State broadcaster NCN paid over $7 million for broadcasting equipment from a foreign company in 2011 but despite the firm’s failure to deliver the equipment, management didn’t follow up on the matter, a forensic audit into the entity has found.
The company, Euro Broadcast Corporation, is now defunct and the auditor Parmesar Chartered Accountants, has recommended that disciplinary actions be taken against the officers who failed to carry out NCN procurement procedures.
In January 2014 the Board of Directors of NCN had appointed Parmesar Chartered Accountants to specifically investigate allegations of financial irregularity occurring from January 2011 to
September 2013 pertaining to the Euro Broadcast Corporation account.
According to the audit report which was released last week, NCN remitted US$33,530 on 26 August 2011 to Euro Broadcasting Corporation as full payment to acquire broadcasting equipment. However the equipment was never supplied to NCN nor was the amount of US$33,530 refunded. Later, Euro Broadcasting Corporation informed NCN that they had terminated communication operations in May 2012. Euro Broadcasting Corporation filed for dissolution in September 2013, the report said.
It noted that the acquisition of broadcasting equipment was approved as part of NCN 2011 capital budget. In March 2011, approval was sought from the National Procurement and Tender Administration Board (NPTAB) for NCN to send requests for quotations to four suppliers to supply broadcasting equipment for NCN. The NPTAB granted approval and the request for quotations were dispatched but only one was received in May 2011 from Euro Broadcasting Corporation to a value of US$71,780.
On 2 July 2011, the NPTAB awarded a contract to the company to supply broadcasting equipment for the sum of US$71,780. However, the procurement body rescinded the contract on July 6, 2011. The audit report provided no explanation for the rescission.
The report said that NCN had purchased equipment previously from Euro Broadcasting Corporation as they are the distributors for broadcasting equipment for the Caribbean and Latin America. By letter dated 15 July 2011, the then NCN Chief Executive Officer (CEO) Mohamed Sattaur, sought approval from the NPTAB for the acquisition of broadcasting equipment from Euro Broadcasting Corporation. This was approved by letter dated 16 July 2011 and the NPTAB issued a contract on 21 July 2011 for the procurement of broadcasting equipment from the company for the sum of US$33,530.
The report said that on 26 August 2011, Demerara Bank Limited transferred that sum to Euro Broadcasting Corporation on instruction from NCN by letter dated 25 August 2011. It noted that no contract nor any other documents were available to confirm the terms and conditions of the supply of the broadcasting equipment.
The report also said that an unsigned pro forma invoice dated 12 January 2011 was seen from Euro Broadcasting Corporation and it indicated that the offer was valid for 90 days from submission of the proposal and the delivery of goods would take four weeks.
“There is no evidence that any action was taken to follow up on the delivery of the broadcasting equipment after the amount was remitted on 26 August 2011,” the report said. It added that by email dated 11 May 2012, Euro Broadcasting Corporation informed NCN that the company has terminated business. “This is more than four months after the commitment given to deliver the broadcasting equipment by end of December 2011,” it noted. It said that Euro Broadcasting Corporation filed its Annual Report for 2011 and 2012 with the Florida Department of State Division of Corporations on 27 September 2013 and on that day also, filed for dissolution.
Outstanding
The report revealed that by memo dated 17 May 2012, Shabana Singh, NCN’s Finance Manager, informed the new CEO Michael Gordon about the outstanding delivery of the broadcasting equipment from Euro Broadcasting Corporation and requested his advice on dealing with the matter. The memo stated that the matter was previously reported to Sattaur but no directive was provided at the time. The memo also indicated that the matter was discussed with Gordon, the Procurement Officer and the Assistant Manager of Production, the report said.
It noted that Singh confirmed that she never reported the matter to the Audit Committee as this Committee was not functioning. Further, she never reported the matter to the Board of Directors. The report said that the amount of US$33,530 remitted to Euro Broadcasting Corporation was shown in the accounting records of NCN as Goods in Transit.
While the audit of the Financial Statements for 2011 and 2012 were completed, this amount was never questioned by the external auditors, it said, while adding that there is no evidence that this matter was addressed by the Internal Audit Department until October 2013 based on the request of the Board. The matter was only brought to the Board’s attention in 2013 when management sought approval to write off the US$33,530 as bad debts.
The report concluded that based on the evidence gathered, NCN did not adhere to its Tender and Procurement Procedures as there is no evidence that the NCN Tender Board Committee or the Evaluation Committee were functioning relative to the purchase of the broadcasting equipment.
“It is our understanding that NCN has in its possession a transmitter which was a loan from Euro Broadcasting Corporation. This is the only asset at NCN’s disposal to recover any value from Euro Broadcasting Corporation. The value of this transmitter has to be determined to ascertain the net loss to NCN,” the report said.
It further noted that there was no requirement for the provision of security for the contract and there is no evidence that any effort was made to obtain the equipment from the supplier after payment was made. There is no documentary evidence that NCN contacted the supplier at any time between August 2011 and September 2013, it further added.
The report said while the amount of US$33,530 was shown in the accounts as Goods in Transit, there is no evidence that the Finance Department was following up this outstanding balance except for the claim that the matter was reported to the former CEO and the memo dated 17 May 2013 to the new CEO.
It recommended that the Board take disciplinary actions against the officers who failed to carry out NCN procurement procedures and should also ensure that the Tender Board Committee and Evaluation Committee are functioning and their work evidenced by appropriate minutes. It also urged the Board to ensure that the audit department is functioning and said the Finance Department should be monitoring all outstanding balances with special emphasis on long overdue balances. The scope of work of the Internal Audit Department should be so designed to ensure that all operations of NCN are monitored during the year, it added.
