The just-concluded special audit into the finances of the University of Guyana (UG) has found that the institution has an estimated debt of $480 million, according to Vice Chancellor Jacob Opadeyi, who says the inefficiencies and inadequate controls in the financial management systems have created an atmosphere that is conducive to fraud.
As a result, Opadeyi has advised government to hold off on putting new money in the system for fear that it may disappear or be mismanaged.
In addition to owing the National Insurance Scheme and the utility companies, among others, it is still unclear how much the university is owed, how much money it is currently in possession of or even if any of the figures are accurate, Opadeyi reported at a news conference yesterday, where he stood by the recent decision to terminate the contracts of the Bursar John Seeram and a Senior Accountant Hazel Bentick.
“We may never know the true amounts for any of these,” he disclosed, while declaring that the state of the financial systems is so bad that the figures which are produced from the bursary are unreliable.
Despite the bleak findings, Opadeyi insisted that the university can go forward to have a bright future. “The audit was the basis for everything that needs to be done,” he said, while noting that a plan will be drawn up to take the university forward and that the university will be requesting that its $480 million debt be written off or dealt with in some other means.
Even a forensic audit, which could determine if there was any malfeasance, is impossible, Opadeyi said, because the information being generated by the existing financial system cannot be trusted.
The special audit was conducted pro bono by auditors from the University of West Indies after it was requested by Opadeyi, who said that when he took office earlier this year it became apparent almost immediately that the university’s finances were in disarray. Soon after taking office, he said, he requested records of UG’s financial standing and was presented with numbers which had to be corrected several times in the same day they were presented. The differences seen each time were alarming.
In their recent report, the auditors noted instances of balances which inexplicably changed overnight. On December 31st 2012, the balance recorded in one of the financial records was $4.5 million, but by the next morning the balance was $6 million. In a similar instance, $82 million changed to $76 million overnight and in yet another case, $3.7 million became $ 3.4 million the next day. This Opadeyi said, brought him to conclude that an audit was necessary to ascertain the university’s financial standing.
Opadeyi, who told Stabroek News that he regrets having to speak publicly concerning the university’s problems, since such information is read internationally, had been deliberately avoiding the public eye during the last month. He said he had been trying to gather all of the facts on the pressing issues surrounding the university before speaking to the public again. However, he said that the recent spate of “inaccuracies” which have been surfacing in the media made it clear that it was time for him to respond.
He admitted that he recommended that the UG Council terminate the contracts of Seeram and Bentick, while saying that his conviction was based on the contents of the final audit report that was sent to and reviewed by the Council. Even the Council, he said, was “alarmed” by what was revealed to in the report, hence its decision.
Addressing claims that he withheld responses to the report’s findings by Seeram and Bentick Opadeyi said the responses were not withheld. He told reporters that the UG Council meeting during which the report was considered went very long, suggesting that the responses, the last item of the agenda of the meeting, were not looked at for this reason. Nevertheless, he said, Council members were convinced by the content of the report and did not ask for the responses made by the former Bursar and Senior Accountant.
The workers’ unions have already issued a petition to the Council calling for Seeram and Bentick to be given back their jobs and have indicated that they are prepared to take industrial action if this is not done.
It has been argued by the unions that the adverse financial system created by the lack of funding at the university created the situation under which the staff members were “forced” to deviate from “by the book accounting” and employ unconventional means of managing the system. This was done, the unions assert, in an effort to keep the university afloat.
But Opadeyi rejected such excuses, arguing instead that in accounting the ethics associated with the profession should prevent any deviation from the prescribed processes, and he insisted that the management be held accountable for the weak system.
He also told Stabroek News that in addition to Seeram and Bentick, there were at least eight other portfolios which were seen as having contributed to the deplorable state of the financial system. But to take similar action against the holders of these positions, he said, would mean that the system would have to be rebuilt from scratch.
Instead, he is hoping that a change in the personnel and practices of these two senior offices will influence a change in the practices of the rest of the personnel charged with managing the financial system.
Since the sackings, Opadeyi said that he has assumed some accounting responsibilities but he noted that there are plans to employ accounting staff who are qualified to manage the vacant positions.
Lack of system
The audit report, which was sent to the Council, was based on findings of phase one (1) and two (2) of the special audit. Phase three, Opadeyi said, was completed last Friday and a report will be completed and submitted shortly.
“The special audit shows that there is a total lack of system control in our processes. Bank and other reconciliations are not always done on a monthly basis and very often data operations are not disclosed. This reflects a significant number reconciling differences which are not being investigated or posted in a timely manner,” Opadeyi said.
These inefficiencies, particularly the lack of timely and effective reconciliation processes, were found by the auditors to have weakened the integrity of the accounting system. In fact, Opadeyi told reporters, the auditors believe that due to the small size of the university’s account base, reconciliations should be done once weekly or even daily. “But we have cases where reconciliations are not done in months,” he said.
He noted that salary accounting reconciliation for December 2012 revealed that they were presented cheques totalling $19 million and that around $900,000 of this amount was stale dated.
Opadeyi said that in the managing of a bursary, if persons do not collect salaries within two weeks, red flags should have been raised. “Why would anybody in the current state of Guyana and UG not collect their salaries?” he questioned.
He also noted that the auditors found that there were 22 other reconciliation differences that amounted to a total of $10 million, from cheques drawn during August 2012 and December 2012 and which were omitted from the general ledger. “The general ledger is the livewire of the accounts of any organisation. If there is any omission, somebody has to explain,” he said, while adding that “there was no evidence of any thorough investigation of these items, these are the finding so the auditors.”
It was also found that the university’s finances were being understated. These discrepancies resulted in a system where the information presented on the monthly reconciliation of the general accounts may not be reliable as there is no evidence review and approval. Also of concern is the fact that the lax system controls allows information to be changed at any time without alarms being raised.
The auditors also found that there is no reconciliation of cash receipts in the student account management system to link cash deposits to tuition fees. The lack of this provision is said to be creating avenues through which inaccurate and fictitious credit can be applied to student accounts whether in error or by intent.
“So somebody can just change the students’ account and we would not know who changed it, when was it changed, why was it changed. So, a student who is owing $200,000 can go the next day and see you are owing zero. There is no system to find out what was done and who did it,” Opadeyi said.
Furthermore, in addition to the errors relating to student credit, the auditors reported that none of the errors detected in the overall system can be traced nor can it be determined if the error is intentional, accidental or even where it originated.
The management processes for handling donor funds were also found to be inadequate. The auditors found insufficient records of how money was spent. Such a weakness, Opadeyi said, can cause UG to be blacklisted. Such a development would greatly affect the university’s growth and development since donor funds is a primary source of such advancement.
The audit also assessed how the bursary segregates it duties and a plethora of less than favourable practices were uncovered. One such issue is the fact that the one officer is responsible for authorising, recording and reconciling transactions. “In accounting you don’t do that, you must have two different persons doing this at least,” Opadeyi chastised.
It was also found that the accountant who is responsible for maintaining student receivables is also responsible for performing the bank reconciliations for the tuition fees. “You can’t be the one collecting the money and the one reconciling it, those must be separate,” he said.
“Without proper segregation of duties, errors and misappropriations of funds and other types of irregularities could occur, but not be detected in a timely (manner) if at all detected. So our position now is that we can’t even detect anything,” he lamented.
The second phase of the audit, which was aimed at assessing the governance of the university’s procurement and accounts payable process, found multiple inaccuracies, including the fact that there is no tender committee to oversee the tendering processes nor a contract committee to oversee all activities related to ensuring contracted works are properly done before payments made.
Instead, these responsibilities are executed by the bursary itself. This reality has created a situation where contractors have been dealt with improperly and even paid more than they were owed.
In one instance, amounts totalling $443,000— his approved granting limit—were approved by the bursar to a contractor to carry out works. The contractor, however, completed the work at the cost of $581,000 and was paid. Opadeyi said that this amount is beyond the powers of the limit of the bursar to grant approval and falls into the jurisdiction of a Vice Chancellor. Yet the auditors found no documents justifying the increase, nor was there any evidence that any Vice Chancellor signed off on the amounts paid.
He said these inefficiencies, along with the many other inadequate control systems which, even now, plague UG have weakened its financial system and created an atmosphere conducive to fraud. “In accounting, if you want to commit fraud, the first thing you do is to make sure that the system is not tight, you break up the system, you break all the rules and it becomes difficult to detect if there is any fraud,” he added.
Opadeyi said the auditors have provided a long list of recommendations, which will be assessed and applied accordingly.
Already, these recommendations have been divided into those which require policies and those which require money. A consultant will be hired by the university to implement the policy recommendations, he said, while adding that the university is looking at the individual cost of each money related recommendation.
Once these have been looked at, and a plan drawn up, it is expected that the government will step in to provide the needed money, but Opadeyi said that the government will first require him to say what measures will be put in place to ensure that the university’s financial system does not degenerate once the solutions are applied.