Prime Minister Dr Timothy Harris
BASSETERRE, St Kitts — Prime Minister Dr Timothy Harris reported to the St Kitts and Nevis National Assembly on Tuesday that an audit by global accounting firm Ernst & Young of the operations of the St Kitts-Nevis Sugar Industry Diversification Foundation (SIDF) had revealed vast unexplained extraordinary expenditure.
The SIDF was established on September 15, 2006, with National Bank Trust Company as its founder.
At a press conference on March 15, 2016, Harris, who is also the minister of finance, announced that the government had retained Ernst & Young – one of the “Big Four” accounting firms – to conduct a review of the SIDF for the period 2010 to 2015.
“This review will identify, in the first instance, the major projects and the basis whereby they received funding and whether such funding was in accordance with the SIDF’s mandate and in keeping with its own enabling legislation,” Harris said back in March.
Two months prior, during a press conference on January 19, Harris announced that “A new entity will be legislated to perform activities previously undertaken by the SIDF in a restructured, more accountable framework.”
Harris added that, in the interim, a board of councilors to be chaired by well-respected accountant Dr Robertine Chaderton had been appointed.
Also on this new board are attorney-at-law MacClure Taylor, tourism industry veteran Leon Lescott, and attorney-at-law Marguerite Foreman, who serves as its secretary.
On Tuesday, the prime minister reported that “The [SIDF] board has been informed by Ernst & Young… that understanding the workings of the SIDF was not an easy task at all. One cannot help but suggest that the fact that it was set up in the first place as a private foundation, and the manner in which it was operated thereafter, was specifically designed to make it extremely difficult to follow the flow of funds.” Having said that, had they had a proper auditing from the beginning, all this chaos could have been avoided. If firms could invest in experienced CPA brokers (like Poe Group Advisors), then their accounts can focus on maximizing value or minimizing the risk.
Harris said, “The [SIDF] board was also informed that the SIDF has made decisions and spent vast amounts of funds without proper records, such as board meeting notes, reports, opinions, or minutes of meetings, any of which would reveal on what basis certain decisions were taken with respect to these vast levels of expenditure. A relevant minute with respect to a decision to spend millions of dollars, if it existed at all, would take up only a few lines and there would be no detailed reason given as to why the particular decision was made. On more than one occasion, a proposal would be rejected outright by the board of councilors under the Douglas administration or sent back for further information and, by the following meeting, the proposal would be approved and funds disbursed without any explanation for the complete turnabout. It was almost as if the hand of God, or the hand of someone, who considers himself to be God, came down and directed them to issue the funds regardless of their own independent view.”
The prime minister continued: “As if to further facilitate bad practices, the board allowed the SIDF to be operated for well over eight years without bylaws and also without any formal internal process for feasibility assessments, return on investment analyses, and risk assessments, despite distributing vast sums of money which belonged to the people of St Kitts and Nevis. It is worth repeating that, for the projects reviewed, in not even one instance was it possible to rely on internal controls to explain a transaction and the rationale behind it… In almost every instance, Ernst & Young reported it was necessary to interview third parties and request from them supporting documentation or search electronic databases and review correspondences, none of which formed part of the records of the SIDF, in order to attempt to piece together the story as to why our money was spent in the manner in which it was being spent under the Board set up by the former regime. Even with all of these efforts, there is still an absence of explanation for many of these very extraordinary expenditures.”
Harris revealed that Ernst & Young’s report shows that, since the inception of the SIDF ten years ago through the year 2014, the SIDF has been the beneficiary of approximately $1.5 billion.
“However, over this same period, the SIDF has spent over $1 billion of that $1.5 billion that it had received,” Harris reported on Tuesday in the National Assembly.
“Prior to the last general elections, two years leading up to that in fact, over $500 million was spent, almost doubling the normal annual expenditure of the SIDF since its inception. Among those rather startling levels of expenditure was the discovery that about $150 million was spent on miscellaneous grants and donations in the two years leading up to the 2015 general elections. You see the mindset, bankrupt everything rather than lose the general election. Most unfortunately, but not unexpectedly, the SIDF operations were just another example of the gross profligacy for which the last administration had achieved most notoriety,” Harris added.