AUDIT INTO THREE STATE-OWNED MOZAMBICAN FIRMS REVEAL GROSSLY INADEQUATE INVOIVING PROCEDURES

MAPUTO, An audit of three State-owned Mozambican companies involved in a multi-billion US dollar loan scandal has revealed that the invoicing procedures at the firms — Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management) — were grossly inadequate.

The audit was carried out by the New York-based Kroll Associates, a leading firm of auditors and risk consulting, after the three firms were unable to service their loans taken from two European banks.

The loan from Credit Suisse to Proindicus was for 622 million USD, mostly spent on purchasing assets (such as patrol vessels) and services from the contractor, the Lebanon-based Privinvest group. The invoice for these assets and services which Proindicus showed Kroll was just one page long and that single page contains just 73 words, including the prices.

The full audit report by Kroll revealed here says the firm spoke to an industry expert who said invoices should include a clear and detailed description of all the assets and services provided.

The invoices provided to Kroll do not supply sufficient detail to gain comfort that the documents accurately reflect the true price of these assets and services, and therefore do not allow accurate accounting records to be maintained by the company,” the audit report notes.

The same was true of Ematum and MAM, which both showed Kroll one-page invoices lacking any significant detail. Indeed, the MAM invoice did not mention specific prices for any assets or services and the Ematum invoice only listed assets which were still to be delivered, and made no mention of those which had already arrived.

Kroll says it was able to add in the book value of the assets which had already arrived, prior to the invoice, to reach a grand total of 836 million USD, the same figure mentioned on the Ematum supply contract. The total loan to Ematum was 850 million USD and the remaining 14 million USD mostly went on bank fees.

The minimal nature of these invoices, the auditor notes, gives rise to potential breaches of certain articles in the Mozambique Commercial Code.

This Code, overhauled in 2005, makes it obligatory for companies to keep organized record books that are adequate for the enterprise, in order to provide chronological information on all the operations and to enable periodic balance sheets and inventories to be prepared.

Kroll warns that the lack of detail in the invoices may put the three companies in violation of this article. Furthermore, some of the assets, which certainly exist — such as MAM’s shipyards in Pemba and Maputo, and Ematum’s Ocean Eagle patrol vessels — cannot be found in the accounting records.

Kroll found that information required for a complete audit was apparently unavailable (or at least the companies refused to hand it over), and this would have implications for the companies’ obligations under the Commercial Code too.

There was no sign that the inventory of assets required by the Code had been kept, and the companies failed to provide Kroll with reliable balance sheet records � in breach of Article 60 of the Code which requires companies to prepare an annual balance sheet of assets and liabilities during the first three months of the immediately following year, to enter it into the inventory and balance sheet records, and to duly sign it.

Regardless of the Kroll independent audit, the three companies had a legal duty to publish audited accounts every year. There are accounts for Ematum for the 2013 and 2014 financial years, but nothing for 2015 or 2016. The company Ernst & Young was hired to audit Proindicus and MAM. Kroll notes that Ernst & Young could not audit MAM because MAM provided insufficient information. None of the three companies have audited accounts later than 2014.

Kroll says it checked the state of the assets and found that, while they had mostly been delivered, they were not functioning properly. In the case of Proindicus the vessels were not yet operational for lack of trained crew members, and the lack of a satellite contract that would allow the communications system to work. So although Proindicus was formed in 2012, by the time of the Kroll audit in early 2017 there were not enough trained sailors to man its boats.

Much the same was true of Ematum: the 24 fishing boats (21 longliners and three trawlers) and three Ocean Eagle patrol vessels existed but none of the assets are fully operational for several reasons, including a lack of trained crew, and the limitation on available working capital.

Part of the contract with Privinvest concerned a Land Operations Coordinating Centre for Ematum. Kroll could not verify that any site existed for this centre, or where its equipment was. Privinvest said the equipment had been delivered, but was not installed due to Ematum’s failure to provide a site or staff to be trained.

The Ocean Eagle vessels were intended to come with unmanned aircraft (Camcopter drones). According to Privinvest , two of the three drones were not delivered because Ematum did not provide appropriate staff for training. The third was supposedly delivered in September 2014, but Ematum could not tell Kroll where it was, or give any details about the price of the drones.

As for MAM, Kroll could confirm that its shipyard in Pemba has been partly fitted out but was unable to verify the capabilities of MAM to deliver the anticipated services at this site.

Bu the auditors could not check the existence of the Maputo shipyard, since at the time of completing the independent audit, access was not available. Privinvest told Kroll that work was ongoing to upgrade and fit out this facility, a process which has been delayed due to failures by MAM to provide access. Privinvest also said that training courses have been delayed because of MAM’s failure to provide suitable candidates.

Source: NAM NEWS NETWORK

AUDIT INTO THREE STATE-OWNED MOZAMBICAN FIRMS REVEAL GROSSLY INADEQUATE INVOIVING PROCEDURES

MAPUTO, An audit of three State-owned Mozambican companies involved in a multi-billion US dollar loan scandal has revealed that the invoicing procedures at the firms — Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management) — were grossly inadequate.

The audit was carried out by the New York-based Kroll Associates, a leading firm of auditors and risk consulting, after the three firms were unable to service their loans taken from two European banks.

The loan from Credit Suisse to Proindicus was for 622 million USD, mostly spent on purchasing assets (such as patrol vessels) and services from the contractor, the Lebanon-based Privinvest group. The invoice for these assets and services which Proindicus showed Kroll was just one page long and that single page contains just 73 words, including the prices.

The full audit report by Kroll revealed here says the firm spoke to an industry expert who said invoices should include a clear and detailed description of all the assets and services provided.

The invoices provided to Kroll do not supply sufficient detail to gain comfort that the documents accurately reflect the true price of these assets and services, and therefore do not allow accurate accounting records to be maintained by the company,” the audit report notes.

The same was true of Ematum and MAM, which both showed Kroll one-page invoices lacking any significant detail. Indeed, the MAM invoice did not mention specific prices for any assets or services and the Ematum invoice only listed assets which were still to be delivered, and made no mention of those which had already arrived.

Kroll says it was able to add in the book value of the assets which had already arrived, prior to the invoice, to reach a grand total of 836 million USD, the same figure mentioned on the Ematum supply contract. The total loan to Ematum was 850 million USD and the remaining 14 million USD mostly went on bank fees.

The minimal nature of these invoices, the auditor notes, gives rise to potential breaches of certain articles in the Mozambique Commercial Code.

This Code, overhauled in 2005, makes it obligatory for companies to keep organized record books that are adequate for the enterprise, in order to provide chronological information on all the operations and to enable periodic balance sheets and inventories to be prepared.

Kroll warns that the lack of detail in the invoices may put the three companies in violation of this article. Furthermore, some of the assets, which certainly exist — such as MAM’s shipyards in Pemba and Maputo, and Ematum’s Ocean Eagle patrol vessels — cannot be found in the accounting records.

Kroll found that information required for a complete audit was apparently unavailable (or at least the companies refused to hand it over), and this would have implications for the companies’ obligations under the Commercial Code too.

There was no sign that the inventory of assets required by the Code had been kept, and the companies failed to provide Kroll with reliable balance sheet records � in breach of Article 60 of the Code which requires companies to prepare an annual balance sheet of assets and liabilities during the first three months of the immediately following year, to enter it into the inventory and balance sheet records, and to duly sign it.

Regardless of the Kroll independent audit, the three companies had a legal duty to publish audited accounts every year. There are accounts for Ematum for the 2013 and 2014 financial years, but nothing for 2015 or 2016. The company Ernst & Young was hired to audit Proindicus and MAM. Kroll notes that Ernst & Young could not audit MAM because MAM provided insufficient information. None of the three companies have audited accounts later than 2014.

Kroll says it checked the state of the assets and found that, while they had mostly been delivered, they were not functioning properly. In the case of Proindicus the vessels were not yet operational for lack of trained crew members, and the lack of a satellite contract that would allow the communications system to work. So although Proindicus was formed in 2012, by the time of the Kroll audit in early 2017 there were not enough trained sailors to man its boats.

Much the same was true of Ematum: the 24 fishing boats (21 longliners and three trawlers) and three Ocean Eagle patrol vessels existed but none of the assets are fully operational for several reasons, including a lack of trained crew, and the limitation on available working capital.

Part of the contract with Privinvest concerned a Land Operations Coordinating Centre for Ematum. Kroll could not verify that any site existed for this centre, or where its equipment was. Privinvest said the equipment had been delivered, but was not installed due to Ematum’s failure to provide a site or staff to be trained.

The Ocean Eagle vessels were intended to come with unmanned aircraft (Camcopter drones). According to Privinvest , two of the three drones were not delivered because Ematum did not provide appropriate staff for training. The third was supposedly delivered in September 2014, but Ematum could not tell Kroll where it was, or give any details about the price of the drones.

As for MAM, Kroll could confirm that its shipyard in Pemba has been partly fitted out but was unable to verify the capabilities of MAM to deliver the anticipated services at this site.

Bu the auditors could not check the existence of the Maputo shipyard, since at the time of completing the independent audit, access was not available. Privinvest told Kroll that work was ongoing to upgrade and fit out this facility, a process which has been delayed due to failures by MAM to provide access. Privinvest also said that training courses have been delayed because of MAM’s failure to provide suitable candidates.

Source: NAM NEWS NETWORK