Lead Editor Investigative Desk
Financial mismanagement, an abysmal financial performance, misappropriation of funds, financial irregularities, and glaring non-compliance were uncovered in an Ernst and Young (EY) audit report conducted by Ernst and Young (EY) on Pan Trinbago’s operations over five years.
The “private and confidential” report was handed over to the Ministry of Community Development and the Arts in April 2018 and has been hidden in plain sight on the Parliament website for almost a year. It came up for discussion at Pan Trinbago’s Annual General Meeting on November 3 but according to several members, but was shot down by president Beverly Ramsey-Moore. However, she has denied that claim.
The audit paints a gloomy picture about Pan Trinbago’s financial activities during the five years, while external auditors Panel Kerr Foster (PKF) said there was “significant doubt on the association’s ability to continue as a going concern.”
The timeframe covered in the EY report was 2013 to 2017 during the tenure of former president Keith Diaz. He and key members of the Pan Trinbago executive, which included then Finance Manager Anthony Mc Quilkin, Manager of Administration Richard Forteau, Chief Administrative Officer Helen Scanterbury-James, Treasurer Andrew Salvador, Assistant Office Manager Melville Bryan, Accounting Assistant Diane De Curuew-Ridley and Accounts Clerk Tasha Jeremie, all held discussions with EY as they attempted to “obtain an overall understanding of Pan Trinbago’s major operational and administrative processes.”
EY also spoke with officials from KPF, Mark Superville and Camille Providence, as well as from Daniel Lambert, CEO of FCL Financial Limited, and employee Tammie Babb.
EY noted that the “association’s net current assets were negative for the entire period of review, with net current assets falling to negative $18.8 m by the end of 2017.”
Those figures did not include additional liabilities of $9.1 m owed by International Conference and Panorama (ICP), a wholly owned subsidiary of Pan Trinbago. Had that been included, by the end of 2017 the steelband body’s debt could have increased to $27.9 m.
Key findings in the audit included unexplained payments to Central Executive Committee (CEC) members. Between 2013 and 2017, 15 of them collected $13.4m in emoluments although Pan Trinbago was consistently in the red and dire need of funds.
Diaz collected some $2.25m, while Forteau was paid $1.68m, Mc Quilkin $1.54m and former vice president Bryon Serrette $1.44m and trustee Allan Augustus just over $1m. Other CEC members received sums in the vicinity of $210,485- $996,330.
EY’s investigations found that Pan Trinbago’s constitution did not provide guidance on compensation package for CEC members.
Article 7 Part B of the constitution states: “No elected position to the CEC shall be compensated by way of salary. However, the CEC shall have the power to determine the sum of a stipend and/or allowance to be paid to its members for the reimbursement of reasonable authorized financial expenditure incurred on behalf of the associates.”
The EY report stated: “Based on our review of the CEC meeting minutes provided for the period November 2012- July 2016, there was no evidence to suggest that the monthly stipends/allowances for the CEC members were discussed and agreed.”
The firm said it was unable to “confirm if the amounts paid to its members during the period of review were formally approved by the CEC.”
This lack of documentation made it difficult to track down particular payments. A review of General Ledger Account #60116 indicated an increase in the monthly allowance paid to CEC members from March 2015 but “no supporting documents were provided for review.”
Apart from the stipend, CEC members were also part of the management team and received salaries, contract fees, honoraria, employee bonuses, overtime salaries, subsistence and travelling allowances, gratuity and leave entitlement in lieu.
It was found that these perks contributed “most to the total administrative and general expenses” of the already cash strapped association.
“We noted that “salaries and staff benefits” had the highest contribution (average 37 per cent) to the administrative and general expenses each year followed by “honoraria and bonus”(average 9 per cent), “stipends, subsistence and travelling”(average 7 per cent) and finally “legal and professional fees (average 6 per cent),” the report stated.
There was uncertainty over salaries and staff benefits, and EY said”they were unable to confirm whether the increases each year were due to an increase in the number of employees or due to an increase in wages, as we were not provided with the relevant employee information over the period.”
The audit also highlighted questionable payments of honoraria to CEC members amounting to over $2.3m. They could find any paper trail to properly justify these payments and “there was no evidence to suggest that any of the payments were discussed and approved by the CEC.”
Diaz received some $351,500 in honorarium payments, Forteau $303,833, Serrette $298,833, Mc Quilkin $258,833, Allan Augustus TT$252,000, while the others received between $30,000- $236,667.
Statutory payments not made
Pan Trinbago’s failure to pay more than $1m to relevant statutory bodies promptly was also another key finding. The outstanding payments were: PAYE $1,055,689, Health Surcharge $75,310 and NIS $68,392. At the end of 2017 total outstanding amount stood at $1.1m.
EY warned: “Failure to accurately deduct and remit the correct amount of PAYE, NIS and Health Surcharge to the relevant statutory body can result in significant fines and penalties to Pan Trinbago for breaches of the National Insurance and Income Tax Acts. In addition, in the event of an incident, persons may not be able to claim their benefits from NIS, since the payments were not remitted by Pan Trinbago.”
To address some of these issues, EY recommended proper documentation in the CEC meetings, outlining proper contracts for members on compensation, allowance, etc, as well as ensuring all income allowances earned by employers are accurately recorded and the required statutory deductions calculated, deducted and remitted to the relevant institutions.
Concerns were also raised bout the lack of regular financial monitoring. According to the report, grants received from the Ministry of Community Development and the Arts were “ significantly less than what was requested by Pan Trinbago each year; however, there was no evidence to suggest that a revised budget was prepared to adjust the shortfalls received.”
This created further problems as “ cash flow forecasts and other cash flow reports are not done to inform management’s decision making and to track and monitor the usage of availability of funds. This is critical given the persistent and severe solvency/going concern issues raised by the auditors.”
Periodic financial reports needed to compare actual to budgeted costs were not produced or reviewed and events were held without confirmation of adequate funding from Government or sponsorship from the private sector. EY said this triggered disastrous results for Pan Trinbago as the organisation “incurred liabilities which may have contributed to their current financial position.”
Three major loss-making events werePan is Beautiful, which incurred losses of $3.5m, Champs in Steel with losses of $1.3m and Pan Trinbago Street Festival with losses of $1.2m, adding up to more than $6m in losses.
This was further compounded by increased expenditure on events such as the Panorama “Greens” and the ICP, combined with a decline in grants and ticket sales. Pan Trinbago ended in a deficit position in 2016 and 2017.
The association’s unconsolidated financial position between 2013 and 2017 showed a consistent dip, with liabilities and member’s equity increasing from $12.2m in 2013 to $23.3m in 2016 and $30.3m in 2017.
According to EY, the following issues may have had a deleterious effect on Pan Trinbago:
° Due to increases in bank overdrafts, loans, and amounts payable concerning events held, liabilities increased by $20,232,123 between 2015 and 2016, resulting in an overall negative members’ equity position of $7,877,757.
° As the association does not produce unconsolidated financial statements, the above liabilities do not include amounts payable of $9.1m to the ICP, which the association is ultimately responsible for and may be liable to pay in the future.
° The increase in fixed assets between 2016-2017 of $ 13.6m is largely as a result of a land re-valuation surplus of $13.7m, which has resulted in members’ equity figure returning to a positive balance of $ 1.9m thereby allowing the association to appear in a favourable position.
Tomorrow: Questions over hefty payments to FCL Financial Ltd