The Guyana National Printers Limited (GNPL) has been making losses and needs to be retooled in order to be competitive, according to a forensic audit done into the company.
The audit covers the period January 2014 to May 11, 2015 and was done by PKF, Barcellos, Narine & Co. It was one of a series ordered by the APNU+AFC government since coming into office in May 2015. GNPL’s principal activity is printing with the largest customer being the Government of Guyana which contracted the company to print exercise books for distribution to school children.
For 2015, up to September, the company made a loss of $44 million, the report said. For the same period in 2015, the company also reported a reduction in sales of 54.75%.
In terms of gross profit, the report said the company has maintained a constant ratio of over 20% up until 2014 when market conditions required it to lower their prices and where they had to contend with increases in material costs. For 2012, 2013, and 2014, the company reported gross profit of 21, 24 and 17 percent respectively. For the nine months up to September 2015, the company reported a gross loss of 5 percent.
“This shows that the industry the company operates in, is competitive and they should be equipped to deal with the challenges, both with machinery and human resources. In the nine months leading up to September 30, 2015 the company could not maintain a gross profit because of the increase in direct costs,” the report said.
Further, it pointed out that in terms of net profit/loss, except for 2013, the company was unable to carry through the gross profit and recorded losses, which, according to the report, was because of the increase in salaries and pension costs in 2012 and increases in overhead and building repairs in 2014 and 2015. It noted that as of September 2015, the unaudited financial statement showed a net loss of 41.22%.
The report said that GNPL needs to retool its equipment to become more competitive for jobs since the majority of the equipment is outdated. It also said that the company needs to have proper succession planning since personnel are being rehired after retirement. It recommended better use of its property such as for rental, parking, storage, additional business line etc and a better policy for recruitment and training of personnel. It also warned that due to segregation of duties, fraud can result from collusion due to the longstanding presence of some managers and the relationship among themselves over the years.
Meantime, the report noted that the debt ratio is low as the company does not rely on loans for financing. However, discussions with management indicated that the company needs financing for capital expenditure and the report recommended that management should consider seeking permission from the shareholders to pursue financing from commercial financial institutions.
The report also said the company does not maintain a fixed assets register. It also highlighted that the company carried out building renovations amounting to $7.3 million in 2014 but this was not put to tender and the audit could not verify $1.4 million of the amount.
The report also said that the company has machinery installed in several locations of the property but these can be centralised in approximately 50% of the plant area and the remaining area should be utilised for alternate revenue generating activities such as rental, diversification in business etc. It said that the company has approximately 20 000 square feet of space that can be rented. The report said that the company occupies a property with a market value of approximately $300 million but made an average of $4 million net loss over the financial years 2012 to 2014.
Further, the report revealed that the company owes the National Insurance Scheme and owes VAT to the Guyana Revenue Authority. The audit highlighted several discrepancies as it relates to payments and expenses.
Meantime, in terms of production, the audit report said that there is no method to capture the full costs of production. “As such management is unable to determine the budgeted or actual profit being derived from jobs.
The company should implement a costing system, a standard system can be implemented to ensure only profitable jobs are performed,” it said.
It also highlighted that the company is using old machinery which is labour intensive. “This results in bills, receipts etc., being manually assembled. With new machinery, certain work would be automated and this can result in cost savings in the labour departments,” it asserted.
The report noted that the sale price is subjectively determined by the sales manager and there is no monitoring at any stage of production.
It said that the company is not competitive due to the type of machinery they are using and while the board discussed with NICIL, the primary shareholder, for a loan to acquire the relevant machinery no commitment was given. It noted that there are strategic plans in place to acquire the machinery but these are based on approval of government subventions.
The report also recommended that the new Board should operate in sub-committees to improve performance and urged the formation of an Audit Committee, Compensation Committee, Nominating Committee, Risk Committee and Public Responsibilities Committee.
