Although the Dependants Pension Fund is in a sound financial position, its operations have significantly decreased and there is an urgent need for the Fund to explore new avenues for investments.
A forensic audit done by consultant Donna Ellis said the records of the Fund revealed increasing surpluses in the Accumulated Fund, which reflect a viable financial position. In 2014, there was $1.4 billion in the Accumulated Fund up from $1.3 billion in 2012. However, it was also revealed that government continues to owe the Fund large sums.
The report said that Fund’s operations have significantly decreased over the years due to its inability to access monies held in the Consolidated Fund along with its declining mortgage portfolio. Large amounts continued to be owed to the Fund from government’s 1% contribution and interest on monthly balances held at the Accountant General’s Department.
“In addition, with wages and salaries eroding a large portion of the Fund’s resources and no real returns on investments there is urgent need for an insertion of financial resources and the acquisition of new investments which would assist in securing the future of the Fund,” Ellis said.
The report said that the audit uncovered no acts of malfeasance and the Fund had 2,447 beneficiaries in receipt of pensions totalling $13.786 million and 97 active mortgages valued at $61.995 million as at May 31, 2015.
According to the audit report, there were no new investments during the period under review and mortgages were on the decline, whilst investments with Crown Agents were running at a loss. “There is an urgent need for the Fund to explore new avenues for investments,” it said.
The report highlighted that the Fund did not fully benefit from the 1% contribution payable by the government as prescribed by the law. Contributions were partially paid resulting in accumulated 1% government contributions totalling $182.997 million being owed to the Fund as at May 31, 2015. “Should such large amounts continue to be owed to the Fund, the efficiency of its operations would be eroded, thus preventing it from adequately providing for its contributors,” the report said.
It recommended that the Fund exhaust all efforts to have government make good on the accumulated 1% contributions owed, which would ensure that the efficiency at the Fund is maintained.
Further, the report said that claims for the payments of interest on monthly balances held at the Accountant General’s Department were never fully honoured. As a result, accumulated government interest totalling $235.714 million remained owing to the Fund as at May 31, 2015. The increasing amount of monies owed to the Fund can potentially have a negative impact on the efficiency of its operations, Ellis said.
The report recommended that the management along with its Board of Directors meet with the Minister of Finance to establish a repayment plan for the outstanding government interest.
Meantime, the report pointed out that as a result of the mortgage ceiling being fixed at $1.5 million and interest repayable at the rate of 10% per annum, no new mortgages were issued during the period of review. “The Fund has now become powerless in competing with other lending institutions in attracting new mortgages. This suggests that contributors are seeking realistic alternatives which afford them the opportunity to acquire or renovate existing homes,” it said.
It recommended that the Fund in collaboration with the Board of Directors makes proposals to the Minister of Finance to have the mortgage ceiling and the repayable rate of interest reviewed.
The report also highlighted that although mortgages are to be repaid within the specified period of five to 20 years as may be determined by the Directors, it was observed that the Guyana Public Service Union (GPSU) took a mortgage of $800,000 in September 1981 at an interest repayment rate of 10%.
An amount of $572,516 remained outstanding on the principal borrowed and accumulated interest totalling $1.195 million resulting in an overall indebtedness of $1.767 million to the Fund. This mortgage was still active at May 31, 2015 after approximately 34 years which is 14 years in excess of the maximum time granted to a contributor to liquidate a mortgage.
The report said there was no evidence to indicate that the Fund took action to have this mortgage foreclosed. Foreclosure is usually the penalty for delinquent mortgagees.
The report recommended that the Fund takes appropriate steps to have the outstanding amount of $1.767 million repaid by the GPSU forthwith or seek foreclosure to recover outstanding indebtedness. It added that similar action should also be taken against those mortgagees who are no longer contributors but are still indebted to the Fund.
It was also pointed out that the $100 contribution to the fund per person had become “grossly inadequate” to sustain the operations of the Fund and an increase would definitely assist in improving the benefits of its contributors. The report recommended that the Board submit proposals to the Minister of Finance to have contributions realistically increased which would adequately provide for contributors.
The report also noted that amounts totalling $11.308 million were expended on security services provided to the Fund by National Security Services (NSS) during the period under review. However, a contract dated June 27, 2008 with no contract sum and end date included was still in force seven years later.
It recommended that the Board review the arrangements in place for security services and take appropriate action by utilizing the NPTAB to have a current contractual agreement in place.
