Raphael John-Lall

Econ­o­mist Dr An­tho­ny Gon­za­les is call­ing on the Gov­ern­ment to im­pose stiff penal­ties against man­agers at state en­ter­pris­es and at the mu­nic­i­pal cor­po­ra­tions who do not sub­mit au­dit­ed fi­nan­cial state­ments in a time­ly man­ner.

“Strict penal­ties need to be en­forced against those do­ing the au­dits. These penal­ties must ap­ply on a time­ly ba­sis in line with the ac­tions that have to be tak­en over time to get the re­ports out at the de­sired date. Penal­ties must al­so ap­ply to ac­coun­tants and of­fi­cers who have to col­lect and pro­duce the bills, in­voic­es, and oth­er doc­u­ments need­ed to do the au­dit with­in the times­pan,” he told the Busi­ness Guardian.

He gave fur­ther de­tails on how he thinks state man­agers could be pe­nalised.

“De­pend­ing on who is re­spon­si­ble, if it is the au­di­tor him­self/her­self then he/she could be fired. A man­ag­er or board mem­ber could al­so be re­moved or sus­pend­ed. A clerk or ac­coun­tant could al­so be fired. Maybe one would need an au­dit as­sess­ment team to ex­am­ine all in­volved and the process and then rec­om­mend the penal­ty.”

He al­so said, “The over­sight bod­ies suh as the man­age­ment team, the boards, Cor­po­ra­tion Sole, and Par­lia­ment are not too de­mand­ing and do not take the re­quired ac­tion against those re­spon­si­ble for not pro­duc­ing these au­dit­ed re­ports on time. Once they are not done on time, it be­comes hard­er to do them as records, in­voic­es and doc­u­ments get mis­placed.”

Gon­za­les not­ed that an amnesty for state com­pa­nies and mu­nic­i­pal bod­ies to have the time to get their ac­counts in or­der is a good idea.

“I agree that the state com­pa­nies would need some time to get all these fi­nan­cial state­ments in or­der. In this sense an amnesty would be help­ful.”

At a post-Cab­i­net me­dia con­fer­ence at the Red House in Port-of-Spain last Thurs­day, Prime Min­is­ter Kam­la Per­sad-Bisses­sar said the Gov­ern­ment is con­sid­er­ing pro­vid­ing an amnesty for state-con­trolled com­pa­nies and mu­nic­i­pal cor­po­ra­tions that are be­hind in the sub­mis­sions of their au­dit­ed fi­nan­cial state­ments.

She warned these com­pa­nies “to get their house in or­der.”

She al­so said CEPEP had not filed au­dit­ed state­ments for five years but still re­ceived “about half a bil­lion dol­lars.” Per­sad-Bisses­sar point­ed to Caribbean Air­lines (CAL) and CEPEP as ex­am­ples of two such com­pa­nies late to pro­vide their au­dit­ed re­ports.

The Prime Min­is­ter iden­ti­fied the Cou­va/Tabaquite/Tal­paro Re­gion­al Cor­po­ra­tion and the Diego Mar­tin Bor­ough Cor­po­ra­tion as not hav­ing filed fi­nan­cial state­ments for 15 years, while the Tu­na­puna Re­gion­al Cor­po­ra­tion has not pro­duced au­dit­ed state­ments for 12 years.

Un­for­tu­nate­ly, pub­lic com­pa­nies sub­mit­ting tardy fi­nan­cial state­ments are not mere­ly a T&T prob­lem and can be found in the most ad­vanced, in­dus­tri­alised mar­ket economies.

In­de­pen­dent news web­site, Cal­i­for­nia Globe, which re­ports news out of the US state of Cal­i­for­nia, pub­lished an ar­ti­cle dat­ed Sep­tem­ber 23, 2020 on the top­ic of why pub­lic sec­tor bod­ies in the Unit­ed States do not pro­duce fi­nan­cial state­ments in a time­ly man­ner com­pared to their coun­ter­parts in the Amer­i­can pri­vate sec­tor.

The head­line of the ar­ti­cle was: ‘Why can’t gov­ern­ment fi­nan­cial re­port­ing match pri­vate-sec­tor stan­dards?”

In the ar­ti­cle, the au­thor Ed­ward Ring, who is the di­rec­tor of wa­ter and en­er­gy pol­i­cy for the Cal­i­for­nia Pol­i­cy Cen­ter, com­plained that in 2020, the most re­cent con­sol­i­dat­ed an­nu­al fi­nan­cial re­port for Cal­i­for­nia’s state agen­cies was for the fis­cal year end­ed June 30, 2018 which was two years over­due at the time the ar­ti­cle was pub­lished.

He then com­pared this to the Amer­i­can com­pa­nies in the pri­vate sec­tor.

“To put this in per­spec­tive, Amer­i­ca’s pub­licly trad­ed multi­na­tion­al cor­po­ra­tions, with op­er­a­tions spread all over the globe, are re­quired to sub­mit to the IRS de­tailed 10K re­ports with­in 90 days of fil­ing their tax re­turns, which in-turn are due the 15th day of the fourth month fol­low­ing the close of the fis­cal year. This means that Wal­mart, with US$514 bil­lion in rev­enue, or Exxon­Mo­bil, with US$290 bil­lion in rev­enue, along with dozens of oth­er mega cor­po­ra­tions, have at most 195 days, or just over six months, to pull to­geth­er and sub­mit a com­pre­hen­sive fi­nan­cial re­port on their op­er­a­tions.”

Ring added, “We must won­der how things would change if pri­vate sec­tor stan­dards were ap­plied to the state con­troller’s of­fice. How would they cope, if they were told to get their con­sol­i­dat­ed an­nu­al re­ports com­plet­ed in six months in­stead of with­in 15 months, or more? It is a rea­son­able ex­pec­ta­tion.”

Di­verse state com­pa­nies

Chief Ex­ec­u­tive Of­fi­cer of the Arthur Lok Jack Glob­al School of Busi­ness, Mar­i­ano Browne, who has al­so served as min­is­ter in the Min­istry of Fi­nance, un­der a pre­vi­ous Peo­ple’s Na­tion­al Move­ment (PNM) ad­min­is­tra­tion and has ex­pe­ri­ence in the bank­ing sec­tor, told the Busi­ness Guardian that not all state-con­trolled com­pa­nies op­er­ate in the same way and this could ac­count for why some do not pro­duce fi­nan­cial state­ments reg­u­lar­ly, while some oth­ers do.

“Not all state en­ter­pris­es are the same. Not all state en­ter­pris­es have the same re­port­ing de­lays as oth­ers. So, the com­pa­nies that are list­ed as part of Na­tion­al En­ter­pris­es Lim­it­ed (NEL) are sub­ject to re­port­ing dis­ci­plines by the Se­cu­ri­ties and Ex­change Com­mis­sion (SEC) and the Stock Ex­change. The com­pa­nies that fall with­in that time­line will re­port with­in a 90 days of the end of a fi­nan­cial year. That is the dead­line. Those fall un­der pri­vate sec­tor dis­ci­pline in terms of the re­port­ing lines and re­port­ing time. Na­tion­al Gas Com­pa­ny (NGC) typ­i­cal­ly re­ports with pri­vate sec­tor dead­lines. Her­itage Pe­tro­le­um re­ports with­in pri­vate sec­tor dead­lines.

“They fall un­der pri­vate sec­tor dead­lines be­cause they bor­rowed mon­ey, it is not guar­an­teed and they have to bring fi­nan­cial state­ments up-to-date and let every­one know where they are. You will find that those re­ports are avail­able on­line and are avail­able on time.”

He ar­gued that those pub­lic com­pa­nies that re­ly heav­i­ly on tax­pay­ers’ fund­ing tend to be more slop­py when it comes to re­port­ing stan­dards.

“For statu­to­ry com­pa­nies and com­pa­nies fi­nanced by the pub­lic purse like Wa­ter and Sew­er­age Au­thor­i­ty (WASA), they have prob­lems with in­com­plete records. So those that op­er­ate in a com­mer­cial seg­ment of the busi­ness like Na­tion­al Pe­tro­le­um for ex­am­ple, they re­port on time. It is those that op­er­ate on trans­fers from the state or those that are a de­part­ment of a min­istry, those are the ones with re­port­ing is­sues. CAL does not like to pub­lish its fi­nan­cial state­ments as it fig­ures that if the in­for­ma­tion is avail­able for its com­peti­tors, it may not have ac­cess to its com­peti­tors’ in­for­ma­tion in the same way. The com­pa­nies that are sub­ject to state con­trol are the ones that are typ­i­cal­ly late.”

He con­clud­ed by say­ing that the prob­lem goes be­yond state en­ter­pris­es and it is a wider prob­lem of pub­lic sec­tor in­ef­fi­cien­cies.

“It re­quires a hu­man­re­source (HR) fix but that is not the on­ly thing. If we are talk­ing about eco­nom­ic da­ta, the same thing can be said for the Cen­tral Sta­tis­ti­cal Of­fice (CSO), the same thing can be said for the Cen­tral Bank. We want all the num­bers with­in a par­tic­u­lar pe­ri­od of time. It is not sim­ply the state en­ter­pris­es.”

Econ­o­mist Dr Ronald Ramkissoon, in an in­ter­view with the Busi­ness Guardian, ex­plained why state com­pa­nies do not pro­duce their fi­nan­cial state­ments in a time­ly man­ner.

“This hap­pens for sev­er­al rea­sons. First­ly, no one is held ac­count­able for in­ap­pro­pri­ate con­duct of the busi­ness of the par­tic­u­lar en­ter­prise. Sec­ond­ly, lapse in su­per­vi­sion and re­port­ing, notwith­stand­ing the pro­vi­sions of the State En­ter­prise Per­for­mance Man­u­al. Third­ly, poor prop­er gov­er­nance prac­tices. Fourth­ly, un­help­ful po­lit­i­cal in­ter­fer­ence. Fi­nal­ly, in­ad­e­quate re­sourc­ing and on rare oc­ca­sions, gen­uine au­dit­ing/ac­count­ing-re­lat­ed is­sues.”

He al­so said the fail­ure of en­ti­ties to pro­duce time­ly fi­nan­cial re­ports is on­ly one part of the prob­lem and is the man­i­fes­ta­tion of var­i­ous fac­tors.

“This in­cludes the in­abil­i­ty to ad­e­quate­ly con­cep­tu­alise the role and func­tions of state en­ter­prise. Sec­ond­ly the re­fusal to reg­u­lar­ly as­sess which ones are strate­gic, which func­tion can be best left to the pri­vate sec­tor. Third­ly, which ones have out­lived their use­ful­ness and are no longer fit for pur­pose. Fourth­ly, which ones ful­fill a clear so­cial or oth­er pur­pose but need to be far more ef­fi­cient etc.”

Ramkissoon said inat­ten­tion to these con­sid­er­a­tions has led to “mil­lions in loss­es of tax­pay­ers’ dol­lars” over the years.

“This, notwith­stand­ing var­i­ous re­ports over decades which have point­ed to the fail­ures and pos­si­ble so­lu­tions of state-owned en­ter­pris­es. It is my hum­ble view that the new ad­min­is­tra­tion could learn quite a lot from the lessons of the past.”

He al­so agreed that an amnesty would be a good idea for all state bod­ies to bring their ac­counts up to date.

“Yes, per­haps be­cause some lim­it­ed time might be rea­son­able. How­ev­er, set sched­ules must be ex­treme­ly tight.”