Serious defects in MRDC records

National, Normal

The National, Friday, June 3rd 2011

ONE of the country’s richest public entities, the Mineral Resources Development Company (MRDC), has fallen foul of the auditor-general and the parliamentary Public Accounts Committee (PAC).
The company, which holds the government’s equity in mineral and petroleum developments and manages all landowner entities, had “serious defects in the records, shareholding and accounts”.
Such was the condition of its accounts that the auditor-general could not form any opinion and disclaimed the audit.
The AG said: “Significant material adjustments were identified in the trial balance provided by the management.
“The magnitude of accounting adjustments indicated that management accounts brought before the board have material errors. The failure to perform key control reconciliations represented a significant failure of the company’s control system and increased the risk of financial statements being materially misstated.”
Much of the adjustments were blamed on lack of understanding of accounting issues, none or no timely reconciliation of the general ledger, shortages of suitable staff, high turnover of staff and human error.
Reporting on the AG report, the Public Accounts Committee told parliament that the finding by the AG was serious and that “it is not a minor agency of government”  and ought to perform better.
 “By 2008 there were still clear evidence of accounting weaknesses within MRDC. Despite the AG’s Report and despite the serious and immediate nature of some of the major problems facing MRDC little had apparently been done by 2008 to remedy these problems or to implement and maintain effective and lawful accounting procedures.
“In other words the findings and recommendations of the auditor-general are simply ignored by the board of a complex and large commercial entity.”
The PAC noted that a new managing director in Augustine Mano was appointed in 2008 and hoped that audit findings and recommendations could meet with more serious attention than had been the case in past years.
Among others, the PAC also noted that MRDC had not lodged its tax returns for the years 2005 to 2007 inclusive.
The company financial statements showed investments in Highlands Pacific Ltd of K1,849,220 which stood at K4,751,089 in 2007. The government transferred MRDC holdings in Highlands Pacific  to the Independent Public Business Corporation in August 2002 but in June of the same year transferred it back.
While MRDC maintained it was the legal owner of the shareholding, the AG could not confirm the ownership. Matters such as this in any commercial corporate entity should be the subject of urgent attention by the board and senior managers, the PAC said.
Another outstanding issue pertains to the placement of K7.7 million in escrow with a law firm to meet certain liabilities pertaining to the sale by MRDC of 5% of its participating interest in Porgera Joint Venture to Oregon Minerals Ltd in May 1999.
The agreement require that once all liabilities were settled the difference of the funds in escrow be paid to MRDC. The funds and interest accruing to it belong to MRDC and had been calculated in December 2008 at K11.6 million.
The AG and the PAC found that no meaningful progress had been made by MRDC to obtain these funds by 2008.
These and other findings caused the PAC to report to parliament that such a state of affairs by a major commercial public entity was “completely unacceptable”.