Auditor General: Several private businesses operating in IAST compound
No contributions to electricity bills, car being used privately, records in a mess
Stabroek News
March 19, 2004
IAST: assisting small businesses...
Roshan Habibulla wrote off a $14 million debt to the power company, illegally entertained a number of private businesses in the compound of the Institute of Applied Science and Technology (IAST) of which he is the head and converted to his private use an IAST vehicle.
These are among the findings of the state audit probe carried out at the behest of the President, which recommends that Habibulla be asked to provide explanations for the write off of the GPL debt, for the illegal occupation of the precincts of the IAST by other private businesses, including a furniture operation by his son, and that he be surcharged for fuel and repairs for the vehicle PGG 4493.
The audit office says Habibulla should also be surcharged for the electricity consumed by his private operation Ceramin Limited in the compound in IAST, and that he provide proof that Ceramin Limited is a joint-venture with IAST, as well as explain how the profits of the joint venture were shared and brought to account in the IAST books.
Habibulla should also be asked to provide evidence of payment of $2M for the ceramic plant and building, and the authority for the purchase of these as the state auditors failed to find that the joint venture was genuine, given that they were unable to ascertain that former IAST Director, Dr Ulric Trotz, had the authority to sign such an agreement.
"As a result, Mr Habibulla would appear to have been conducting the operations of Ceramin Ltd at IAST illegally," the report into a probe of reported irregularities said.
President Bharrat Jagdeo, through his special assistant, Kheedmat Budhu, called in state auditors on February 6 for a special investigation into the operations of IAST following reports of misuse of government resources among other charges against Habibulla.
The report, handed in last Thursday, recommends that the government remove all private businesses from the IAST's compound and Habibulla be asked to pay $7.3M as rent owing by Ceramin Limited between February 1991 and January 2004 as per agreement to IAST.
The allegations
The allegations against Habibulla included the following:
* IAST has essentially become Habibulla's personal private business;
* Habibulla was operating his personal furniture shop within the precincts of the institution and this has been going on for 30 months;
* Habibulla has been operating his personal ceramic plant in the compound of IAST for 12 years;
* The employees of the furniture and ceramic plants were initially on IAST's payroll;
* Items of stock are normally uplifted from the stores of IAST for Habibulla's two private businesses without any documentation;
* Some 70% of the power and 60% of the water billed to IAST were consumed by Habibulla's plants for which he made no contribution; that Habibulla has been boasting that he could have GPL write off the bill as he is a director on the board of GPL.
* A motorcar PGG 4493 belonging to IAST was being driven by Habibulla's son, Justin;
* Habibulla has a refrigerator container stored in the compound for a number of years and this belongs to a neighbour who pays no electricity charges;
* Habibulla duplicated the IAST work year after year.
The findings
*Investigators found that a private furniture Shop was being operated in the compound of IAST by a Nigel Thomas of 54 Housing Scheme, Campbellville, but there were no formal agreements between IAST and Thomas for that operation. The auditors found that Thomas claimed to be in a joint venture with Justin Habibulla, the son of Roshan Habibulla.
Thomas confirmed to investigators that the furniture shop used electricity between September 1, 2001 and 31 January 2004 from IAST, but was never asked to make any contribution to the cost of electricity. Thomas said as well that the equipment in the furniture shop was removed from the premises of IAST on January 31 2004 on the instructions of the senior Habibulla. The investigators verified this and found evidence suggesting that the location of the furniture shop was a hazard to IAST stores and Ceramin because of dust pollution.
*In the case of Habibulla operating his personal ceramic outfit in the compound of IAST, the auditors found a photocopied document showing that Ceramin Limited entered into a joint venture with the National Science Research Council and its subsidiary on January 23rd, 1991 for two years. NRSC/IAST granted a licence to Ceramin to use the Ceramic Processing Facilities (CPF) and equipment.
*Under that photocopy document, Ceramin Limited was, among other things, to employ 10 previous employees of the CPF on terms and conditions no less beneficial than their previous employment by IAST, and Ceramin was to pay IAST $50,000 per month in rental.
The document was signed by Dr Ulric Trotz, former head of IAST and Alston Kim Kissoon, a director of Ceramin. The witnesses were Habibulla and Ms D Bagot, sister of a former driver of IAST. However, Bagot has denied ever signing as witness to the agreement and Trotz resigned from IAST in February 1991. Investigators said the signature on the document appears to be similar to the letter appointing Habibulla, only a photocopy of which was available for scrutiny.
However, the auditors could not find any documentation or correspondence to show that the subject minister in charge of IAST granted permission for the joint-venture agreement and no proper accounting records were maintained for 1982-1993, hence no financial statements to verify whether Ceramin did pay rent for February 1991-December 1993.
There was one receipt for $2million in favour of Habibulla on behalf of Ceramin Limited but there were no details and all three copies were still in the triplicate book. The auditors could not verify if this $2m was received and deposited in IAST's bank account since the bank statements could not be located and the commercial bank has since ceased operations.
*The auditors found that the employees of Ceramin Limited were initially on IAST's payroll (as a condition of the joint venture). But the lack of accounting records could not allow for verification as to whether they were paid by IAST. None of the employees of the furniture shop were ever on IAST's payroll.
* The auditors could not determine what percentage of power and water was used by Ceramin and the furniture shop but found that IAST, the Environmental Protection Agency, Ceramin, the furniture Shop, Juice Up, Guyana Electricity Corporation and a copy shop were all connected to the same meter registered in the name of IAST. Since 1994, IAST has reflected the total sum paid for electricity on financial statements, instead of the actual electricity charge for the year, and the auditors have determined that the expenditure statements as well as the debtors' statements were both understated between 1994-2002. According to the records of IAST, no electricity charges were ever met by Ceramin, the furniture shop, Juice Up and the copy shop, all private businesses.
*The investigators found the balance of electricity charges owing at the end of December 2001 to be $10.3 million (no bills were produced for audit examination between April to December 1999, January, March and July to December 2000). In 2002 bills for June and December were missing but the balance as of May 2002 was $13.796M but at July this moved to $868,748.
No payments were made and IAST's accountant confirmed to auditors that no payments had been made and could not explain the credit by GPL to IAST in excess of $14M. Consumption in May 2002 was $1.062M the highest charge for any single month between 2001 and 2003. Electricity bills for January, May, September and December last year were also not available for audit scrutiny but consumption of the other months showed an average consumption of $474,000 per month. The private generator system did not lead to any significant reduction in GPL monthly bills. The generator has been out since November 2003.
*Regarding motor car PGG 4993, the auditors say it appeared that Habibulla had taken control of this since December 30, 1998 and kept it at his premises for his personal use. During 1999-2001, the director claimed $520,893 for fuel and repairs for the vehicle. This payment ceased in January 2002 after the accountant had written Habibulla on May 3 2001 suggesting that the vehicle be returned as it was not being used to benefit IAST. The vehicle was returned during this investigation.
*The auditors found a 20-foot refrigerated container in the compound, which has been there for 10 years. Its owner, a Mr Fletcher, said he was given verbal permission by Habibulla to store it there. Fletcher told investigators that in the first six and a half years, his container had not been connected to IAST's meter but the IAST staff refute this. Fletcher said he was asked by Habibulla to contribute to the purchase of fuel from July 1, 2002 and Fletcher paid a total of $927,843 between April 2002 and November 2003. Fletcher confirmed he had not been paying towards GPL charges.
*On duplication of the institute's work programmes year after year, the investigators were not provided with any work programmes or budgets but accessed the annual reports for the last three years. However, the status of work programmes as well as the outcome of objectives could not be determined. Heads of Department could not produce their work plans for 2004 as they said they do not have one because they receive direct instructions from the Director. The auditors found some of the staff not to be fully occupied while others had "absolutely nothing" to do. One department head with two staff said she did not have any work to do for six months.
IAST has been showing declining revenues in the last three years. Income in 2000 was $12.7M, which dropped to $2.59M in 2001 and $2.42M in 2002.
The investigators conclude that there is a conflict of interest in Habibulla being the Director of IAST and a director of Ceramin Limited and in his son being a co-owner for the furniture shop. It recommends as well that a study of the performance of IAST be carried out to determine if it is still profitable and if it should continue to be in operation.