Public service credit union seeking to write off $55.6M in bad loans
-auditors report cites serious gaps
By Miranda La Rose
Stabroek News
July 12, 2004
At its first AGM in five years, the Guyana Public Service Cooperative Credit Union (GPSCCU) yesterday announced it was seeking to write off $55.6M in delinquent loan for 1992-2003 and serious questions remain about its accounts based on the latest audit.
"That is not to say, however, that efforts to recover amounts would not continue", incumbent Chairman of the controversy-ridden GPSCCU told the Annual General Meeting (AGM) at the GPSU Sports Complex on Thomas Lands yesterday.
Veecock proposed the debt write-off "against the (GPSCCU) Reserve Fund over the past five years with effect from 2004". The proposal came "after efforts to recover some or all sums failed."
On the other hand, too, Veecock suggested that the Committee of Management might have to seek legal recourse to get defaulters to repay their loans. He said, too, that stronger measures to guarantee repayment might also have to be introduced. He sees it as being unfair to guarantors to be contacted to repay a bad debt.
However, the proposal for the debt writeoff which was tabled at the meeting was not discussed by the general membership but Stabroek News understands that even if no decision was taken the Committee of Management would be able to write off certain bad debts that may have occurred due to the death of a defaulting member.
Veecock noted that at the AGM of 19981999 approval was sought and given for a debt write-off for a total of $2.8 million for 1,319 members who were delinquent over the period 1979 to 1997. This amount was written off against the reserve fund over a period of three years: 1998 to 2000.
A breakdown of the bad debts for the period 1992 to 2003 is as follows: 2003 $6.9 million; 2002 $13.9 million; 2001 $$9.4 million; 2000 $6.2 million; 1999 $5.7 million; 1998 $4.9 million; 1997 $3 million; 1996 $2.9 million; 1995 $1.6 million; 1994 0.6 million; 1993 96,544; 1992 $37,175; and before 1992 $24,707.
At the meeting, copies of the annual reports for 1995 to 2001 were circulated. In the report on the 2001 accounts dated January 16, 2004, Deloitte and Touche said that the balance sheet included $849M for loans to members but management did not carry out an evaluation of the portfolio to determine those which were inadequately secured or not secured at all. The auditors also detected several instances where borrowers did not meet their payment obligations and as a result some of the loans were refinanced. The auditors said they were therefore unsure about the collectibility of the loans to members and therefore could not voice an opinion on the $849M on the balance sheet listed as loans to members. It pointed out that an adjustment to this balance would have a consequential impact on the income and expenditure account for the year ended 2001 and the retained income at that date of $154M.
Further, the auditors said they could not verify capital amounting to $731M because of the absence of supporting documents and neither could they vouch for $54M listed as cash on hand at the bank since no verification was provided. The auditors also cited $98,209 as debtors and prepayments and fixed assets of $1,138,596 which it also could not confirm because of the absence of documentation.
Delinquency
In his report to the credit union, Veecock said that delinquency is an area where every credit union is vulnerable since they lend money mainly on trust.
During the period under review, he said that the GPSCCU has been most deficient and factors responsible for this include the incumbent delinquency officer not functioning and expending his services on preparing motions to unseat members of the committee; the dismissal of the incumbent delinquency officer and the appointment of a new one who is gradually bringing the situation under control and the fact that in most cases defaulters cannot be traced.
However, Veecock said that most members are not being deliberately dishonest in not repaying loans as in most instances they would have lost their jobs due to the downsizing of the public sector.
Veecock said that the 2002 accounts have been finalised but have not yet been audited. These, he said, will be tabled at the 2005 AGM when it is expected that the accounts for 2003 and possibly 2004 will also be ready.
He said that the main problem was staffing in both quality and quantity in addition to the inappropriate conduct of certain senior staff members and some members of the management committee. Malfunctioning of computer programmes compounded the problem and only manual corrections to the List of Balances, which took some time, was able to resolve the problem.
He said the committee of management hopes to considerably improve the service over the ensuing years with a view to removing all causes for complaints.
Among the queries made in the audit reports over the years was that the GPSCCU head office was renovated at a cost of $7 million when in fact the actual cost was $8,302,514. Among the auditors' queries were that not more than one quotation was requested for items purchased; a public tendering was not done for the additions to the building contract valued at $8.3 million; that the contract for the renovation and extension works was done for $6.1 million when the total amount paid was $8.3 million, which was not approved by the members; that the GPSCCU paid $175,000 for a building situated behind its office and sold it to a member for $20,000; and that several payments were made to the contractor without obtaining interim certificates certified by a quantity surveyor.
The building, which was bought for $175,000 was not sold to a member for $20,000 but the member was paid to dismantle the building for the sum of $20,000, Veecock explained. He said that a system of tendering has now been put in place.
Veecock in his report said that during the period, record-keeping was at its lowest ebb causing the auditors to remark unfavourably since in many instances documents could not be quickly located and be produced for audit.
He said this did not mean that documents were not in place but because of the long delay in having accounts ready for audit, it was not easy to find them as document storage space was limited.
The credit union, Veecock said, has come a long way over the past ten years despite the high rate of delinquency and bad publicity.
He said that considering the share capital in 2001 was in excess of 790 million it must be acknowledged that the credit union has outgrown even the dreams of its founders "as it is without doubt the largest credit union in the country."
He announced that because of the growth of the credit union the committee has moved towards obtaining the services of an internal auditor on contract. The internal auditor would report to the management committee, as the credit union has outgrown the services of the Supervisory Committee which is made up of persons who have full-time jobs elsewhere.
For the period under review, the GPSU membership was 10,500 in 1995, growing to 13,500 in 2001.
The share capital in 1995 was $107.7 million and it had grown to $731.7M in 2001, according to Veecock.
Meanwhile, reelected to serve on the Committee of Management were Frank Emery, Kenneth Watson and Anthony February. Jean Underwood was also reelected to serve. The other members of the Committee of Management are Veecock, Edward Johnson, Uhlan Leander, Patricia Went, B. Singh, Florine Dalgety, Patrick Yarde and C. McKenzie. The committee will elect a chairman.
Meanwhile the Supervisor's Committee, which meets once or twice per month primarily to interact with the Secretary/Manager and accountant and to examine monthly financial statements and other financial records also observed that credible accounting and tender board procedures were not implemented; loans were issued contrary to loans policy; and employment contracts were vague.
The committee recommended that officers signing cheques must be meticulous and should peruse all vouchers and supporting documents before affixing their signatures.
The Supervisor's Committee noted that many times requests were made to see the credit union's annual budget and its organisational chart but to no avail.
The committee also recommended that the management committee must have an independent secretary and feels that no credible and acceptable reasons could be given for noncompliance with the timely and regular preparation of the audited financial statements. The late submission to the AGM, the committee said, is due fully to the tardiness of the current Management Committee.
In 2000 due to complaints about financial impropriety and maldministration on the part of the Management Committee and based on a report from an inquiry conducted into the operations of the credit union, the then Chief Cooperatives Development Officer (CCDO), Lilian Miller sought to replace the management committee with another committee. The GPSCCU management committee then moved to the courts to overturn the decision.
The matter dragged out in the courts from 2000 even after it had been thrown out on two occasions. The GPSCCU then appealed the case and Chancellor of the Judiciary, Desiree Bernard finally ruled last year that the CCDO appoint a representative to oversee the operations of the GPSCCU.