Mismanagement of funds, lack of financial transparency, lack of proper tendering processes, conflict of interest and policy breaches have been unearthed in the 2018 Ernst and Young (EY) final audit on the The Trinbago Unified Calypsonians' Organisation (TUCO).
The organisation receives millions of taxpayers dollars annually.
The audit spanned three years—between 2013-2016—and the final report was completed in April 2018 and submitted to the Ministry of Community Development, Culture and Arts (MCDCA) and Minister Dr Nyan Gadsby Dolly. According to the Hansard of June 22, 2018, the audits were not only done for TUCO but also Pan Trinbago and the National Carnival Bandleaders Association (NCBA).
While the minister outlined general concerns raised in relation to the three special interest Carnival groups that the audits covered, the specifics of the TUCO audit report had not been revealed in detail.
At the annual reading of the national Budget in October, funds are allocated to the National Carnival Commission (NCC) which then disburses amounts to the special interest entities including TUCO.
TUCO typically receives the money in three tranches. The first tranche is usually disbursed between October and December, the second in January, and the third between February and March.
Between the period 2013-2015, TUCO received $41.6 m. While TUCO's budget was $7.7 m in 2016, EY stated in its report that it did not see the subvention received.
As shown in the table, over the period 2013-2016, the funding requested by TUCO was approximately TT$5.2 m to TT $22.1 m higher than the subventions provided by NCC.
Year Budget Subvention Difference
2013 TT $17.4m TT$12.2m TT $5.2m
2014 TT$38.2m TT$16.1m TT$22.1m
2015 TT $27.7m TT$13.3m TT $14.4m
2016 TT$7.7m Not seen Not seen
•The EY report raised issues about president of TUCO Lutalo Masimba paying himself through a publishing company he owns and a questionable million-dollar payment to a then NCC board member whose company was contracted to do the project without any proper tendering process.
EY indicated that a sum of $84,000 had been paid to Masimba Publishing between the period 2013-2014. EY noted that the company which publishes posters, postcards, magazines, books, and music, is owned by the TUCO president.
The payment, EY noted, stated—"Payment on cash commissions 2013." They added, "That for part payment of TT$20K, Mr Lutalo Masimba approved this payment which is a concern related to segregation of duties."
The segregation of duties is the assignment of various steps in a process to different people. The intent behind doing so is to eliminate instances in which someone could engage in theft or other fraudulent activities by having an excessive amount of control over a process. In essence, the following three general functions in a process should be split among different people.
However, in this instance, EY stated, that principle was not followed. Masimba reportedly signed off on payment for himself.
EY stated in the audit report, "On April 4, 2018, we were informed by the assistant treasurer that although the payments were made to Masimba Publishing, they were not related to publishing services. The payments were in relation to cash sponsorship commissions (20 per cent of which general council members were entitled to claim an invoice from Masimba Publishing was also provided). The rationale for passing these payments through Masimba Publishing was not disclosed."
During a sitdown interview at the Queen's Park Savannah last Monday with the TUCO president, Masimba insisted that he saw nothing wrong with the arrangement. "I was asked to do so. The money is mine, that is my commission that I worked for."
Asked if he did not see anything wrong with signing off on payments for himself,
Masimba shot back, "So how they should pay me for my commission? I bought in the money for sponsorship into the organisation."
• Masimba washed his hands of another arrangement that EY pointed out as a conflict of interest—a $1.25 m payment to Waterwheel Studios Limited in 2015. This company was owned by Vaughn Noreiga, a former member of the board of the National Carnival Commission (NCC).
According to TUCO's Finance Committee meeting minutes on June 26, 2015, Masimba stated that then culture minister Lincoln Douglas had some proposed projects and funding for one of the projects based on the history of calypso and dedicated to Lord Kitchener, which would be channelled through TUCO's summer camp for the youths. The president stated that Noreiga was spearheading this project.
In that same meeting, Shirlane Hendrickson, the assistant general secretary, said as an executive member she was disappointed that she was not informed about the development of the project.
In quotes from the minutes of the meeting contained in the audit report, Hendrickson stated that some weeks before, she had been called by Maria Legall, the accounts assistant, to sign some cheques. As one of the signatories, Hendrickson said "she was quite surprised that she was allowed to sign the cheque made out to Waterworks in the amount of $1.25 m. She stated that she had never signed a cheque for this large amount and even asked Ms Legall if she could really sign this cheque. And Legall confirmed that she could, so she proceeded to sign the cheque. She informed that some days later Mr Johnson, the assistant treasurer informed that the cheque was on hold since corresponding information was being investigated."
EY said based on their review, "we noted that Waterwheel Studios Limited was incorporated on 21 April 2015 and the owner listed as Mr Vaughan Noriega (NCC board member). Furthermore, a cash payment voucher in the amount of $1.25 m was prepared and approved by TUCO eight days later on 29 April 2015.
"The cheque for TT$1.25 m to Waterwheel Studios Limited was dated 11 June 2015 and was cashed in the FCB current account on 18 June 2015. As such, it appears that Waterwheel Studios Limited was created specifically for this project, by the person who was charged with spearheading the youth camp."
EY's report stated that "based on the delegation of authority, Ms Hendrickson does not have the authority to sign cheques of this value. We requested the cashed cheque to verify the signatories, however, this was not provided up to the date of this report."
When questioned about this arrangement, Masimba said, "My mission was not to explore Waterwheel or anything but carry out the instructions of the minister." Asked if he did not see anything wrong with acting on a directive that would benefit a then NCC board member, he insisted he was following the minister's instructions.
The letter outlining this request, and which formed part of the report, was signed off by the then minister, Douglas.
Douglas: I can see how people would see it as a conflict of interest
When Douglas was contacted by phone last Wednesday and asked if he felt it was a conflict of interest granting this job to an NCC member, he would only say, "I can see how people would see it as a conflict of interest."
Pressed further, Douglas said he would not make any further comment.
To prevent this from occuring in the future, EY stated that "all potential conflicts of interest must be identified and disclosed."
EY added, "A code of conduct inclusive of a conflict of interest policy must be developed to guide members on proper disclosure of conflicts of interest and the appropriate course of action taken."
Noreiga: It's disheartening and unfortunate
When Sunday Guardian contacted Noreiga about the contents of the report, he said, "It is disheartening and unfortunate that a successful project has to have this kind of labelling. This project was all over the radio and media with these children. How could something so good be put under such scrutiny? I don't see this as a conflict of interest."
Noreiga also defended the inference made in the report that Waterwheel Studios was set up specifically for this particular project.
"Waterwheel has been in existence for quite some time. We have a website and we can be found on Facebook. We do a lot of back end production for Carnival and other events. The company was not formed solely for that reason," said Noreiga.
•The EY report also raised questions about the vacation leave payout granted to Masimba.
They questioned a cheque payment made out via a voucher on January 5, 2016, to the president for the sum of $135,750 in lieu of ten years vacation. The salary memo attached to the payment was approved by Treasurer Denis Cox, which indicated in a document attached to the report that Masimba had not taken vacation from the years 2006-2015.
They noted that he was entitled to six weeks or 45 days vacation leave per year—multiplied by ten years, it totalled 450 days.
The EY report stated that "this is 25 days greater than the maximum vacation allowance for TUCO's employees, however vacation entitlements for the members of the general council are not formally documented within the constitution or by-laws. In terms of formal approvals, we also noted that the 15 November 2013 Finance Committee minutes stated: 'A compensation package would also be considered for Mr Lutalo Masimba in lieu of vacation leave.' ''
EY noted that they "were not provided with any general council minutes/approval in relation to the 45-day annual vacation allowance of the specific $135,750 payment made in January 2016, and as such cannot confirm that general council's approval of this entitlement."
When the Sunday Guardian brought the vacation leave matter up with Masimba, he said "that is misinformation."
Masimba insisted that he had submitted all documentation to EY and felt that he should have been privy to the final report.
EY, in the introduction of its audit report, noted they were hired by the MCDCA to do this audit and its contents were to be made available to MCDCA.
"After whatever they say there, all these points that were raised there, we had documentation because we met with Ernst and Young," Masimba said.
Masimba challenged the final audit report, insisting that a lot of what was contained in the 42-page report was "erroneous."
•The EY report also stated that certain documents including finance reports and working papers presented in finance committee meetings could not be located for review.
They noted that the internal control environment at TUCO was "weak, with limited oversight, monitoring or accountability."
Some of EY's key findings were that "accounts are not consistently or accurately monitored, which increases the potential risk of misappropriation of funds and significant financial losses."
Another key finding was that "outside of annual audits, key accounts, and receipt of revenue are not properly checked and reconciled. EY was unable to verify all the amounts received into TUCO's bank accounts. There appears to be limited documentation to support expenditure."
EY found that there were "bank accounts in use, but payments were made inconsistently from these accounts." They observed that "the cash receipt process is not being consistently followed, 82 per cent of our revenue transactions sample which totalled TT $6.7 m, could not be located within the receipt books provided. Additionally, 42 per cent of the total sample, amounting to TT $ 2m, had neither receipt nor deposit book entries."
•They also found that the tendering process was wanting and found that "TUCO engaged in individual purchases over $100 K, totalling TT$3.1 m, from vendors who appeared to be solely selected."
The TUCO president said that the organisation had developed relationships with certain key vendors and that these vendors may be sole-sourced at the council's discretion.
With regard to the staging of major events such as Calypso Fiesta, Kaiso Karavan, Extempo competition to name a few, EY found several serious financial discrepancies.
They said "it is uncertain as to whether the cash was used for other immediate cash expenses or if it was deposited with other sums of cash and therefore entered into QuickBooks as a bulk deposit or potentially misappropriated. We also noted that large deposits were divided into multiple batches to avoid filling out Source of Funds forms."
When asked about this, an upset Masimba said, "If they say they did not see evidence and I provide them with evidence...after I provided them with evidence and they come back in the document and say they did not see evidence, then something is wrong with that."
Masimba even asked that the interview be discontinue as he"did not appreciate the road what we were going down."
•Pressed by the Sunday Guardian about the $5 m loan facility they secured from First Line Securities, Masimba said they used the sum to take care of "Carnival production and from the receipts of that we put in an investment fund."
According to the EY report, the $5 m loan was paid back by the NCC. In January 2018 TUCO said they would repay the sum to the NCC over a four-year period.
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Peters: NCC will control how money is spent
Chairman of the NCC Winston "Gypsy' Peters said on Thursday during an interview, "We did pay off the facility for TUCO because, as you know, they always find themselves in problems. We did pay it for them and because we had a shortfall in our subvention we gave them a shortfall and although they were to start paying us back in 2018, we thought it would be unconscionable seeing that we got a shortfall and they got a shortfall from us. So we are starting to take back the money from this year."
Peters said he had not been privy to the TUCO report, but based on what he knew, the NCC had taken a stand in terms of all the special interest Carnival groups to ensure better financial accountability.
"We have a MOE with all interest groups, the ones we give money from the coffers of the NCC we have a MOE with them that state we control the finances. We going to give it to you, but we have control over it in terms of how it is spent and we are sticking to that," Peters said.
"There is always a struggle. There has been a problem for a long time, this subvention agreement that the Government had with these groups was for only three years. After three years the Government was supposed to cut everything loose and not do that at all, but over the years it has gone into millions and then tens of millions until it is where it is today. So we now have to take control of this and see how best we can bring it back."
Sunday Guardian sent messages to Minister of Community Development, Culture and the Arts Dr Nyan Gadsby-Dolly asking if the ministry had recommended any action based on the 2018 audit reports for the Carnival special interest groups and also if she had any concerns surrounding the serious issues raised in the TUCO audit report that included mismanagement of funds,
The minister did not respond to the WhatsApp messages, although the messages were read.