The Guyana Defence Force Co-operative Credit Union’s decision to grant loans on the security of vehicles purchased through its Auto Sales Department “appears to be unlawful” since no permission for this move was received from the Chief Co-operatives Development Officer, chartered accounting firm Ram & McRae has found.
In a 17-page report to the office of the Chief Co-Operatives Development Officer Kareem Jabar, and which has been seen by this newspaper, the firm said it found a number of abnormalities, including loans to non-members, in the operations of this specific aspect of the credit union, which may have come into existence on the orders of Chief-of-Staff Commodore Gary Best. The Management of Committee of the union has strongly denied that Best was the one who ordered the establishment of the Auto Sales Department, saying it was set up following a business proposal.
The Ram &Mc Rae investigators also found that the guidelines of the department, done by Major (ag) Lesley Ramlall, former secretary/manager of the union who was suspended from its Committee of Management and sent on leave to facilitate the investigation, were not implemented consistently and this resulted in a number of irregularities.
The investigators have since made a number of recommendations and at the top of the list is a comprehensive review of the rules guiding the union, including specific authorisation for it to engage in commercial risk-taking activities such as the Auto Sales Department. “We recommend that the Committee of Management draft modifications to the rules and submit these to the members and the Chief Co-operatives Development Officer for review and approval in accordance with Section 10 of the Co-operative Societies Act Cap 88:01,” the firm said.
Since the submission of the report in late October, Minister of Labour Dr Nanda Gopual, under whose ministry the Chief Co-operatives Development Officer falls, has ordered the suspension of the GDF credit union’s Committee of Management, which was headed by Colonel Enoch Gaskin. A new committee was installed with a new head. Steps are also being made to implement the several recommendations made by the investigators.
Ram & McRae was invited on August 29, last year, by way of a letter from Carol Prasad, who was acting for Jabar at the time, to conduct the special audit on the GDF Co-operative Credit Union’s vehicles acquisition procedures. This letter followed a request to Jabar’s office by Gaskin for an audit of the general operations of the union for the period of January 2011 to August 2012 and an investigation of the Auto Sales Department extending over the previous two years.
The general membership of the union, while satisfied with the report, is hoping that the millions of dollars owed to the union by the GDF is also investigated. Sources had said that the investigation was only ordered as a personal vendetta against Ramlall by a senior officer who did not take too kindly to how he operated when he managed the credit union briefly before being removed.
‘No instruction from CoS’
During their discussions with Gaskin, the investigators were informed that the Auto Sales Department is one of the six major commercial activities undertaken by the union, with the others being the Joinery, the All Ranks Sports Club, the Hospitality House, the Business Complex and the Transportation Fleet.
The investigators said they were advised that initially the Auto Sales Department was conceived to tender for supply of vehicles to government agencies but following discussions in June/July 2010 at an Annual General Meeting it was supposedly suggested that vehicles be imported for the sale to members. However, in the minutes of that 2010 meeting provided to the investigators, there was no evidence that a formal decision was made to undertake such a move and in fact it was only mentioned once. It was noted that the then secretary/manager Lieutenant Colonel Lelon Saul was tasked with formulating a business proposal for the Auto Sales Department.
The investigators said that during their interview with Saul, he indicated that instruction to set up the department was given by Chief-of-Staff Best. However, since this information was provided, the union’s management has denied the claim, stating instead that the business proposal was presented to the Central Management Committee of the union for comment and it was found acceptable and that Best “did not instruct that the department be set up”.
Further, investigators found that the objects set out in the rules of the union did not allow for the commercial risk taking activities undertaken by the union and this required changes in the rules.
Management of the union disagreed, arguing that in order to satisfy the objectives of the union to create a source of credit out of savings, the traditional forms of investments contemplated in the Act “are woefully inadequate.
“The commercial activities therefore are meant to supplement the source of credit available to members. To the best of our knowledge the decisions to engage in these activities were endorsed by the general membership. The evidence of these decisions has however not been found. The rules will therefore be amended and registered to reflect these activities,” management conceded.
‘Loans’
The investigators added that if the credit union was not authorised to deal in vehicles, it could not loan money on the security of vehicles without the approval of the Chief Co-operatives Development Officer.
The report said that since the introduction of auto sales operations, 76 vehicles were purchased and sold, of which one was for the use of the union and three for the use of GDF.
It was noted that during investigators’ initial meetings with the credit union, it was suggested that 58 vehicles were purchased and sold. The listing received from the acting secretary/manger of the union, however, showed a total of 65 vehicles, while the final listing showed 76.
It was also revealed that there are some 60 loans outstanding for vehicles purchased through the scheme. And while Section 30 of the Act states that loans could only be granted to members of the union, of the 60 outstanding loans, 17 are with non-members of the union. Also of the 76 transactions, 23 of them were with non-members, 18 of whom were afforded credit facility. Because the draft accounts for the years 2010 and 2011 did not indicate the profitability of the Auto Sales Department, the investigators said they could not comment on that aspect of the operations.
The union has no proper sale agreement to reflect the nature of the transactions; investigators were presented with documents headed ‘Hire-Purchase Agreement,’ although the transactions were combined credit sale and loan agreement. The union has since ceased using the agreement in favour of bills of sale.
Additionally, the investigators found that there were no formal procedure of inspection of the Auto Sales Department; they were informed that transactions were conducted on an informal basis but on the understanding that the number of transactions would be restricted to available positive cash flows.
The investigators said the first documented guidelines were prepared by Ramlall and submitted on July 5, 2011 to the Committee of Management for approval but it was not clear which of the provisions of the guidelines operated prior to that date and which were additional. There was no evidence of any approval of the guidelines, which were not consistently applied.
Departure from the guidelines prepared by Ramlall included the failure to have invoices and quotations signed/approved by the relevant persons for a number of transactions. Of the 60 transactions with outstanding balances, 23 files were not presented to investigators and where files were prepared, they often did not contain sufficient and relevant information. Further, sales agreements were not prepared for every transaction and of those prepared several were not signed by the customers while the original Certificates of Registration were not retained for a number of the transactions.
The investigators also found that there was no evidence of vehicles being insured for a number of transactions and of those which were evidently insured—15—only three were assigned to the credit union. The investigators gave the example of one customer (named in the report) who received insurance proceeds for her vehicle after it was burnt and noted that this emphasised the importance of maintaining such guidelines.
Another abnormality of the Auto Sales Department’s operations was that the system and procedures for the execution of bills of sale did not operate satisfactorily and the investigators only found evidence of one bill of sale being properly executed out of the 60 outstanding loans.
“Our enquiries suggest that this was partly due to poor coordination between the Legal Office of the Guyana Defence Force and the Auto Sales Department and a clear understanding of their respective obligations in effecting bills of sale,” the investigators said.
Interestingly, the investigators also said that for transaction with outstanding balances, a number of bills prepared could not be located, and a number of those prepared were not signed and executed. The investigators were advised by the GDF’s legal officer that a total of 22 bills of sale were prepared and sent to the Auto Sales Department for be signed by the customers and returned to the officer for processing by the court.
The requirement that a minimum of 40% of the quoted cost of the vehicle be made as a down payment before the vehicle was purchased was not adhered to for a number transactions. Additionally, nine customers’ down payments were held in their special savings account rather than be transferred immediately to the auto sales ledger upon ordering the vehicles.
The investigators also found instances where separate invoices were provided by the supplier for the same transaction, one copy of which was submitted to the Guyana Revenue Authority for Customs Duty and Excise Tax purposes and another copy used for actual payment to the supplier. “Where this practice results in the payment of lower taxes than would otherwise been due, it is considered an offence,” the investigators noted.
‘Adversely affected’
Meanwhile, investigators said they were not provided with minutes of all meetings held and those provided did not indicate when the previous meetings were held, making the task of determining whether the minimum requirement of one meeting per month was adhered to difficult.
They stated that they had to resort to the files of the society held at the Office of the Chief Co-operatives Development Officer.
They also noted that in an interview with Ramlall, he acknowledged that he had paid no deposit for the second vehicle purchased by him, a bus, but that it was understood that there would be extension of the repayment period. He said he had oral approval for the waiver and that a number of persons, including the accountant and the chairman of the Committee of Management were at all material times aware and were parties to the transaction.
However, both Gaskin and the accountant denied Ramlall’s claim, with Gaskin reporting that he was unaware of the transaction as it had been omitted from the reports submitted to him. He said he first heard of the transaction in December 2011 and on initial enquiry was told by Major Rodney that there was no issue of concern. However, in August 2012 he received, at his request, a report from Major Rodney confirming that there was indeed a second transaction by Ramlall.
“As a result of the perceived impropriety, Col Gaskin instructed that the bus be repossessed and no money be accepted from Major Ramlall,” the investigators said.
Ramlall has returned the bus and has since returned to work, but he has been given no information as to whether the bus would be returned to him.
Ramlall had legally challenged the move to send him on leave and remove him from the committee of management and acting Chief Justice Ian Chang made the orders which were sought by him against Best and Gaskin – the then chairman of the union’s Committee of Management – absolute.
In his affidavit in support of the motion for the orders, Ramlall had stated that the decision to send him on leave and suspend him from the union’s Committee of Management was “arbitrary, unfair, unreasonable, irrational, unlawful and unconstitutional and as such is therefore null, void and of no legal effect.”
He had contended that being sent on administrative leave had prevented him from completing a course he had started to be considered for promotion to the rank of Major this year. He also contended that the Chief-of-Staff was not empowered under the Defence Act to send him on leave.
This newspaper had been reliably informed that the army credit union, one of the largest of 24 such organisations registered with the Guyana Cooperative Credit Union League, had been experiencing “serious operational problems.”
It was alleged by persons in the army that money from the credit union was being used for activities that were not in the union’s remit. It was also said that the army owes in excess of $75 million to the credit union for various services rendered.
