Is our Provident Fund (FNPF) in safe hands?

  • 23rd February 2010
  • FNPF
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What is holding up the certification of FNPF accounts and the publication of its annual reports for the years ended 30 June 2008 and 2009?

The FNPF Act requires the accounts of the Fund to be audited and certified and its annual report to be published as soon as practicable after the end of each financial year. The Fund’s financial year closes on 30 June.

The publication of the 2008/2009 reports are now well overdue by any standards.

No explanation whatsoever has been forthcoming from the Board of the fund or the interim administration as to the reasons for the inordinate delay in complying with the requirements of the Act.

Meanwhile, there is a great deal of anxiety among the members of the FNPF as to the safety and security of their funds totalling over $4billion. This, moreso, because of the well known fact that FNPF is now being used as the State’s cash cow to keep its operations going through massive borrowings from the Fund.

FLP is reliably informed that the members of the Fund’s Board are refusing to sign off the accounts unless two very significant discrepancies totalling some $240 million are explained and the reasons for it disclosed to the members of the Fund. However, the authorities that be are reported to be objecting to this exercise in accountability and transparency from being carried out. Hence the delay!

The discrepancies reportedly relate to:

(i) the development costs of Natadola Bay Resorts developed
through an associated FNPF company, NR Ltd

(ii) the un-reconciled difference of about $40 million in the
Members Contribution Account

In the first case, FNPF books reportedly show approximately $400 million in equity and grants to NRL, whereas the NRL’s books reportedly show the value of the property and development costs at around $200 million.

So where is the difference of $200 million? It is not small money and members of the Fund have every right to an official explanation.

In the second case, it is reported that a discrepancy of around $40 million exists in the Members Contribution Account which remains un-reconciled. Again, this is a large sum and individual members must not be left to lose out on their hard earned contribution income.

In its 2007 Report, the auditors (KPMG) had expressed qualified audit opinion on the Natadola Development stating that the Fund had been unable to obtain the financial statements of the related companies due to a dispute with the minority shareholders who were responsible for the accounting and preparation of the financial statements.

That was almost two years ago. Since then information has come to light and the actual position should now be known. So, why the delay in getting on with the certification of the financial statements, and disclosure of the facts to members of the Fund?

KPMG has been auditing the accounts of the Fund for the past several years but has not in its report to the members of the Fund ever disclosed the substantial discrepancy in the Members Contribution Account. That too needs to be explained.

The auditors have also in the past several years not reported to the members the huge losses sustained by the Fund through its investment arm FNPF Investments Ltd (FIL) which had invested hundreds of millions in resort development and in a number of other companies which subsequently failed, resulting in the virtual write-off of substantial amounts.

Some informed sources argue that the auditors could be held accountable for professional incompetence/negligence and that the current Board may wish to pursue this possibility to recoup some of the losses sustained by the Fund.

On the other hand, if the auditors (KPMG) had drawn the attention of the Board and Management of the Fund to the losses sustained as a result of these imprudent investments and failure on their part to comply with or satisfy the requirements of the Trustees Act, then the Board members and senior management staff may be held culpable for failing to fulfil their fiduciary duties.