Forensic audit of mma ada

95 Pages·2016·2.06 MB·English

REPORT ON THE FORENSIC AND REVIEW AUDIT

OF THE OPERATIONS OF THE

MAHAICA – MAHAICONY – ABARY

AGRICULTURE DEVELOPMENT AUTHORITY

FOR THE PERIOD

JANUARY 1, 2012 TO MAY 31, 2015
Contents
Page
Transmittal Letter 1
Report 2
Background 3
Objectives and Scope of the Forensic Audit 4-5
Key Audit Procedures Applied 6
Executive Summary 7-8
Letter of Comments and Management's Comments 9-27
Report Appendicies 28-82
Management's Comments Appendicies 83-91
December 31, 2015

Mr. Jaipaul Sharma
Junior Finance Minister
Ministry of Finance
Main Street
GEORGETOWN

Dear Sir,

RE: FINAL REPORT ON THE FORENSIC AND REVIEW AUDIT OF THE
OPERATIONS OF THE MAHAICA - MAHAICONY - ABARY
AGRICULTURAL DEVELOPMENT AUTHORITY FOR THE PERIOD
JANUARY 1, 2012 TO MAY 31, 2015.

Enclose is a final report on the above.

Regards,

Ramesh Lal
Managing Partner-TSD LAL & CO.

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REPORT
FOR THE FORENSIC AUDIT AND REVIEW OF THE OPERATIONS OF
MAHAICA - MAHAICONY - ABARY AGRICULTURAL DEVELOPMENT
AUTHORITY
FOR THE PERIOD JANUARY 1, 2012 TO MAY 31, 2015

We have conducted a forensic audit and review of The Mahaica - Mahaicony - Abary
Agricultural Development Authority for the period January 1, 2012 to May 31, 2015.

The Mahaica - Mahaicony - Abary Agricultural Development Authority is responsible to make
available all documents, records, physical assets and explanations necessary to carry out the
audit and review.

We conducted our audit and review in accordance with the scope and objectives stipulated in the
terms of reference. The terms of references require that we plan our audit and review so as to
ensure compliance with laws, regulations and systems efficiency and accountability of
documents and records.

We have identified certain internal control matters, compliance issues with Laws and
Regulations and operational deficiencies. These matters are included in the report under the
heading “Letter of Comments”-page 9 to page 27.

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1. Overview

Background

The Government of Guyana is reviewing the performance and efficiency of publicly
owned entities, statutory bodies, Projects and activities financed by or through public
funds. In this regard, the Government of Guyana has commissioned this Forensic Audit
and Review of the Operations of the Mahaica Mahaicony Abary - Agriculture
Development Authority (MMA-ADA).

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2. Objectives and Scope of the Forensic Audit

Below is a summary of the scope of the engagement as set out in the Terms of Reference, the
status of the work done and relevant comments regarding the areas of the scope.

Objectives and scope of the Forensic Audit Status Comments

Determine the entity’s adherence to and fulfillment of principles Done MMA ADA act was
of corporate governance in all aspects, including its interpretation reviewed for any
of its mission, adherence to legal or statutory policy instruments non-compliance.
and good practices;

Assess and test systems and detect any instances of corporate Done Review of internal
malfeasance and inefficiency for remedial and/or judicial controls systems was
interventions and systems realignment; done in relation to
all systems.
Determine the authenticity and validity of significant commercial Done All large payments
and financial transaction entered into by the entity with related were reviewed.
parties, suppliers and customers and measure the extent of
potential prejudice the entity may have suffered through such
dealing, if any;
Carry out a comprehensive financial systems audit which should
look at all systems, decisions and practices which have
underpinned the entity’s finances test and assess financial
discipline at all levels. Without limitation, the Consultant/Firm
should:

a. Review and examine all financial books and records of the Done A thorough review
entity as required to undertake such review and to obtain was done of the
such clarifications and explanations as may be required in Authority's
relation to such books and records; financials.
b. Review all contracts administration and approval processes in Done - Large payments
relation to the expenditure of funds during the period; were reviewed to
ensure the terms and
conditions attached
to the payments were
complied with.

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2. Objective and Scope of the Forensic Audit - cont'd

Objectives and scope of the Forensic Audit Status Comments
c. Review all material expenditures and contracts made by the Done - All large
entity during the period and obtain all necessary information payments were
and explanations as may be required in relation to such books reviewed.
and records;

d. Examine all areas, including budgeting, financing, Done - Leases and rental
expenditure, management of revenue inflows, trade terms, were reviewed for
procurement or purchase decisions and supply chain income. Purchases
management; and inventory
systems were
reviewed for
common controls.

e. Examine the entity’s assets management system, including its Done - Physical
fixed assets, their disposal, management or deployment; verification and
enquires on fixed
assets were done

f. Examine the entity’s marketing, production and Done Not Applicable.
commissioning policies, systems and agreements to
determine their integrity, efficacy and responsiveness;

a. Examine the entity’s archiving policy both by way of records Done Enquires were made
keeping and as a performing asset that yields revenue for the in relation to this.
entity.
Recommend statutory, legal or organizational changes required Done See
to identify and prevent any recurrence of improprieties. recommendations
Conduct a human resources audit which should include key Done An overview of the
issues like manpower policy and needs determination, selection human resources
and recruitment regarding philosophy, grading and function was
departmentalization, payroll system and management, performed, including
performance, culture and whole policy on advancement and a review of payroll
promotions, labour issues, skills development and deployment.
Examine current incentives, their access and distribution and
what impact they have on skills attraction and retention on staff
motivation, performance and commitment;

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3. Key audit procedures Applied

The following auditing techniques were used to review the performance and efficiency of the
entity:

• Inspection of documents, records and physical assets:
This involved the examination of documents and records to confirm the value, existence
of items purchased, rights and obligations. Inspection of physical assets also confirms
that the assets seen were in existence.

• Observation: This involved observing a procedure or process being performed.

• Enquiry: This involved seeking information from client’s staff or external sources.

• Recalculation: This consisted of checking the mathematical accuracy of documents or
records and can be performed through the use of Information Technology where
appropriate.

• Re-performance: This was the auditor's independent execution of procedures or
controls that were originally performed as part of the entity's internal control.

• Analytical procedures: Evaluated and compared financial and/or non-financial data for
plausible relationships. Also included the investigation of identified fluctuations and
relationships that were inconsistent with other relevant information or deviated
significantly from predicted amounts.

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4. Executive Summary
• The entity does not have a code/policy on good corporate governance;

• The Authority did not comply with certain areas of the MMA-ADA’s Act.

• Policies and good practices were lacking in areas of asset management, inventory
management, fuel consumption, lease distribution, rental of premises, etc. see pages 9
to 27 for detailed findings.

• Human resource – No evaluation system was in place; thus, appointments may be
biased. Some positions were held without staff being qualified and/or experienced.
Breaches of employment contract were noted.

• Income
o Leases were awarded for 25, 50 and 99 years with the latter being free in some
instances. There was no documented reason why some 99 year leases were free
and some were not.

o Rental agreements for buildings were not up to date and debt collection was being
managed inefficiently.

• Expenditure
Many instances were noted where a tender process (for large payments) or a three
quote system (for smaller payments) was not being utilised.

• Inventory
Internal control for the management of inventory was poor. Both quantities and
valuation of inventory were misstated. Regular inventory counts and reconciliations
were not being performed. See detailed findings on pages 14 to 16.

• Fixed assets
The assets register was not up to date. Instances were found where serial number,
location of assets, assets numbers/labels were missing. Also, assets were being
transferred between MMA-ADA and the Ministry of Agriculture and other Ministries
without proper documents or correspondence being sent.

• Cash at Bank
o Management was unable to provide evidence of approval for opening two bank
accounts at RBL: 736-770-9 and RBL 686-199-1
o Bank reconciliations were not done for the following bank accounts: RBL 736-
770-9 and RBL 686-199-1.

• Income
There was a strong possibility that the Authority may be losing revenue because of
under-valuations of rental property, minimal rent charges and not collecting fees in
relation to drainage and irrigation services.

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4. Executive Summary – cont’d

• Expenses
The Authority operates a cash basis of accounting. All revenues collected were
documented and banked subsequently.

• Contracts for the procurement of goods and services over one million dollars
($1,000,000) were not being approved by the Board of Directors or sent for tender
board approval (Ministry of Finance). Contracts under one million dollars were not
being awarded based on a three quote system of goods and services.

• Instances were noted where sole sourcing occurred (it is possible that better quality at
cheaper prices could have been obtained if contracts were advertised for tender).

• Though budgets were being prepared, a detailed breakdown was not available and
instances were found where vehicles were purchased but no authorization was seen in
the budget or minutes of the meeting of Board Members. For example, in 2012 four
vehicles were purchased and in 2013 ten vehicles were purchased with no appropriate
authorization seen.

• The MMA-ADA’s asset management needs improvement. Registers were not kept up
to date, assets were disposed of with no documented evidence, vehicles were crashed
with no proper investigation being done or staff being penalized.

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