THE Audit Report into the National Frequency Management Unit (NFMU) has found that, in late April 2015, Managing Director Valmikki Singh was paid a total of $9,660,169 for 326 days accumulated leave, due for the period 2004 to 2014.But while the request for payment in lieu of leave was approved by the Head of the Presidential Secretariat, Dr Roger Luncheon, the unavailability of documented application and approval of the leave carryover prevented any effort to verify the accuracy of the number of accumulated days’ leave.

“It is widely considered bad practice for persons not to take their annual vacation, and this particular instance is, in our opinion, an egregious misuse of the exception,” the report by Chartered Accountant Christopher Ram of accounting firm Ram and McRae said.

The auditor also contended that, had the leave been taken at the time it was due, the NFMU would have saved approximately $3,367,206, since the leave pay was made at the current level of earnings (US$4,500 per month) while some of the leave was in respect of years in which the earnings were US$1,500.

The auditor also noted that an examination of what are called “closed accounts” revealed instances where several years had elapsed before the unit took any action to follow up a number of operators.

“In one case, no action appears to have been taken for six years and five months, before a letter following up on spectrum payments owed by a licensee was sent. The current value of the accounts examined amounted to $3,340,290 and (the accounts) are still kept on the books. Failure to pursue accounts promptly can lead to loss of substantial revenue”, the report chided.

According to the audit, the internal controls governing the invoicing system were found to be poor.

“Indeed, in its response to our draft, the NFMU refers to a company which is a client of Ram & McRae, but which is not in the receivables listing provided to us, and from which our sample was taken. The receivables ledger as at May, 2015 showed a total of 264 credit balances with a value of $66.5 million, which reflects invoices that were never created, or were omitted from the accounting system even though monies were received.”

The excuse by the management that these represent prepayments is in violation of the Standard Operating Procedures of the Accounts Department of the NFMU, which require that users should be billed six weeks before the anniversary date, the report disclosed.

Even if they were prepayments, the accounting treatment and the explanation by the NFMU demonstrate a fundamental misunderstanding of accounting for prepayments, according to the report.

“The law provides a statutory basis for the collection of fees from telephone companies. However, instead of using the statutory fees, the Government and the NFMU have been applying a negotiated fee, referred to by Dr Roger Luncheon as ‘the Hinds (PM) Formula’, which could vary by tens of millions from the statutory fees.

“Not only did the NFMU not calculate the fees based on the statutory rate, but it also failed to resolve the matter in a timely manner, and to ensure that the rates charged were gazetted”, the report disclosed.
The audit report noted that while the NFMU now seeks to justify the charge based on the level of technology, it did not provide any evidence justifying a variation from the statutory rate.