AIJCFA close to insolvency
Published:Wednesday | March 23, 2011 | 12:00 AM
Audit knocks bosses for poor financial management, governance
Mark Titus, Business Reporter
The Auditor general has given a failing grade to the management of the All-Island Jamaica Cane Farmers Association (AIJCFA) for its handling of affairs on behalf of more than 1,500 members, following the conclusion of a comprehensive audit of the association's finances that found it was close to insolvency.
The AIJCFA has a legal require-ment to provide financial assist-ance and undertake research aimed at improving the farmers' output, said Auditor General Pamela Munroe-Ellis.
"However, the results of our audit suggest that the AIJCFA is struggling to survive because of inadequate resources, which will negatively affect the service level it is capable of providing to the farmers," she said.
"It is imperative that quick and drastic measures be taken to cease the trend towards insolvency."
Attempts to reach AIJCFA head Allan Rickards for comment were unsuccessful.
The Incorporation and Cess Act of 1941 allows the AIJCFA to deduct a levy from the farmers' sugar-cane sales, but also requires the association to make periodic reports to the minister on how its resources are being utilised.
The association's accounts were last audited in 2006, at which time it was making a loss.
Minister of Agriculture and Fisheries Christopher Tufton requested the audit after concerns about the financial viability of the AIJCFA were raised in a European Union-backed study done by Jamaican firm CA Goodridge and Associates.
"Clearly, this points to a number of deficiencies that must be corrected, and in the new dispensation of a privatised entity, the farmers association is very critical," Tufton said Tuesday.
"Now that the results of the audit are out, I have directed that an agreed restructuring proposal is implemented."
The farmers produce 800,000 tonnes, or 40 per cent, of the island's total cane output, the ministry said.
Government hopes to increase total cane production to a minimum of 3.5 million tonnes per annum.
"This will necessitate the restructuring of the All-Island Jamaica Cane Farmers Association to provide strong leadership to the cane farmers so that they can meet this challenge," the ministry said in a statement.
Tufton said the ministry will ensure the replacement of senior management staff, implementing new systems to control expenses and improve transparency and accountability, as well as renegotiate, reschedule and service the debt incurred.
The auditor general found that the association committed a number of breaches, including staging only four annual general meetings over the last decade; failing to prepare estimates of income and expenditure for the past eight years; and not providing financial statements since 2006-07.
From each tonne of cane supplied to a factory, a cess is to be paid over to the Sugar Industry Authority (SIA) on a per tonnage basis, and the proceeds used to fund AIJCFA programmes.
However, the AG found that the monies were being collected by the Jamaica Cane Product Sales, which is the industry's marketing arm.
Munroe-Ellis also noted the absence of a system to determine how much cess was received; and that only repayment of J$17,098 from a total of J$8.1 million used by the JCPS to purchase 13 motor vehicles - 11 of which were sold to officers of the association - could be verified.
Another J$4.5 million of the cess was withheld by JCPS and used to offset staff members' motor-vehicle loans with the AIJCFA, but this was believed to be on the instruction of the association.
Staff members also benefited from what the AG describes as unauthorised payments amounting to J$6.2 million. She said she was unable to verify the authenticity of payments totalling J$85.3 million due to the absence of the relevant supporting documents.
The association also had an operating cash flow deficit of "negative J$2.2 million to negative J$18.8 million".
Munroe-Ellis also reported that her team was challenged by the inadequacy of the accounting records presented, with the computer system containing the required data crashing, and a laptop with supporting information stolen, one month before the start of the investigation.
"If there is anything criminal from the audit, the law will have to take its course," Donovan Stanberry, permanent secretary in the Ministry of Agriculture and Fisheries, told Wednesday Business.
"Cane farmers are poised to play a more significant role in the restructuring of the industry going forward," he said.
The farmers will have a say about whether the AIJCFA management remains, with indications that Rickards still has some support among the general membership, inside sources said.
A meeting of association members was said to be set for western Jamaica today to discuss the audit report.