Tue | Jun 30, 2015

PCJ ordered to repay PetroCaribe funds

Published:Friday | July 9, 2010

Mark Titus, Business Reporter

The Petroleum Cor-poration of Jamaica (PCJ) wrongly diverted millions from the PetroCaribe Develop-ment Fund (PCDF), which it used to enrich it own bank accounts, a probe of the agency has found, and now the Auditor General is recommending that the energy agency make restitution.

The watchdog over Government's financial resources has also recommended, given weaknesses detected in PCJ's governance structure, that a wide audit of other public bodies be conducted.

Auditor General Pamela Monroe Ellis reported to Parliament on June 17 that PCJ had transferred and/or retained investment funds and interest income due to the PetroCaribe Fund totalling J$14.7 million in the two years in which it managed the facility on behalf of the Government.

The fund is now managed by the Development Bank of Jamaica (DBJ).

Monroe Ellis' review of PCJ was prompted by the findings of an audit of the energy agency by Papineau Consulting Inc (PCI) that focused on PCJ's corporate governance structure, but also turned up anomalies in the management and internal controls.

PCJ's acting general manager Nigel Logan told the Financial Gleaner on Tuesday that his agency was in the process of repaying the diverted funds.

"We have made formal arrange-ments with PetroCaribe to repay and have commenced the repayment of those monies, and we expect to complete this by the end of this fiscal year," he said.

But Logan did not provide details of the amount already paid, nor the timeline to clear the liability.

Formulated in January 2006, the Venezuelan-backed PetroCaribe Fund manages the proceeds of the PetroCaribe oil facility that Jamaica is allowed under the agreement to treat as loan proceeds.

The funds were to be lodged into PCJ/NCB Account No. 352434116.

In her review of the PCI report, Monroe Ellis said that during its investigation, PCI discovered that there was an "inappropriate transfer of J$9.5 million of PCDF monies to PCJ's main operating banking account."

Another J$4.065 million of interest income from the invested proceeds was also determined by the Auditor General to have been retained by PCJ when management of the Fund was transferred to DBJ; while another J$1.127 million of interest income was directed to PCJ/NCB Account No. 108, with no trail to show that the monies had been made it back into the PCDF account.

An equivalent amount was transferred to the PCJ's Canteen Account No. 023.

According to the PCJ records, the J$9.5 million was withdrawn to reimburse Petrojam Limited for monies advanced to PCDF in March 2007, but according to PCI, this was not so as PCDF had already repaid the amount owed to PCJ.

"PCJ also never forwarded these funds to Petrojam," PCI said in its report.

Another J$480,000 was also found to be improperly deposited into the energy agency's main account, but the Auditor General was unable to determine whether the monies belonged to the PCDF, as it was not established whether account number 352434116 contained only PCDF funds.

The PCI also charged that on April 2, 2007, "PCJ transferred J$43 million of PCDF monies into the PCJ's main operating account so that it could clear its cheque for closing the purchase of land for a PETCOM station."

While the amount was repaid 10 days later, the audit could not determine whether the monies were used for the stated purpose.

The PCJ was eventually ordered to transfer the PCDF to DBJ by July 1, 2007 but ignored the Finance Ministry's directive, choosing instead to invest a principal amount totalling $3.7 billion between July 31, 2007 and February 7, 2008.

When it eventually released the Fund to DBJ, the PCJ held on to the interest income from the invested monies, totalling more than J$4 million. It retained the funds in the PCJ/NCB account 352434116, except for J$633,147, which was transferred to the PCJ's main account.

Monroe Ellis' report was sent to Speaker of the House of Representative Delroy Chuck; chairman of the Public Accounts committee Dr Omar Davies, PCJ board chairman Catherine Phipps, and the permanent secretary in the Ministry of Mining and Energy, Hillary Alexander.

mark.titus@gleanerjm.com