Oversight of NIF, resort company now under control
PERMANENT secretary in the Ministry of Labour and Social Security Colette Roberts Risden yesterday pointed to a runaway oversight system in the relationship between the National Insurance Fund (NIF) and its resort management company (NIFRMCOL), which may have facilitated weaknesses that led to more than $187 million being transferred from the fund to the company in 2017 without her approval.
The breach was uncovered in a 2018 internal audit ordered by the permanent secretary after she became increasingly alarmed about activities concerning the operations of the NIF and NIFRMCOL at the time.
The findings of that audit are now under review by the Public Accounts Committee (PAC).Roberts Risden told the PAC yesterday that a lack of clear separation between the NIF Advisory Board, and the board of NIFRMCOL saw the emergence of practices that were not always in line with good governance.
“Based on their construct and how decisions are taken and how things had functioned prior, I would say that I was not necessarily the most comfortable…the audit allowed me to see what was happening there,” she told the committee.
Roberts Risden recalled being invited to a ground-breaking event at the hotel in early 2017, works for which no procurement document had come before her.
“I was concerned about what was happening at the hotel because by this time I was becoming aware of what was happening there, and I realised the hotel was not doing as well as it should.
I became concerned because while there was general talks, I had not seen any procurement that had been done,” she explained.The internal audit report said between February 12, 2017 and June 29, 2017, more than the $187 million was transferred from the NIF to NIFRMCOL without the prior approval of the NIF Board or permanent secretary, and that notwithstanding a management agreement, the auditors could not confirm whether full operation of the hotel was transferred to the manager, Melia Hotels International.
Roberts Risden explained that the structure of the NIF was difficult to understand, as despite not having its own legal status, the fund was treated like a corporate body over the years despite being a department of the ministry.
“That in and of itself creates a number of challenges,” she said.She stressed that because of the unique nature of the NIF and its board, and relation with the finance ministry, she had not been involved with the fund’s daily operations.
Roberts Risden pointed out, for example, that the NIF’s advisory board itself was appointed by Cabinet, but the board for NIFRMCOL, whose membership comprised a subset of the main board, were not.
She noted that since the findings of the audit, changes have been made, including some amount of separation between the NIF and investor, through the creation of a dedicated board for the NIFRMCOL, which now has oversight for the Melia Braco village resort.
The management agreement signed in 2014 pointed to the head of the NIF being the owners’ representative, which effectively made the civil servant, the managing director for the company, who would also be reporting to the permanent secretary.
The ministry then hired a consultant in 2018 to interface directly with the management of the hotel in order to resolve this anomaly.The ministry says changes have since been made so that the NIF Advisory Board is now required to approve all transfers from the fund to NIFRMCOL.
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