock due to CID’s inability to close the investigation, which is long overdue.”The report also noted that the Financial Statements for 2009 showed the misappropriated amount as cash at bank, meaning that the bank balance is overstated by the missing amount, in the Statement of Financial Position.“We observed in the Financial Statements for 2009 that this amount was included in the cash/bank balance account and the audit opinion was not qualified as was done in the previous year.”NO AUDITED STATEMENTSWith regard to the lapse in submitting audited statements, the auditor noted that best accounting practices require that SILWF’s Annual Financial Statements be completed within two months (28 February) after the close of the preceding financial year (31 December), and be ready for audit. It made it clear that to do otherwise, breaches the committee’s responsibilities and good governance.“Thereafter, this Committee shall as soon as possible submit such reports and financial statements to the Minister of Social Protection. Regulation 15 (also) requires the accounts of SILWF to be audited each year by the Auditor General (AG).”“(However) no Financial Statements have been produced for audit for the years 2012, 2013 and 2014, as well as an interim to 31 May 2015,” the auditor noted. “Hence this practice contravenes Regulation 11 and it is also a critical breach of good governance and fiduciary responsibilities of the Committee.”The auditor noted that the latest audited Financial Statements were at December 31, 2009. It was acknowledged that management has since completed the 2010 Financial Statements and is awaiting the Committee’s approval, while the 2011 draft Financial Statements have been prepared.In addition, the auditor noted that there is an Annual Report for year 2012 which did not contain audited Financial Statements. With that in mind, the auditor noted that the report was incomplete.CASH BALANCESAnother example of mismanagement cited by the report is the failure of the Finance Secretary to make any investments of the substantial cash balance the fund registered. In fact, it was noted that Billions have just been sitting there, without earning interest.It was highlighted that over the period January 2012 to May, 2015 the Fund had large cash balances held at the Ministry of Finance. In 2012, this balance stood at $1.2B; in 2013, $1.2B; in 2014 $1.1B and up to May 2015, $1.1B.“Under Regulation 13, the Finance Secretary is empowered to invest monies deposited. Hence a portion of cash can be so invested to earn interest income. As an example, monies can be invested in short term securities such as Treasury Bills. Over time, a substantial amount of interest was lost due to the omission.”RECOMMENDATIONSThe auditor recommended that the Committee obtain authorization from the Finance Secretary of the Ministry of Finance (as required by the Act) to write off the misappropriated amount of $35.1M from the records of SILWF. This, it stated, is so that the overstated bank balance would be correct. The auditor also recommended that a note to the 2010 financial statement be included detailing this.The auditor was also clear in noting that management’s failure to prepare the Fund’s Annual Financial Statements for the years 2012 to 2014 on a timely basis is a critical financial breach. It was also noted that this will affect both the Committee and its management, among others, in making important decisions.“Hence, the Annual Reports submitted for the year 2012 was incomplete, due to the absence of audited Financial Statements,” the auditor related. “It is imperative that urgent attention be given to finalizing the respective accounts, and the Annual Financial Statements for the relevant years be prepared, signed by the authorized personnel, and be submitted urgently to the AG for audit.”Its third recommendation is that the committee/management should request and follow up with the Finance Secretary to invest a portion of the Fund’s idle cash to earn income in interest, as provided for under Regulation 13 – Chapter 69:03 of the Sugar Industries Special Funds Act 20 of 1947.The SILWF is controlled and administered by a Committee in accordance with Section 8(2) of the Act. This Committee is required to facilitate disbursements for the benefit and welfare of sugar workers.Such disbursements are for home loans to sugar workers, developing housing areas, and to provide water subsidies. The report noted that from 2014 the water subsidy was $4,000 to each sugar worker.In addition, it could be used for construction/rehabilitation of roads, footpaths, bridges, and bus sheds, etc. in sugar workers’ areas, as approved by the Committee. It is also used to develop community centres, recreational facilities and other infrastructure to better the sugar workers, subject to the approval of the Committee.The audit, which was one of many announced by the Granger-led administration upon coming into office last year, was conducted by Maurice Solomon, to the tune of $4.7M. It is one of several recently released by the Ministry of Finance.