Despite a court order, Guyana Power and Light Inc (GPL) may never be able to recover the more than $184 million owed by Bill Direct (Guyana) Incorporated for customer payments, according to a 2016 audit, which has found that it was the gross negligence and complicity by GPL’s management and executive officers that has resulted in the loss.
The audit of the company’s operations from November 1, 2011 to May 31, 2015, which was conducted by Nigel Hinds Financial Services, also found that no disciplinary action was taken against any GPL officer in relation to this matter.
According to a summary of the findings, Bill Direct was a Collection Agency for GPL and was responsible for the remittance of customer payments. As at December 31, 2014, it owed GPL in excess of $184 million.
The audit report noted that GPL commenced litigation against Bill Direct on September 21, 2011, with judgment being granted in its favour on January 11, 2012. “It is important to note that although GPL secured judgment against Bill Direct, it is very unlikely that the amount of $184 million will ever be recovered,” the report said.
It stated that the circumstances surrounding GPL allowing Bill Direct to collect customers’ monies and not remitting same to GPL is due to gross negligence and complicity of management and executive officers.
“There is no evidence that GPL has recovered any funds from Bill Direct related to the court judgment, other than the amount of $628,519, when the Court ordered the Bank to pay over monies to GPL held in two accounts maintained by Bill Direct at the Bank,” the report said.
The report later explained that on February 4, 2008, GPL and Bill Direct entered into an agreement, which made Bill Direct an authorized collection agent of GPL. Bill Direct operated in this capacity until September 11, 2013, at which time GPL terminated its contract when the company failed to remit collections to GPL in excess of $184 million. This sum excluded legal costs incurred to recover the sum.
Bill Direct, the report said began breaching its Contractual Agreement with GPL from as early as 2008. It was found that as of January 31, 2009, it had unremitted collections in the sum of $21.47 million, which represented an average of 21 days of collections. By February, 2010, Bill Direct’s unremitted amounts had increased to $56.4 million, which denoted an average of 20 days of collections.
Further, as of October 31, 2010 unremitted collections by Bill Direct were in excess of $124.5 million. Ultimately, the unremitted amounts had accumulated to a sum in excess of $180 million by April 2011.
According to the audit report, in an email correspondence from Matthew Wade, Manager of Bill Direct to Jason Ali, an accountant of GPL, dated September 16, 2009 the reasons for untimely remittances of its collections to GPL were listed.
The report said that based on Wade’s explanation, collections from Sub-Agents of Bill Direct were first deposited into the Sub-Agents’ accounts and then the Sub-Agents would write a cheque to Bill Direct that would then have to be cleared over the necessary number of business days before Bill Direct was able to remit payments to GPL’s accounts.
Further, Wade noted that Bill Direct did not have an overdraft facility to cover collections that were due from its agents (Sub-Agents) to facilitate timely remittances.
“A potential solution to this would have been for GPL and Bill Direct to renegotiate their agreement to have these Sub-Agents deal directly with GPL to deposit funds directly to GPL’s account, which would have expedited the time period for remittances,” the report said, while adding that another approach could have been Bill Direct’s acquisition of a security deposit that was equivalent to its Sub-Agents’ vending limits.
The report made it clear that GPL’s executives were negligent.
It was stated that former Deputy Chief Executive Officer (CEO) Aeshwar Deonarine stated in an internal memorandum, dated October 29, 2012, that he notified the former CEO Bharat Dindyal around November 2009 after learning from Management Accountant Dorrie Johnson that Bill Direct was failing to remit collections, which amounted to $25 million at the time. During November 2009, the report said Deonarine’s position with GPL was Senior Divisional Director, making him responsible for Finance & Commercial Services.
Deonarine further stated in the said memorandum that he also briefed Dindyal after being alerted once again by Johnson in July-August 2010 about the aforementioned issue with Bill Direct.
In addition, based on Dindyal’s own statement in a memorandum dated October 29, 2012, he was alerted by the Deonarine that unremitted amounts from Bill Direct had increased to $124,564,535 as of October 2010, the report, while said adding that in the October 29, 2012 memorandum, Dindyal again stated that he was once again alerted by Deonarine in April 2011, at which time Bill Direct had an unremitted amount in excess of $180 million.
Deonarine, in his statement via memorandum to Dindyal, dated October 29, 2012, showed that reviewing the cash-in-transit in April/May 2011 was one of his responsibilities at the time.
According to the report, he asked that a meeting be convened with Bill Direct and after not receiving an update “assumed that the matter was resolved.” This, the report said “appears willfully negligent for a senior officer.” It added that both Dindyal and Deonarine had ample time to address the issue and take corrective action. “The executives of GPL also demonstrated negligence in dealing with the unremitted collections of Bill Direct by failing to terminate the contract at an earlier date. For instance, stipulated in the terms of the agreement between GPL and Bill Direct, section entitled “Default,” paragraph (1) is a provision for either party, in the event that a material breach is committed by either party, to immediately terminate the agreement after the defaulting party would have been given 30 days to rectify the breach if it was capable of rectification,” the report said.
The report also concluded that GPL’s legal department failed to include “some form of collateral or bank guarantee in the agreement between GPL and Bill Direct to mitigate the risk of loss in the event that Bill Direct failed to remit collections.”
GPL’s Board, the report said, decided in March, 2014, that management liaise with external counsel to actively pursue legal action both locally and internationally in an effort to recover the outstanding sum.
The report said that the failure to take disciplinary action is “difficult to comprehend, given the level of losses the company will inevitably suffer.” It was pointed out that while policies and practices were subsequently implemented to mitigate the risk of loss from authorized collection agents, GPL has not consistently complied with its policy of obtaining either a bank performance guarantee or cash deposit from its agents.
The report stated that in handing down its judgement, the court ordered Republic Bank, which held Bill Direct’s two accounts, to pay over the balance contained therein to GPL. By way of a cheque, the $628,519 was paid over, and according to the report based on evidence examined these funds were the only “collateral that Bill Direct had in Guyana that GPL was able to receive.” It said that there is no evidence that GPL has recovered any funds towards the unremitted collections from Bill Direct other than the amount received.
The report stated that GPL treated the Bill Direct debt as a Related Party Receivable and added the sum to the standard 1.5% bad debt provision on turnover.
As a result, the amount shown in the Income Statement as bad debt amounted to $435 million. This treatment of the debt, the report said, is “improper” as it should have be written off as it is improbable that it will ever be collected, especially considering that the company has no assets in Guyana.
