By Ariana Gordon

A FORENSIC audit of the operations of the Guyana Oil Company (GuyOil) done by Nigel Hinds Financial Services for the period November 1, 2011 to May 31, 2015 has shown that GuyOil General Manager Badri Persaud failed to disclose his close relationship to persons who had been granted contracts.The audit recommended that Persaud be “disciplined for non-disclosure of conflicts of interest” for awarding contracts to his brother and a nephew; and for abusing his authority and breaching

the procurement policy. Persaud was fired at the end of February this year.

It was discovered that, over the period of review, Persaud awarded transportation contracts worth $62M to his brother Indarjeet Persaud, and a construction contract valued at $860,000 to his nephew Avinash Persaud.

The audit found that apart from the initial sole-sourcing contract to Indarjeet Persaud, there were no subsequent contracts issued between GuyOil and Indarjeet Persaud, but he continued to provide services beyond the stipulated contractual period without any written agreement to so do.

Another side of the charge of conflict of interest was highlighted when Badri Persaud decided to become a candidate on the People’s Progressive Party Civic’s (PPP/C) national list for the May 11, 2015 General elections.

“Adherence to the decisions of a political party concurrent with managing a state-owned corporation creates conflict of interest issues that have negative implications for employee morale, use of (GuyOil) resources and the image of (GuyOil),” the audit report stated.

It was found that the more-than 30 dealers attached to the company were “poorly managed”, and more often than not, the company had no record of Identification Cards (ID), Tax Payer Identification Number (TIN), Transport, Lease, Tenancy Agreement, or relevant Guyana Energy Agency (GEA) licences and insurance coverage for those dealers.

Additionally, the forensic auditor found that Article VI of the contracts between GuyOil and the dealers was breached to the extent that some dealers received fuel on credit without a bank guarantee or security bond.

Also, “major irregularities” in the charge system used for fuel sales to customers were found.
“A 10% sample of 758 charge customers was conducted, and our findings revealed that over fifty percent were irreconcilable and improperly managed.”

The report found that a credit limit of $5,000,000 was granted to Mohamed Bacchus to buy fuel from GuyOil, but no bank guarantee was provided by Bacchus. Bacchus is the brother-in-law of Leonard Khan, who served as the manager of the Castrol Brand. Khan had signed as guarantor, stating that there would be “non-default” by his brother-in-law.

“Mr. Badrie Persaud, MD, breached the Board Sub-Finance and Audit Committee decision dated February 18th 2008 on requirements for a bank guarantee by approving a credit limit of $5,000,000 on 09.17.2013 to Mr. Mohamed Fawaaz Bacchus, who is the brother-in-law of Mr. Leonard Khan – GASI Manager (Formerly GOCL Castrol Brands Manager).”

The auditor recommended that Bacchus’s credit limit of $5,000,000 be cancelled immediately.

There was no documented policy for the granting of credit purchases for customers, including wholesale, duty free, employees and government agencies.
It was also noted that prepaid customers were monitored manually in ledgers at respective locations, instead of using the company’s accounting system – ACCPAC.

“The risk here is that an existing prepaid customer may have exhausted his payment and then fuel is delivered without payments being made,” the audit report stated.

It was discovered that there was a breakdown of internal control systems of credit sale of fuel and lubes by the service stations, which resulted in unapproved credit sales.

An attempt by the Forensic Audit to reconcile a sample of 77 of 758 credit customers proved difficult, since 54,458 transactions did not reconcile with the approved vehicles in the customers’ files.

Contributing to the differences seen were “cashiers entering inadequate information” regarding full vehicle registration numbers on charge bills; delivery to customers by attendants at service stations was done using the Customer’s Purchase Order, which was submitted without checking the Management Memorandum detailing approved vehicle(s) for credit customers; and submission of statement of accounts for payment to National Sports Commission for vehicles not approved by GUyOil, such as vehicles PRR 1219, PRR 9222, PSS 2332, PLL 1734.

It was found that substantial numbers of local and overseas suppliers were not pre-qualified; the selection of suppliers was not supported by documentation evaluation.

Three modules related to the procurement of goods, services and construction were purchased at a cost of 10.5 million dollars over the period March 2013 to March 2015, but these modules were never used by the company.

It was also found that the tender process was “often abused, as contracts were awarded based on single-sourcing.” This was evident when purchases exceeding $60M were made by Manesh Seeram, an Information Technology supplier to Guyoil.

“Purchases were frequently singled sourced from Powercompu, breaching the Tender Board requirements.
Powercompu is owned by contractor Mr. Manesh Seeram, who is also (GuyOil’s) accounting local solutions provider from ACCPAC.
The procuring was handled by the IT Control Officer, Network Administrator, Finance Manager, Managing Director. Payments to date at 08.07.2015 for Mr. Manesh Seeram are $90,854,911.”

The Guyana Oil Company does not have a credit card facility, and in order to obtain goods from overseas, sums of money for purchases on behalf of GuyOil were transferred to the account of Mr. Azaad Hassan, IT Network Administrator, the report said.

“This allows Mr. Hassan to benefit directly from using his credit card on behalf of GOCL, through concessions and interest savings.”
The auditor recommended that the use of Hassan’s card be discontinued immediately, noting that such practice exposes the company to self-enrichment schemes. “It is a poor financial decision, and should be discontinued immediately.”

That aside, the failure of GuyOil to establish a corporate debit or credit card facility, inherent weaknesses in this method of purchasing unnecessarily expose the corporation to opportunities for fraud by insiders, the report stated.

Aviation Refuelling Insurance of 13.6 million dollars was paid to Marsh NST Limited without any bidding process. The money was paid on behalf of Guyana Aviation Services Inc., a subsidiary of GOCL. $4.8M were paid to Panorama Media Ltd on May 26, 2014 based on a handwritten invoice from Panorama. The payment was for the placement in the Miami Herald of an article captioned: Guyana Panorama “A Land of Opportunities”, the audit stated.

Some $94.5M were used for the purchasing of fuel from Deodat Dhanrajh during the review period. Dhanrajh has been described as a “major fuel transportation contractor” for GuyOil. It was noted that established fuel suppliers like Rubis and SOL Guyana Inc. were bypassed in the process. The amount paid to Dhanrajh could have been less had the fuel been purchased from an established supplier.

Without bidding or signing a contract, Dhanrajh was also paid $199.8M for the shipment of fuel during the period in review. The report said that on 05.04.2015, GuyOil purchased from Rubis 238,481 litres for $47,457,719 subsequent to the purchase of fuel from Deodat Dhanrajh on 05.06.2015 at the same price.

“Indicating the staggering splitting of a full order to facilitate ordering from Mr. Deodat Dhanrajh, the fuel could have been sourced at a lower negotiated price based on the volume of purchases from Rubis.
(GuyOil) wholesale price in effect at the time was $172.30 effective 03.05.2015 and was subsequently changed to $198 on 06.05.2015,” the report stated.

Additionally, no documented policy for changes in the fuel prices at GuyOil was found, and the absence of such a policy requires immediate corrective measures due to the national implication of such a decision, according to the auditor.

An examination of the records of Guyoil indicated that there were several instances of duty-free customers being charged higher rates than GuyOil’s published duty-free charge.

GuyOil’s profit before taxation was seemingly understated by $340 Million in 2011, and by $532 Million in 2013. Efforts by the auditor to have Finance Manager Hans Manohar explain the seeming discrepancy were unsuccessful.

Fuel valued at $31 Million was loaned to Guyana Power and Light Inc., Sol Guyana Inc. and Bauxite Company Guyana Inc. without any loan agreement. The loaned fuel was still owed to the company as at May 31, 2015. In addition, the timing of the return of the fuel during a period of low fuel prices could cause significant losses to GuyOil.

Additionally, the functions of Operations Assistant Manager Robert Lynch were examined, given that his roles included preparation of engineering cost estimates, designing specifications, and monitoring contracts; but Marcel Gaskin & Associates Ltd were paid $77.9M during the review period to perform his functions.

The auditor believes that additional in-house personnel could have been hired at a substantially lower cost, if needed.