ALARM bells raised by the Auditor General’s Department about poor governance practices in equity investments made by the National Insurance Fund (NIF), and activities of the Rehabilitation Programme — both under the Ministry of Labour and Social Security — are now the subject of investigations by law enforcement.

Permanent secretary in the Ministry of Labour and Social Security (MLSS) Colette Roberts Risden revealed Tuesday that the investigation related to NIF investment activities was being carried out by the Financial Investigation Division (FID), while that of the Rehabilitation Programme is being conducted by the Major Organised Crime and Anti-Corruption Agency (MOCA).

The Rehabilitation Programme provides assistance to the most vulnerable through grants for emergencies, education, social intervention, and rehabilitation.

Auditor General Pamela Monroe Ellis and her team identified, during a special investigation, several breaches of the policy governing that programme, as well as payments made under questionable circumstances. A report was tabled in Parliament in February this year, containing findings on the NIF’s investment portfolio, as well as the Rehabilitation Programme.

The auditor general and the permanent secretary shed more light on the findings of that report when they appeared before Parliament’s Public Accounts Committee (PAC) on Tuesday.

The report revealed that the NIF had breached its own investment policy guidelines in a number of transactions. It highlighted purchasing decisions related to the acquisition of shares in 19 companies at a cost of $2.78 billion and US$2.34 million, between February 2015 and September 2017, and stated that the auditors were “not satisfied that NIF consistently and adequately conducted qualitative and quantitative assessments prior to deciding on its investment options, potentially exposing the NIF to material financial losses on the individual investment and by extension the overall portfolio”.

On Tuesday, committee chairman Mark Golding said: “The idea of buying investments without having done proper analysis of what you’re buying is of concern, given that this unit is managing the public pension fund of the country, which has issues anyway in terms of adequacy of funding, so those issues would only be worsened if it’s not being managed diligently or honestly”.

Roberts Risden, who declined to say much on the matter due to the ongoing investigations, insisted that some action has been taken since the report was published, including a full detailed review of the NIF’s investment policy.

“Notwithstanding that (the review), instructions have been given that the policy must be faithfully followed as is documented. Since the report, all matters now go to the investment committee or the board for approval.”

According to the permanent secretary, the investment policy was last reviewed and approved by the Ministry of Finance in 2014.

At the same time, she emphasised that the NIF does carry out some amount of due diligence when investing.

“Whenever there is a new investment there is usually an analysis that looks at the company, the stock trend, and so forth. What may not have been faithfully done is when you have, for example, things that are already in your portfolio and you’re going to be expanding. The analysis is not as detailed as if it were a new company… there is varying degrees of analysis that is done based on the particular investment,” she explained.

Golding argued that it would be better to subject those securities to ongoing assessments outside of the instances which Risden mentioned.

“Because [what] was a good investment three years ago may not be [now] because the competitive landscape may have changed,” he pointed out.

In relation to the Rehabilitation Programme, the Auditor General’s Department identified some major deficiencies in the management processes. Among the key findings were that 4,749 direct grant payments totalling $84.8 million were made to beneficiaries instead of suppliers, which heightened the risk of these grants not being used for their intended purposes. The MLSS is said to have not adhered to its monitoring and evaluation policy for projects under the programme and therefore does not know whether the programme is achieving its objective.

The report also cited instances of conflict of interest where payments of $2 million were made to staff members between April 2012 and March 2017, and two companies owned by a staff member. It was also reported that 64 payments totalling $1.7 million were made to family members and one friend of an accounting clerk in the public assistance department, which administers the grants.

The MLSS, in its written response to the report, has emphasised that among other things, it is reviewing internal procedures and controls, has held re-sensitisation sessions with staff in monitoring activities, and that as of this month it will crossmatch Taxpayer Registration Numbers in the human resource database of the ministry with those in the public assistance division’s database.