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PSA President Watson Duke.

An audit of the Public Services Association’s (PSA) finances, ordered by the High Court in January 2020, has reported overspending that exceeded its income by $6.3 million in the last four years, questionable procurement practices, as well as a pension plan in limbo. It also flagged an unusually high frequency of reimbursements to PSA President Watson Duke.

The audit of the years 2014 and 2015 was done by chartered accountants E Augustus Alexander and Company.

The report’s leak comes less than six weeks before Tobagonians return to the polls for the Tobago House of Assembly (THA) elections on December 6, where Duke, as political leader of the Progressive Democratic Patriots (PDP), is leading his party against the People’s National Movement for control of the Assembly. The PNM lost significant ground in the THA polls in January and tied 6-6 with the Duke-led party for control of the THA.

Apart from his role as PSA President, Duke is also the THA Minority Leader and the incumbent for the Roxborough/Argyle seat.

The audit from E Augustus Alexander and Company identified “reportable conditions” under international auditing standards. “Reportable conditions include matters coming to our attention relating to deficiencies in the design or operation of the internal control structure that, in our judgement, could adversely affect the entity’s ability to record, process, summarise and report financial data consistent with the assertions of management,” the audit stated.

Responding to the audit report’s findings, Duke distanced himself.

He said, “The PSA is a sovereign organisation that exists within the framework of its constitution. This matter, and all financial matters, falls within the ambit of the PSA’s General Council (financial body) and no one else.”

However, former PSA general council members, who served during the financial years 2014 and 2015, alleged that Duke has long been making financial decisions without monthly general council meetings, financial committee meetings or the annual conference of delegates–as required in the union’s constitution.

They claimed the last conference of delegates was held in 2012, meaning that, since then, all financial transactions done by Duke were done without the proper constitutional oversight and approvals. The conference of delegates, according to former general council members, is designed to act as a check and balance of the union’s financial management.

Under the PSA’s constitution, spending can only be authorised by the union’s president or its general council.

In January 2020, High Court Justice Devindra Rampersad ordered that an audit be performed by the month’s end after a group, calling themselves concerned public officials, filed a legal claim against the Watson Duke-lead executive of the PSA.

The group accused Duke’s executive of failing to follow proper procedure in the handling of the union’s affairs, alleging, among other things, that there was no financial accountability.

In Justice Devindra Rampersad’s ruling, he said, “The court is satisfied that there is sufficient evidence in relation to the unlawful expenditure.”

Before Justice Rampersad’s order, the PSA was last audited in 2014.

The PSA has more than 80,000 members, from more than 100 organisations, with around $26 million in reported assets.

Duke has served as PSA President since 2008.

PSA’s expenditure exceeded its income

The audit found that during the last four years, PSA’s expenditure exceeded its income by $6.3 million.

It found that the PSA was in a state of asset deficiency, with its year-end current liabilities exceeding current assets.

Asset deficiency, according to the financial website Investopedia, suggests a company is in financial distress and may default on its obligations to creditors and possibly head to bankruptcy.

Auditors suggested the losses were a potential threat to the PSA’s future, “Continued deficits will adversely affect the liquidity position of the Association, negatively impacting its ability to discharge its obligations to creditors and ultimately, the ongoing operations of the Association.”

According to Section 29 (1) of the Trade Union Act, a general statement of receipts, funds, effects and expenditure of every trade union registered under the Act shall be sent to the Registrar before June 1 every year and shall fully show the assets and liabilities at the date, and the receipts and expenditure during the year preceding the date.

A trade union, or any acting trade union officer, found in contravention of the section is liable on summary conviction to a measly fine of $200 per offence.

Any person who wilfully makes, or orders to make, a false entry in, or an omission from, the general statement is liable on summary conviction to a fine of $2,000.

Procurement issues

In section nine of the audit report presented to PSA management on August 4, 2020, auditors found that there were fundamental breakdowns in the procurement process, for which no reasonable explanations were provided.

They found that the controls designed to protect the interest of the Association were being circumvented by the executive.

“The Auditors noted an unusually high frequency of reimbursements to the President. On enquiry, we were told these were purchases made on behalf of the Association. On further enquiry by the Auditor, as to why the sourcing of these standard items was not obtained using the Association’s established procurement, the auditors were informed that is how it happened based on instructions at the time,” the report stated about the current status of procurement.

In March 2021, Guardian Media’s Unspun revealed that Duke was under investigation by the TTPS Fraud Squad for allegedly receiving a $521,000 pension payment from the PSA in 2019.

Duke allegedly received payment, in three tranches between September and November 2019, after promising to resign as the union’s president.

In September 2019, Duke declared during a press conference that he was stepping down.

Instead, Duke contested and won the PSA presidential election in December 2020.

Assets

Section five of the report raised issues with the fixed asset register, indicating that it “does not reflect the current values, locations, asset numbers and descriptions of all the assets held by the union.”

This, they indicated, can lead to two implications which include, “that assets may be transacted without the knowledge or authority of the union,” and “the absence of a complete fixed asset register may result in the value of the union’s assets not being adequately represented in the Financial Statements,”

PSA’s financial statement for February 2021 reported assets of more than $26 million.

Of that, more than $20 million was reported in the financial statement to be in property, plants and equipment.

A PSA financial statement in February reported that the union had $865,078 in hand and at the bank, while it claimed there was another $3.6 million in its pension fund.

Pension plans

During enquiries, auditors said they were told by PSA’s management that it was unaware of the status of the organisation’s pension plans.

The organisation failed to provide any evidence of registration of its pension plan and was unable to provide any information on the operations and status of its pension plans, according to the report.

It was found that, as a result of this failure, future pension expectations for employees, as well as the association’s contribution obligations were significantly impacted. There are at least 40 workers who have been contributing to the pension plan.

Relationship Between PSAMASCOL and PSA

While the PSA’s assets were found to be valued at around $26 million, the assets of PSA Management and Services Company Limited are worth more than $100 million, according to auditors.

Formed under former PSA president Jennifer Baptiste-Primus, PSAMASCOL was created by the PSA to conduct commercial real estate business on behalf of the union.

A union is barred in the constitution from conducting commercial business as an entity.

In 2013, according to media reports the PSA through PSAMASCOL leased 3.1 hectares of land in St James–formerly called PSA Grounds–to DTL Property Developers.

In the agreement, PSA was supposed to receive $45 million upon the completion of a housing development.

The project was never completed and has been subject to legal claims, with clients taking the developers, DTL Property, to court.

WIth PSAMASCOL remaining active, auditors expressed concern that there is no defined relationship between PSAMASCOL and the PSA.

Auditors found that PSAMASCOL entered into agreements with third parties, on behalf of PSA, to develop PSA leased lands and other real estate ventures.

“Currently these real estate developments amount to over a hundred million dollars, approximately five times the total assets of the PSA; are over budget and years late on completion/delivery times; are occurring in a period of deflating real estate prices, and are subject of legal actions by property purchasers for breach of contract by the property developers,” section two of the report said. As a result, auditors said it could not conduct an independent assessment of the reduction in the recoverable value of fixed assets caused by the PSA’s relationship with PSAMASCOL.

Membership

The PSA claims to have more than 80,000 members but according to the 2020 audit by E Augustus Alexander and Company, there is no active member list available.

It noted there was also no complete record to determine the financial status of members concerning the payment of dues to the association.

They outlined the implications of this stating, “This leaves critical gaps in the application of governance to the Association. Also, this represents a failure of internal controls to ensure its records reflect the transactions of the Association,” the report said.

It recommended that management should, with the greatest of urgency, develop and implement a membership system that provides the current financial status of members.

It also recommended that there should be a consistent reconciliation (minimum monthly) between the financial records and the membership database of dues received and members accounts credited. According to PSA financial reports in early 2021, monthly income from membership fees averaged between $1.3 million to $1.5 million.

In comparison, executive expenditure averaged a little more than $273,000 per month, with $149,062 of that being executive salaries, according to the statement.

Another $37,900 went towards monthly allowances for the likes of travelling and cell phones.

In March 2021, when the PSA reported more than $1.4 million in revenue, personnel expenditure accounted for $767,000-$276,116 was for executive expenditure; $279,913 for salaries for general staff; $116,440 in Other Staff Cost.

Professional fees accounted for $121,992, while legal fees accounted for $102,000.

There was a $39,000 bill for stationery and office supplies and $29,000 bill for telephone, internet and cable.

The PSA reported a $240,000 net income that month.

Policies and procedures

The audit found that there were no current policies, procedures or documents to guide the operations of the organisation.

“There is a dependence on verbal instructions based on previous practice, which is specific to the person performing the function…this will create gaps in the ability of the organisation to function in the absence of said personnel,” section seven of the report read.

Because of the absence of documented guidelines, auditors said there will be a challenge to hold people accountable for actions.

It was recommended that all existing policies, procedures and practices be reviewed, documented and approved by management.

Oral Saunders: I told you so. You were warned

According to former PSA general secretary Oral Saunders, who was elected in 2009 as part of Duke’s Team Pioneers team, he warned PSA members about Duke years ago.

He said that mere weeks after Duke’s team was elected in 2009, he expressed concern about certain serious financial transactions.

Saunders believed the audit report was grounds for members to call for Duke’s resignation.

“As it was in the beginning, so it remains. This report once made public has the capability to force the resignation (of PSA President Duke) and a sincere apology to our union, the PSA, and my fellow members.

“This report indicates that absolutely nothing has changed in terms of accountability, prudential management, transparency or even ethical behaviour that shows respect for the financial sacrifices of every grassroots member.”

Saunders said the findings of the report were a clear indication that the union is failed, with a lost executive.

He claimed that a parlour selling snacks or a bar likely had had better financial accountability than the PSA.

“To think that its leader is desirous of controlling the purse of the THA or worse, becoming the Prime Minister of this country is mind-boggling,” the former PSA general secretary said.

“The most distasteful aspect of this report speaks about the pensions of the employees of this organisation. It is unconscionable for the staff to be placed in such a precarious position, which reflects the soul of the PSA executive.” Saunders called on the Registrar of Trade Unions to investigate possible violations of the Trade Unions Act.