Audit finds company exposed to criminal probes, litigations, penalties
By Asha Javeed (Express).
Spending Spree
Failure by the corporate communications department of the National Gas Company (NGC)to adequately account for how its budget ballooned from $67 million in 2012 to almost $200 million in 2014 has potentially left the management and board “exposed to criminal and integrity probes, litigations, penalties, fines and reputational damage”.
That was the conclusion of an audit conducted into just one department of the country’s most profitable State company in November 2014.
In 2013, NGC recorded a profit after tax of $6.5 billion for its financial year.
The company’s internal audit team for this report, which was obtained by the Sunday Express, included internal audit manager Rabindranath Lakhan, its head, Financial & Compliance Audit Marina Dukhedin-Lalla, senior auditor Wendy Murray-Thomas and auditor Rebecca Procope.
The corporate communications department (CorpCom) is responsible for sponsorships, donations and any community-related activity in which NGC invests.
The audit revealed weak internal controls “resulting in the concealment (deliberate or otherwise) of the true extent of the company’s expenditure, obligations and commitments”, and there was evidence of CorpCom management’s “non-compliance with standard and requisite requirements”.
“No information was provided on the approval for the increase from eight recreational facilities to 23 although budgetary and costs reporting protocols require full disclosure. Such arbitrary and inconsistent management reporting practices distort the outcomes of the company’s analyses of CorpCom’s expenditures; value for money received; and cost behaviours relevant to its planning, budgetary, forecasting activities. Such practices are also indicators of fraud and/or gross negligence,” the audit noted.
Among NGC’s communications expenses were:
1. In 2012, the budget for Economic & Communities was $21.7 million. The budget increased by 114 per cent to $83.6 million in 2014.
2. Donations moved from $2.3 million in 2012 to $9.13 million in 2014, an overall increase of 515 per cent.
3. In 2012 and 2013, the company spent no money on reputation and branding. But by 2014, $20.4 million was spent under the category Reputation and Branding.
4. In 2012, NGC spent $8.4 million in advertisements. By 2014, there was an 80 per cent increase to $20 million.
5. The NGC went from spending $2.4 million in a category External Communication-Gas Facts to $4.5 million in 2014.
6. In 2012 and 2013, there was no category of spending for Corporate Social Responsibility. In 2014, $9.5 million was spent.
7. In 2012 and 2013, there was no category of spending for Environmental & Greening. In 2014, $3.2 million was spent.
“The audit team reviewed similar expenditures from 2012 to 2014”, and it “showed that costs of these projects have escalated by 50-114 per cent,” the report stated.
“Manager CorpCom (Charmaine Mohammed), in response to audit queries, stated that the increases were due to inflation. However, statistical data provided on the Central Bank of Trinidad and Tobago’s website relating to inflation showed an average rate of seven per cent under review. Additionally, some increases were made when other business activities within NGC were required to reduce budgets and actual expenditure in 2013, that is, by memo dated January 11, 2013, staff training and conferences, seminars and workshops reduce by 30 per cent and 25 per cent respectively,” it noted.
“CorpCom’s management has not provided any evidence to substantiate the reasonableness of the costs of community-related projects, monies expended on said projects, nor any evidence that value for money was received,” it noted.
Audit Conclusions
“Audit has concluded that CorpCom’s management of risk may be incomplete (based on lack of detailed information provided to Audit on risk management activities) and may expose the organisation to risks such as corrupt procurement practices, invalid transactions, poor quality works, lack of transparency, false advertisements and disclosures, potential conflict of interests which can result in a breach of public trust,” the audit said.
“CorpCom’s lack of records to support its risk management of community-related projects that are impacted by the Environmental Management Agency (EMA) and the Occupational Safety and Health (OSH) Act, can be viewed as breaches of the legislations, especially as NGC’s published Freedom of Information Act (FOIA) statement indicates that the company maintains these records.”
It added: “If the underlying records to support this declaration are proven to be non-existent then the declaration will be assessed as a false declaration which can result in charges of criminal negligence against management and directors,” the audit warned.
“There is also evidence and/or red flags or materialising risks within CorpCom’s procurement and contracting activities for community related costs. CorpCom’s approved budget 2014 included a list of ten recreational facilities under its Corporate Social Responsibility programme. On review of 2014 June, CorpCom’s Management report showed that works were committed for fifteen (15) and another eight (8.) are under consideration for 2014. Assurance cannot be provided that CorpCom’s activities are compliant or that they create value for monies expended,” the audit said.
The audit also noted that insufficient information was provided by CorpCom to ensure compliance with legal and regulatory requirements as well as NGC’s procurement rules.
“Hence, assurance cannot be provided that the sums allocated within CorpCom’s budget for community-related projects, donations, sponsorships and advertisements were utilised in a manner that resulted in the company receiving value for money (best combination of price and quality, and acceptable time frame),” it said.
“The lack of reliable records and major variations observed between Legal Services and CorpCom’s information on MOUs, contracts and valuations for community projects, are clear indicators that neither the company nor CorpCom’s management has established a formalised process for the execution, assignment of responsibility, monitoring, performance evaluation and reporting of all agreements/MOUs and contracts executed, most of which are valued (more than) TT$2 million. Hence at no time is the company aware of or able to assess the entire population of MOUs and other agreements, their related commitments and obligations (financial and legal/regulatory), be it by a deliberate lack of transparency and disclosure or by management’s negligence,” it said.
Following the submission of the audit for sign-off, the Sunday Express understands that one auditor has since been reassigned to another NGC subsidiary.
Last week, the NGC advertised for two auditors.
All-Inclusive Fetes
Last week, the Sunday Express reported that over $1 million was spent on tickets to all-inclusive fetes by the NGC for Carnival 2015.
The NGC bought 1069 tickets at a cost of $1,073,497.80.
The company spent $352,000 on 220 $1,600 tickets for the South Cancer Support Group, which took place on January 31.
But while 130 tickets were assigned to the Corporate Communications staff, 245 were assigned to the manager of corporate com-munications. (See table above).
The Sunday Express was unable to get a response from Mohammed on why she was assigned that quantum of tickets and who were the recipients of those tickets.
No response from NGC
On February 20, the Sunday Express sent a list of questions to NGC’s vice-president of human and corporate relations, Cassandra Patrovani-Sylvester with regard to the audit.
At that time, Patrovani-Sylvester replied and copied the e-mail to NGC’s president, Indar Maharaj, and committed to providing a response on February 23 because Maharaj was due to travel.
The e-mail said: “I confirm receipt of your email and the questions contained within which have been referred to the president, NGC.
A response will be forthcoming no later than Monday, February 23, 2014, as the president is due to travel.”
However, the Sunday Express did not receive any response to the questions it submitted on the date.
Last Friday, the Sunday Express sent another e-mail and copied manager of corporate communications Charmaine Mohammed, seeking answers to the questions, which were overdue by a week.
Patrovani-Sylvester responded by sending the e-mail again to Mohammed, with the note:
“Charmaine, good morning.
Ms Javeed’s e-mail is self-explanatory.
I gave a commitment following conversation with the president for a response by Monday, 23 February, 2015.
Your attention to this matter would be appreciated.”
However, the Sunday Express received up to yesterday.
Telephone calls and text messages were also sent to Mohammed seeking a response.