A former senior officer of the Vanuatu National Provident Fund (VNPF) says the current Board of the Fund should terminate the current management for professional default for not paying members their dividend for the Financial Year 2013. He says government must intervene in VNPF quickly to prevent members’ funds from being depleted further.
The ex-senior officer concerned who wished not to be identified, but whose identity is known by the VNPF management, made his comment following numerous articles and letters in the Daily Post and VNPF’s General Manager’s (GM) response to members’ concerns in which he alluded “Facts are there to guide members…avoid rumours and speculations” on Daily Post Issue 4308.
In a letter to the Daily Post he called the GM’s piece with facts and figures as “absurd” and added that members of the VNPF were justifiably concerned that no declaration of interests/dividends were made for 2013.
He said the GM’s response to Fund members’ concerns purported “to justify and dilute members’ concerns on the financial inability of the Fund to meet its financial obligations to its members”.
The Fund’s former senior officer was particularly concerned that the VNPF GM’s response to members and stakeholders stipulates in parts, that the current management came in 2013 and is currently cleaning up the mess done by previous Board and Management.
“Being a member of the previous Fund management team, I wrote an email to the Fund GM on 4th November seeking his clarification and requested that he be specific on what the mess is/or are? I also requested if he could be specific on which past VNPF board and management created these mess he’s referring to with specific financial periods during the tenure of the former Board and Management?”
The former senior officer said he did not receive any positive answers to his email questioning the GM’s “absurd” facts except that the GM said he (ex-officer) raised some fundamental points and that the Fund would consider these.
The man then said that when he left the Fund in 2012 after eight years there, VNPF did not have any non-performing assets.
But before he left, during his 8 years of service the VNPF had only four non-performing assets.
These were the Offshore Investment with Pacific Century, Milai Property on Santo, Bouffa Property on Efate, and the GM’s Residence at No. 3, Port Vila.
“Given the financial impacts on the Fund’s Profit & Loss Statement, management at that time explored options and decided to re-call the Offshore Investment Funds, dispose of GM’s residence, and develop Bouffa and Milai properties to their previous principle activities which is farming while exploring members’ housing models and concepts that is viable and sustainable.”
He said, “reading the Fund GM’s purported facts, members may accept it and perceive that the past Boards and Management created this mess his management is cleaning and assume to rectify.
“I found the Fund GM’s purported facts to be of no substance and only attempts to justify the current management’s inability to perform to member’s expectations and declare dividends to members.
“Being the head of Fund Management Team and assert to blame the past boards and management poor decisions to justify the current management team’s poor performance is unethical and unprofessional. The current board should terminate the current management for professional default,” the ex-VNPF senior officer said.
He implored that what is needed are sound and achievable strategies to turn around the Fund rather than depriving the members the right to their share of return on their funds.
“Given the current financial situation the Fund management priority agenda should be management cost restructure. This was not part of the strategy and members should compel the management and board to restructure management expense.”
This ex-senior officer of VNPF added that the GM should have never accused past management and board for the situation the Fund is faced with, but he should accept that there are issues to address and take it as part of one’s agenda to rectify them.
He said he had highlighted in his email to the Fund GM the non-performing assets but he did not dwell in detail on that, and he thought the GM “should be open enough to inform the members of his plans and from there members could ascertain and judge whether his plans will work”.
This former VNPF senior officer also expressed concerns about plans to restructure to a level that is going to increase the operating costs of the Fund.
“I have highlighted a significant portion of the Fund’s assets as non-performing and coupled with the high cost of operations, the Fund had no other alternative but to pursue a fundamental restructure.
“Restructuring as mentioned in the management’s media publicity is too shallow and I am concerned that it will not address the key issues being faced by the Fund. The Fund management seems to put in a structure as their strategy when it is strategy that determines structure.”
He said that the Fund is in dire straits and in need of full revamp of operations and expense management, investment, and quality management but the manner in which it is being managed is of major concern.
“This is evident when the Fund GM had to use RBV to cease a Vt1.8 billion investment in Erangorango Estate comprising of 130 hectares when the decision should have come from him in the first place. The current board and management set a very bad precedent, which paints a picture of no leadership in VNPF and it is serious for a huge financial institution as VNPF.”
He suggested that the Fund GM should include in his purported facts that the current management and board acknowledge the achievements and efforts of past management and board to grow the Fund’s Balance Sheet to where it is today.
He added that the Fund’s management should be firm and to inform Fund members and stakeholders that, currently the Fund is unable to declare interest to its members in financial year 2013 due to the following alleged reasons:
“1) Previous Board and Management always consider General Reserves Accounts position when declaring interest to Fund members. In doing so, previous management advised the Board on what would be the nominal and real interest rate for board’s considerations and deliberations.
“2) The current Fund GM was one of the Directors which made up the Fund’s Decision Making body or Executive Management in 2012 when the Fund declared 5.25% well above its Net Profit or its financial ability for the financial year to meet its financial obligation to its members. As a result of that decision it had a severe impact on the Fund’s General Reserves Accounts (GRA).
“3) Equity Investment in Submarine Cable of VT1.8 billion came to previous management and board five times for discussions and considerations and after thorough due diligence on the investment they decided not to pursue the investment due to investment risks and earning risks on the project.
“After thorough due diligence, the financials looks skeptical as no dividends would be paid after 18 years. More so, it would be infringed of Funds Investment Policy Guidelines. The new Investment Policy Guidelines that the Fund GM referred to is still in draft form and has not been approved by the Minister of Finance and Reserve Bank of Vanuatu as required by the VNPF Act. According to current Investment Policy Guidelines the Fund is prohibited to invest in new equity entity.
“The current board and management went and approved the investment which it will take the Fund 20 years to recoup the funds invested in submarine cable. “This is the vital piece of this investment that the Fund management should mention to members so that members can judge for themselves if current management and board are prudent in their investment decisions that will financially benefit the members.
“4) Investment in Wilco Hardware property of almost Vt1.5 billion came to previous management and boards agenda for discussions and considerations. After thorough due diligence they resolved not to pursue the investment due to earning risks.
“The current board and management went and approved the investment in Wilco Property because the key player in this investment is the CEO of Wilco company who sits on the Fund’s Investment Committee and (allegedly) drive the due diligence to favour Wilco with wider earning risks on the members’ funds.
“This transaction was pursued with the aim of bailing off Wilco company and its shareholders to improve the company’s profit and loss and balance sheet, not to benefit the members.
“The Fund management should mention to members that it will take the Fund 17.9 years to recoup the invested funds in Wilco Property so that the members can judge if the management and board have been prudent in Wilco investment.
“Management never informed the members what was the nominal and real cost on their funds versus the real return on their investment so that they judge if management and board are prudent in their due diligence.
“5) Further the Fund GM should inform the members on the following few non-performing investments which some of them are under mortgage and current management and board utilized members’ funds to retire their debts with the aim of improving their business financial positions: Center Point – Vt390 million; Club Vanuatu Building – Vt250 million; Land at No.2 – Vt55 million; Patrick Heinz Property – Vt40 million; land close to Pekoa Airport – Vt35 million; land at Etas – Vt3 million; Banyan Estate – VT185 million; CL Agency Loan (which may still be in default) – Vt35 million; New Commercial Building Project abandoned and write-off to Profit and Loss – Vt87 million.
“The Fund GM should also include Investment in Submarine Cable and Investment in Wilco Property which both totaled up to Vt3.3 billion with severe earning risks. In total the Fund had in its books non-performing investment value of over Vt4.3 billion.
“6) The Fund GM should be bold and confirm to Fund members that Financial Year 2013 was the first time in the history of the Fund that it did not declare interest to its members.
“7) The Fund GM should publicly inform the members that FY2013 was the first time in the history of the Fund that current management and board breached the VNPF Act and did not deduct Special Death Benefit (SBD) which runs the risk of depleting the SDB fund.
“8) The Fund GM should inform the Fund members that since the Fund inception, October 2014 was the first time in the history of the Fund that Reserve Bank of Vanuatu (RBV) as the Fund’s regulator cautioned the current Fund Board and Management for poor due diligence on one of its dodgy investment (Erangorango Estate) dealings for a value of Vt1.8 billion for 130 hectares.
“9) The Fund GM should reveal to members that had the Fund declare interest to members in FY2013, VNPF would be pronounced technically insolvent.
“10) Significantly, the Fund GM should inform the members that management expense is not on his priority agenda, although the Fund is in critical financial demise. Strategically, this would be the best strategy to escape insolvency and provide members that level of comfort that their funds are safe. However, the Fund Management chose not to inform the Board to pursue this path in order to rescue the Fund. Instead the current management sees it fit and prudent to deprive the members from their earnings on their investment funds,” the former senior officer alleged.
The ex-senior officer commented on the current structure alleging “this structure is far too expensive and will continue to deteriorate the Fund’s viability and financial ability to meet its financial obligations to its members.”
He said he had seen a copy of the structure and this structure only fits in well for a billion dollar Fund or Vt100 billion Fund.
Comparatively, “VNPF is only a small Fund with a net asset of Vt16 billion and this complex structure will explode the management expense”.
Under this new structure he said the Fund’s four Directors, (who will be performing the job of one person before) and costing annually over Vt30 million, he doubted these people are being utilized on full capacity.
“My observation is they often over-stepped managerial roles/responsibilities.”
He concluded his concerns by recommending that the Fund GM direct the board to approve for cost restructure and thereafter he should outline change in management policies and strategies for the Board to approve to include implementation of a new and revamped organization structure.
“My recommendation is for the Fund GM to direct the board to approve for complete restructuring.
“The approach should also include an outline of change management policies and strategies that should be implemented to achieve cost savings over the long term and a sustainable organization structure.
“If he cannot foresee the need for a restructure and how it should be implemented, then the Board should take appropriate measures to deal with the current management for professional incompetency because every second of delay is only costing us the members and the clock is ticking.”
The VNPF General Manager was contacted by email for his comments but none was received at the time of going to press.