Whose water infrastructure is it, GWI or QAII?

A response to questions posed by Chairman of the GWI board

I have no other interest, save and except my humble attempts to make a contribution towards protecting the interest of the State, and safeguarding public assets and resources. I am therefore not in a position of conflict of interest in relation to my assessment of the ownership of the well. That assessment is based on my considered professional judgment and whatever evidence that was available to me in an environment where a lack of transparency to a large extent continues to rule the day.

There is no compromise in the preservation of the integrity of the State, and any attempt by persons in position of power, influence or authority to promote or superintend over any aspects of its diminution or liquidation without justification and consent of the people, is a treasonable, unpardonable and unpatriotic act.

Last week’s article on the above subject provoked a reaction from the Chairman of Guyana Water Inc.(GWI), Nigel Hinds in which he refuted my assessment of the ownership of the well at the Sanata Complex. I had stated that GWI technicians attempted to conduct an inspection of the water connection to the buildings in the Complex. This led to a confrontation with the new owners, Queens Atlantic Investments Inc. (QAII) which saw the intervention of the Chairman. The technicians were asked to discontinue the inspection until the issue surrounding the ownership of the well is established. GWI subsequently issued a statement confirming that: (a) the well was no longer under GWI’s control; and (b) QAII had bought the Complex which includes the well but inherited the daily checks of the well by GWI.

 

accountability-watchToday’s article is devoted to responding to the several unedited questions posed and comments made by the Chairman in relation the above-mentioned article. As I do so, I may be forgiven for reminiscing on the years when I was Senior Associate Lecturer at the University of Guyana and more recently as International Audit Expert in Afghanistan. I always tried to provide answers to questions posed by students regardless of how I felt about them.

 

  1. Where in accounting or law – does it define that property, building and erections sold, exclude a water well or similar asset?

 

You simply cannot sell what is not legally yours. The well, a revenue-earning asset, is the property of GWI, notwithstanding that it is sited in the Sanata Complex compound. There is no evidence that ownership was transferred to the Complex, and therefore the well could not have been part of the sale and purchase agreement. If it was sold as part of the deal, then why is GWI paying $3 million in electricity charges per month? Why is GWI incurring expenditure for the operations and maintenance of the well? Why is GWI collecting water rates from 9,000 residents in the surrounding area? From an accounting standpoint, you simply do not incur expenditure on an asset that you do not own, as this would be tantamount to fraud.

 

  1. NICIL’s position on who owns the well is omitted. Who owns the well is a question AG should ask NICIL. GWI awaits the sale agreement from NICIL for the entire property with building and erections thereon.

 

Ownership of the well depends on whose balance sheet it sits and who has title to it. Since 2002, when GWI was established all assets and liabilities, including the well, were transferred to the new entity by Vesting Order 14 of 2002 which is a legal instrument. The well is still in the asset register and balance sheet of GWI. I have scrutinised the agreement of sale and purchase between NICIL and QAII and I can say with confidence that nowhere in the agreement is there any mention of the well. Would NICIL give a different answer? In any event, the comment that GWI is awaiting the sale agreement from NICIL contradicts GWI’s own statement that: (a) the well was no longer under GWI’s control; and (b) QAII had bought the Complex which includes the well but inherited the daily checks of the well by GWI.

 

  1. Vesting order number 14 of 2002 according to AG, does not detail the assets transferred to GWI.

 

There was an opening balance sheet attached to the Vesting Order showing fixed assets totalling $8.047 billion. GWI would have had the details in order to set up the books of account, including an assets register in support of the above amount. I am not privy to GWI’s books of account. Notwithstanding this, I based my assessment on GWI’s audited financial statements for 2013 and 2014 which reflect an item under fixed assets entitled “Water Infrastructure” and which include not only the pump station and well at Sanata but also those of Shelter Belt, Tucville Terrace, Kingston, Agricola, Turkeyen, Sophia, North Ruimveldt, Festival City and Central Riumveldt, and related assets. In addition, I relied on Vesting Order 14 of 2002 which establishes GWI and which clearly stated that all assets and liabilities relating to the GS&WC and the Guyana Water Authority have been transferred to GWI. These include immovable property and buildings, and all assets relating to the undertaking of the Commissioners and the Authority held by the Government or by an entity owned by the State or in which controlling interest is vested in the State or any agency or other entity on behalf of the State.  What other evidence does one need?

 

  1. AG says via order No. 40 of 2010 the Sanata Complex was transferred to QAII, then makes a convenient and illogical disconnect between the Public Corporation Act and the Companies Act.

 

NICIL is a company incorporated under the Companies Act. It is not a public corporation. However, Section 66 (1) of the Public Corporations Act 1988 permits the Minister by notification in the Gazette to apply any of the provisions of the Public Corporations Act, with modifications, or such modifications as specified in the notification to any body corporate, not being a corporation, owned by the State or in which controlling interest vests in the State or in any agency on behalf of the State. A notification dated 18 July 2000 was made to the effect that Section 5 of the Act shall apply to NICIL. That section provides for the vesting in a public corporation of movable and immovable property. In relation to the transfer of an asset/property, Section 8 of the Act is applicable. However, the notification of 18 July 2000 does not extend to this section. Despite this, the Minister has used Section 8 for the purpose of disposing of assets vested in NICIL, and therefore legal support for this action appears to be in doubt.  One needs to view Vesting Order No. 40 of 2010 in this context.

  1. There is no evidence that several buildings and erections are included in the Valuation of June 2007, including the Well.

 

The comment is contradictory. On 10 September 2010, QAII informed the Government that it was exercising the option to purchase the Sanata Complex. At the request of QAII, a valuation of the Complex was carried out as of 26 May 2007 which valuation came up to G$370.375 million, comprising land (G$269.200 million), and buildings and erections (G$119.155 million). The schedule of property relating to land makes reference to water being supplied via the main service provider GWI and on site storage reservoirs and overhead trestles. A similar wording pertains to the service providers Guyana Power and Light for electricity, and GTT in respect of telecommunications services. The schedule does not include the well or any photographs of it, as was the case in respect of all the assets identified in the valuation.  It is evident that the valuation did not consider the well as being part of the assets of the Complex.

 

A similar valuation was carried out as of 25 June 2007 for the purpose of calculating stamp duty and Registrar’s fees, which valuation placed the value of the Complex at G$245.175 million, comprising land (G$130 million), and buildings and erections (G$115.175 million). Again, there was no evidence that the well was included in the valuation.  At the request of NICIL, a third valuation was carried out which placed the value of the Complex at G$1.042 million.

 

On 26 October 2010, an agreement of sale and purchase was entered into, which made no mention of the well. The agreed sale price was US$3,489,324, equivalent to G$711.822 million which is G$330 million below the valuation that NICIL had requested and which represents the average between the valuation obtained by QAII and that obtained by NICIL. By Order No. 40 of 2010 dated 20th November 2010, the Sanata Complex was transferred to QAII.

  1. It is revealing that items certified by the external auditor provide sufficient grounds for AG to treat the Auditor General findings as irrefutable evidence – September 20 Article – SN.

 

The Auditor General has issued an unqualified opinion on the accounts of GWI for 2013, which was laid in the National Assembly in July 2015. The well is shown as an asset in the balance sheet of GWI under the heading “Water Infrastructure”. If there were questions surrounding the ownership of the well, why is it that there was no mention of the Auditor General’s detailed management audit attached to his report? For 2014, the Auditor General contracted GWI’s audit to a Chartered Accountant in public practice. Although the audit has been finalized, the report is yet to be laid in the National Assembly.

  1. AG does not state when and how the well was included in GWI asset register re: September 20 Article – SN.

 

Please see response to No.3.

 

  1. What rational basis does AG use to pontificate that QAII is a customer of GWI for the property formerly known as Sanata Complex, when QAII is the owner of the property, buildings and erections; where the well is located.

 

There is no evidence to suggest that the well at the Sanata Complex was the property of G & C Sanata (or its predecessor organization, Sanata Textile Ltd.) at the time when the agreement for the lease of the Complex was entered into between NICIL and QAII. In addition, neither the lease agreement nor the subsequent sale and purchase agreement makes any reference to the well.  Further, the valuations of the Complex that NICIL relied on as the basis for arriving at the sale price, did not include the well.

 

On the other hand, the evidence clearly shows that the well is the property of GWI since: (a) it is reflected in GWI’s assets register and hence its balance sheet duly certified by the external auditors; (b) GWI is paying the electricity bills as well as the cost of operation and maintenance of the well; and (c) GWI is collecting water rates from some 9,000 residents in the area. GWI is therefore a service provider and QAII, a customer of GWI.

  1. Based on several references to absence of evidence – see September 20 Article – SN; AG still manages to conclude that QAII does not own the well.

 

Please see my conclusion in response to No. 8.

  1. Is AG suggesting that QAII should pay electricity costs incurred, related to the 9,000 plus residents receiving water from the well?

 

QAII is a customer of GWI which is a service provider just like Guyana Power and Light, and GT&T. In the same way that the 9,000 residents in the area are paying for water charges, so should it be for QAII. I note that GWI’s 2014 audited accounts showed a trade receivable amount of $6.094 billion, of which $3.394 billion or 56% was considered “impaired”. There was also a write-off of bad debts and “impaired receivables” of $118.780 million and $516.048 million respectively.  Is QAII’s indebtedness to GWI reflected in any of these amounts?

  1. It strikes me that AG undermined several positions he took during the NICIL audit. NICIL should issue a statement on who owns the well.

 

I am not aware of any inconsistency. I, however, did take a position as regards the audit of NICIL when the former Minister of Finance was chairman of NICIL’s board. There is no need for NICIL to issue a statement as to who owns the well. The books of GWI and the agreement of sale and purchase of the Sanata Complex speak for themselves.

 

Finally, I wish to state that as I have no other interest, save and except my humble attempts to make a contribution towards protecting the interest of the State, and safeguarding public assets and resources. I am therefore not in a position of conflict of interest in relation to my assessment of the ownership of the well.  That assessment is based on my considered professional judgment and whatever evidence that is available to me in an environment where a lack of transparency to a large extent continues to rule the day.

 

There is no compromise in the preservation of the integrity of the State, and any attempt by persons in position of power, influence or authority to promote or superintend over any aspect of its diminution or liquidation without justification and the consent of the people, is a treasonable, unpardonable and unpatriotic act.

 

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