Raphael John-Lall

For­mer chair­man of the (CC­GI) and at­tor­ney-at-law, Ron­nie Bisses­sar, be­lieves that too many state en­ter­pris­es have au­dit back­logs that go back for as many as 15 years.

Bisses­sar spoke at a vir­tu­al fo­rum en­ti­tled “Au­dit­ed Ac­counts for State En­ter­pris­es” host­ed by the Caribbean Cor­po­rate Gov­er­nance In­sti­tute last Wednes­day.

He re­ferred to sta­tis­tics from re­search done over the last few weeks by the CC­GI’s cur­rent chair­man Nigel Ro­mano on pub­lic com­pa­nies in T&T and Ja­maica and which com­pa­nies have up­dat­ed fi­nan­cial state­ments and which do not.

“In fact, we had the ben­e­fit of Nigel Ro­mano’s ex­cel­lent re­search just pri­or to com­ing on, deal­ing with this where he found that ap­prox­i­mate­ly 40 to 50 per cent of these lo­cal 47 state en­ter­pris­es have au­dit back­logs rang­ing from three to 15 years. So, we im­me­di­ate­ly see a breach or de­fi­ance of the di­rec­tive from gov­ern­ment for au­dit­ed fi­nan­cial state­ments on a time­ly ba­sis,” Bisses­sar said.

He said state com­pa­nies in T&T’s crit­i­cal en­er­gy sec­tor have been the most ef­fi­cient.

“If we dis­till the da­ta, it shows that state en­ter­pris­es in the en­er­gy sec­tor scored high­est with Her­itage pro­vid­ing au­dit­ed state­ments up un­til 2024, Paria 2022 and 2023 and the Na­tion­al Gas Com­pa­ny (NGC) up to 2021. It al­so shows that mu­nic­i­pal cor­po­ra­tions were the worst of­fend­ers, some hav­ing be­tween 12 to 15 years of back­logs. The To­ba­go House of As­sem­bly (THA) last sub­mit­ted in 2022, but the Au­di­tor Gen­er­al not­ed dis­crep­an­cies in cash bal­ances,” sad Bisses­sar

He re­ferred to oth­er promi­nent state-owned com­pa­nies like Caribbean Air­lines (CAL) and the Com­mu­ni­ty-Based En­vi­ron­men­tal Pro­tec­tion and En­hance­ment Pro­gramme (CEPEP), which have fall­en short in terms of fil­ing of fi­nan­cial state­ments in a time­ly man­ner.

“Caribbean Air­lines, which we know is a re­gion­al air­line, re­ceived a tongue lash­ing from the Prime Min­is­ter, the new Prime Min­is­ter, to get its house in or­der. Its last au­dit­ed fi­nan­cial state­ment was, I be­lieve, in 2016. But even so, it re­ceived a qual­i­fied opin­ion from KP­MG. And CEPEP, the oth­er state en­ter­prise that I re­ferred to, its most re­cent au­dit­ed state­ment was in 2017, I be­lieve. And for three pre­vi­ous years, it re­ceived dis­claimers from the au­di­tor gen­er­al. The Prime Min­is­ter has gone on record in say­ing that CEPEP has not filed au­dit­ed state­ments for five years while re­ceiv­ing about half a bil­lion dol­lars from the trea­sury.”

Based on these ex­am­ples, Bisses­sar said it ap­pears that the new gov­ern­ment, which has been in pow­er now for sev­en months, has sig­nalled a dis­tinct change in pol­i­cy by which state en­ter­pris­es are more ag­gres­sive­ly re­quired to demon­strate fi­nan­cial ac­count­abil­i­ty through au­dit­ed fi­nan­cial state­ments to be re­viewed by par­lia­ment through the var­i­ous se­lect com­mit­tees.

He ar­gued that an­oth­er in­di­ca­tor of this change of pol­i­cy is the re­cent an­nounce­ment of large, high-val­ue cap­i­tal projects in­clud­ing the re­ju­ve­na­tion of Port-of-Spain and San Fer­nan­do wa­ter­fronts and the con­ver­sion of the Fred­er­ick Street and Car­rera pris­ons in­to rev­enue rais­ing ameni­ties.

“In my view, that sig­nals a shift to us­ing pub­lic pri­vate part­ner­ships as a means of en­hanc­ing cap­i­tal stock while us­ing pri­vate sec­tor ini­tia­tives to in­crease com­pet­i­tive­ness, ef­fi­cien­cy, and in­no­va­tion. And it may be that this marks the start of a gov­ern­ment-led process that will lead, if fol­lowed through, to the di­vest­ment of some state en­ter­pris­es through pub­lic of­fer­ings and which of course we know re­quires time­ly and up­dat­ed au­dits.”

He al­so spoke about the re­cent state­ment from cen­tral gov­ern­ment that there will be an amnesty for cer­tain en­ti­ties, in­clud­ing state en­ter­pris­es, to reg­u­larise their ac­counts.

“This does re­quire, in my view, in or­der to be ef­fec­tive that sig­nif­i­cant im­prove­ments be made in­house in the var­i­ous state en­ter­pris­es to im­prove au­dit ca­pac­i­ty. Hav­ing said that, it is note­wor­thy that while di­rec­tors of most pri­vate and pub­lic com­pa­nies un­der­score the bot­tom line and there­fore en­hance div­i­dends as the prin­ci­pal in­di­ca­tor of pri­vate sec­tor suc­cess, state en­ter­pris­es op­er­ate un­der a dif­fer­ent for­mu­la.”

It is in that con­text, he spoke about com­pet­ing vi­sions of how these types of com­pa­nies should be man­aged.

“One pop­u­lar view is that all state en­ter­pris­es ir­re­spec­tive of their busi­ness or the ser­vices they pro­vide, should be well run and prof­itable with ap­pro­pri­ate lev­els of ac­count­abil­i­ty, as demon­strat­ed by up­dat­ed fi­nan­cial state­ments, which are of course re­viewed by Par­lia­ment through the var­i­ous se­lect com­mit­tees. And by this ar­gu­ment, ac­count­abil­i­ty is board-led and board-dri­ven.”

He then gave the op­pos­ing view where at least some state en­ter­pris­es ought not to be eval­u­at­ed like pri­vate com­pa­nies where the bot­tom line is re­gard­ed as the prin­ci­pal in­di­ca­tor of how well run it is.

“This is on the foot­ing that many state en­ter­pris­es pro­vide heav­i­ly sub­sidised wel­fare and pub­lic ser­vices where prof­it is not the prin­ci­pal mo­tive. So, we im­me­di­ate­ly see a com­pet­ing view. It fol­lows, there­fore, that in dis­cern­ing which view should pre­vail, we must take our sound­ings from cen­tral gov­ern­ment.”

Ac­count­abil­i­ty

Ja­maican at­tor­ney-at-law and a di­rec­tor at the CC­GI Camille Facey, who al­so took part in the we­bi­nar, shared her ex­pe­ri­ence at a Ja­maican state-run com­pa­ny, Na­tion­al Sol­id Waste Man­age­ment Au­thor­i­ty (NSWMA) which she helped turn­around. That com­pa­ny went many years with­out sub­mit­ting au­dit­ed fi­nan­cial state­ments un­til she be­came a board mem­ber in 2015.

She said the com­pa­ny had be­come no­to­ri­ous for be­ing “very cor­rupt.”

The NSWMA’s fi­nan­cial state­ments were out­stand­ing for nine years, she said, not­ing that no com­pa­ny can be ef­fec­tive­ly man­aged with fi­nan­cial state­ments out­stand­ing for that amount of time.

To over­come that sit­u­a­tion, the board of which she was a mem­ber took strong mea­sures.

When the NSWMA man­age­ment made the ex­cuse that all the fi­nan­cial records were de­stroyed in a fire and they could not pro­duce them, her board went to the bank that dealt with the com­pa­ny and was able to piece in­for­ma­tion to­geth­er to un­der­stand and re­build its fi­nan­cial his­to­ry.

“The board has to un­der­stand its role be­cause…you can­not give fi­nan­cial over­sight if you don’t have fi­nan­cial state­ments. There were laws by which we had to com­ply. The board has to be trained. The board has to es­tab­lish clear ob­jec­tives and or­gan­i­sa­tion­al stan­dards.”

An­oth­er im­por­tant func­tion of any board, she said, is to ap­point a CEO and hold him or her ac­count­able and the CEO then pass­es this man­date on through­out the or­gan­i­sa­tion.

She said there are the laws in Ja­maica that guide how state-owned com­pa­nies should be man­aged but the next step is how these laws should be im­ple­ment­ed.

“What we are do­ing at the Pri­vate Sec­tor Or­gan­i­sa­tion (PSOJ) in con­junc­tion with Ja­maican Ac­count­abil­i­ty Me­ter Por­tal (JAMP) is we have de­vel­oped a tool where we have mea­sured the ac­count­abil­i­ty of those 146 pub­lic bod­ies that we have with the laws. One of the mea­sure­ments we are us­ing is ac­counts filed in Par­lia­ment. With­in two months of get­ting those ac­counts, the min­istries should be fil­ing them in Par­lia­ment. The pur­pose is to re­port to the cit­i­zens how you have spent their mon­ey.”

Fi­nal­ly, she made it clear that if man­age­ment is se­ri­ous about turn­ing around a com­pa­ny’s fi­nan­cial sta­tus, there must be no ex­cus­es even in light of Hur­ri­cane Melis­sa which re­cent­ly hit Ja­maica.

“The dis­as­ter and Melis­sa must not de­rail gov­er­nance. In fact, we must re­ly on gov­er­nance. If you don’t hold fast to your gov­er­nance struc­tures, you will end up in chaos.”