Covid, the challenges of financing | Local company
Outstanding financial reports, questionable purchases and an inability to retain staff are some of the issues identified by the Public Accounts Committee (PAC) report on the East Port of Spain Development Company Ltd (EPOS).
The PAC was chaired by Wade Mark and included Vice President Rushton Paray, Amrita Deonarine, Renuka Sagramsingh-Sooklal, Fitzgerald Hinds, Laurel Lezama-Lee Sing, Keith Scotland and Stephen McClashie.
The PAC report was tabled in Parliament on Friday 9 September.
Interestingly, the deadline given by the PAC to EPOS and its parent ministry – the Ministry of Housing and Urban Development as well as the Ministry of Finance to respond to concerns and recommendations was 9 September, the same day of its writing.
The report reviewed the company’s audited accounts, balance sheets and other financial statements for fiscal years 2012 and 2013.
She noted that public companies are required to submit audited financial statements to the finance minister within four months of the end of their financial year.
“These reports must be tabled in Parliament and then submitted to the Public and (Company) Accounts Committee for review. Based on parliamentary records, the latest audited financial statements submitted to parliament were for the year 2013,” the report said.
As it stands, the report notes that EPOS officials said final audited financial statements for 2014 to 2017 have been received from the company’s auditors and submitted to the Ministry of Finance.
“The first draft of the 2018 and 2019 audited financial statements were received from the Company’s auditors on May 22, 2021 and February 15, 2022, respectively; and the auditors planned to begin fieldwork for the 2020 audit in April 2022 and 2021 will follow thereafter,” the report states.
According to the report, the Ministry of Finance should submit an update on the status of submission of audited financial statements for 2014 to 2017 to Parliament no later than September 09, 2022 and that EPOS should submit an update of status and an action plan to reduce risk. further delay in submitting the 2018 to 2021 audited financial statements to Parliament no later than September 9, 2022.
Express Business was unable to verify by press time whether the Ministry of Finance had complied with this recommendation.
The report noted that the position of internal auditor is not a position in the organizational structure of EPOS, therefore, EPOS does not have an internal auditor.
The internal audit function, he said, was outsourced to PricewaterhouseCoopers at an annual cost of $295,000 as of December 31, 2019.
The company’s decision to select a single consultant to develop a strategic plan came under scrutiny by the PAC.
EPOS hired a consultant, Definitive Management Solutions, at a cost of $192,900, to help update its strategic plan for the 2021-2023 period.
“The CEO of EPOS (Deborah Austin) said this was the first time the company had outsourced the preparation of a strategic plan for the company. Prior to the engagement with Definitive Management Solutions, EPOS’ previous strategic plan was developed internally,” the report states.
He noted that Definitive Management Solutions, a company incorporated on June 20, 2018, was engaged after a proprietary tender process.
PAC noted that according to Ministry of Finance tendering policies, there must be proper justification for a single tender.
“The Managing Director of EPOS informed the committee that after learning about Definitive Management Solutions’ work regarding the Balanced
Scorecard Methodology, the company submitted a proposal which EPOS accepted,” the report states.
The PAC recommended that EPOS provide an explanation as to why single tendering was the preferred procurement process used to select Definitive Management Solutions as the hired consultant for a critical document such as the company’s strategic plan. the company, given that the Balanced Scorecard methodology is not unique to the company selected before September 09, 2022.
“In the future, if the need arises to outsource consultants using a single tender process, EPOS should check with the OPR for the conditions necessary to justify/satisfy a single tender process until the special manual and guidelines from EPOS are finalized with the OPR. EPOS should provide an update to Parliament by September 9, 2022 on steps to be taken to address delays in preparing the strategic plan going forward,” the report said.
Challenges in Retaining and Recruiting Staff
The report notes that the inability to retain and recruit competent staff has disrupted EPOS’s ability to effectively run its operations.
“EPOS has been challenged by its inability to fill key technical and professional positions due to uncompetitive compensation packages and the current terms offered were not comparable to similar sized organizations. It was stated that this issue has compromised the company’s ability to recruit and retain the best staff, it was also pointed out that EPOS is constantly losing staff to better salaries offered at other companies, making it difficult to replace them then that many interviewees expect to be offered competitive compensation,” he observed.
He noted that although a new organizational structure for EPOS was approved by the Board of Directors (BoD) in November 2020, remuneration was to be reviewed by the Human Resources Advisory Committee (HRAC), a sub-committee of the Cabinet responsible for monitoring wage negotiations in the public sector for approval.
According to the report, the organizational structure of EPOS requires 44 people, but at the time of the public hearing, only 23 positions were filled.
Critical positions such as Internal Auditor and Technical Director cannot be advertised and filled without HRAC approval.
Among the recommendations of the PAC, we note that:
1. The Department of Housing and Urban Development and EPOS should request a progress update including the reasons for any delays from the HRAC in its decision to approve the revised organizational structure of the ‘EPOS and the compensation packages offered. Once received, MHUD and EPOS must submit a status report to Parliament by September 9, 2022;
1. EPOS should provide a plan to assist EPOS in establishing an appropriate staff mix over the next six (6) months to address staffing shortages pending a response from the HRAC; and
2. EPOS should develop a succession plan to keep company services running smoothly as experienced employees move on to new opportunities and submit an update to Parliament by September 9, 2022.
Covid-19 on development projects
The report notes that the most significant issue the company faced after the onset of the Covid-19 pandemic was rising development project costs.
“The Managing Director explained accordingly that the pandemic has led to an increase in the price of construction materials, which has affected contractors’ supply chains and their ability to deliver their projects on time and within budget. EPOS, having been incorporated as project manager to lead the redevelopment of East Port of Spain, was now being approached by some of its contractors to absorb the additional costs,” the PAC report noted.
The PAC noted that EPOS should submit an update on initiatives implemented by the company to ensure that each development project affected by the rising cost of raw materials is completed on time and within budget. in Parliament by September 9, 2022; and it should develop future lessons learned guidelines to document all information that reflects both positive and negative project experiences with aligned countermeasures in the event a similar event occurs.
Funding Challenges for Development Programs
He noted that untimely disbursement of funds to execute Infrastructure Development Fund projects has caused significant delays and stoppages.
“The Managing Director of EPOS said that one of the challenges facing the company is the disbursement of funds to execute the business development programs. It was explained that the small contractors hired by EPOS could not bear the financial burden of the projects while waiting for the funds to be released. The company’s ability to deliver its social and economic programs for East Port of Spain was also affected.
“The General Manager indicated that the funding received for its social and economic programs was insufficient to fund the human development, capacity building and vocational training programs carried out in the East Port of Spain region. With the reduced allocation for fiscal year 2022, EPOS has engaged other state agencies, the private sector, and NGOs to assist in the implementation of these programs,” the report states.
The PAC recommended that the department and state entity submit an update to Parliament by September 9, 2022 on whether the challenges related to the lack of funding have been resolved and provide a progress report on the company’s ability to carry out its projects.
The report noted that while there have been notable improvements in EPOS operations, some key areas require further improvement.
He observed that the advent of the Covid-19 pandemic has resulted in stalled progress of development program projects in East POS, increased construction costs and critical human resource challenges.
“While all of the issues covered in this report are important, none is perhaps more fundamental than those of the timely submission of financial statements and approval of the strategic plan which, as previously stated, the organization does not “is not fully equipped to pursue its key objectives. . Accordingly, the Committee awaits the submission of responses to the recommendations contained in its report in the audited accounts of EPOS,” the report concludes.