Jul 07, 2020 Last Updated 11:48 AM, Jul 5, 2020

Secret report reveals widespread salary and allowance rorts at USP

  • Jun 11, 2020
  • By  Michael Field
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Senior academics and staff at the University of the South Pacific in Suva are accused in a special audit report of manipulating allowances to pay themselves hundreds of thousands of dollars they were not entitled to, as several Pacific governments say Fiji is using the COVID-19 emergency as a cover to take over the university.

The scale of allowance abuse has outraged Pacific member nations of USP, including Nauru, Samoa, Tonga and New Zealand. USP staff are accused of helping themselves to money intended to educate the people of the Pacific.

The payments took place under the leadership of Fijian Vice-Chancellor Rajesh Chandra. They were revealed by his replacement, Pal Ahluwalia on November 1, 2018.  Since then, Vice Chancellor Ahluwalia and USP Pro Chancellor, Winston Thompson, have been at loggerheads, with their opposing factions rallying behind them. This week a contentious meeting of the Executive Committee of USP’s Council installed Professor Derrick Armstrong as acting VC after suspending Ahluwalia.

Ahluwalia’s whistle-blowing forced Thompson to bring in the Auckland office of international accounting firm BDO to investigate. BDO Auckland’s report was submitted to USP on August 21 last year, but kept secret.

The report has now been leaked as Ahluwalia comes under attack from USP’s host government, Fiji. Critics claim Fiji is trying to nationalise the 52-year-old regional institution. Fiji’s education minister, Rosy Akbar, denies this is the case.

Along with the 114-page BDO report, a cache of USP documents reveal attempts to drive Ahluwalia out of the country.

Ahluwalia, born in Kenya and schooled in Canada, was appointed by the USP Council as VC to replace Chandra. BDO suggests this was against the wishes of Thompson and Fiji, and evidence is revealed that efforts began, even before Ahluwalia arrived, to frustrate his work.

In May last year Ahluwalia revealed the financial and salary rorting underway and presented the USP Council with a paper, “Issues, concerns and breaches of past management and financial decisions.”

BDO was hired to investigate.

In the report, BDO names 25 senior USP academics and staff who, it is alleged, were involved in payment manipulation. Most of the cases involved a system of allowance payments not usually seen in other universities.

While BDO dismissed some of Ahluwalia’s allegations, other unusual salary and allowance arrangements were found to be true: “When analysed critically they do not make commercial sense,” BDO said.

Payments were made as “inducement allowances’, “responsibility allowances” and “acting allowances” and bonuses.

It meant USP staff, funded by taxpayer dollars, were on their own gravy train.

“We are of the view that the oversight, governance and control of remuneration is a key weakness across USP,” the BDO report said.

“This was a key theme throughout our investigation as many of the matters raised in the (Ahluwalia’s) Paper, or the likely motivations behind those matters, relate to remuneration.”

BDO’s report reveals that “inducement allowances” had been paid extensively across USP, totalling $4,271,774 between 2016 and 2018.

The allowances had varying conditions and USP’s Remuneration Committee and Council were not fully aware of them.

“Responsibility and Acting Allowances have also been awarded extensively across USP, with payroll records indicating that $3,011,112.53 was paid to staff across the three years (2016-2018)… very little guidance exists to govern how these allowances are applied,” BDO said.

BDO said there was “a consistent theme of policy breaches” over allowances: “Specially, we have noted instances where staff members have been awarded ‘multiple’ bonuses which is not allowed under current policies.”

BDO reported that bonus payments worth $1,890,129 were made to some staff.

“We are of the opinion that the cumulative effect of this lack of oversight and control has resulted in breaches of policy (where policies exist) and numerous instances where staff members, particularly those in senior roles, are remunerated well outside Council approved salary bandings.”

BDO’s report graphed payments showing that USP’s 13 top staff, with the addition of allowances, all earned substantially more money than the top end of their salary bands.

Comments BDO: “Through our work, we have identified numerous instances which breach one or more of the conditions stipulated in the inducement allowance policy.”

In 2018, a total of 57 employees received “inducement payments”. Over the 2016-2018 period a total of 90 staff received inducement payments. These ranged between 35 and 60 percent of salary. The highest inducement allowance was $214,200.

“We have noted cases where employees have received an inducement allowance for many years, some tracing back over a decade spanning multiple contracts, promotions and pay increases,” BDO says.

“It seems commercially illogical that these employees would need an inducement allowance to stay in USP’s employment.

“In our opinion, and based on our experience, it appears that inducement allowances have been a systematic way of artificially inflating the value of certain roles and places a number of positions outside approved salary banding.”

BDO said inducement allowances were not paid in Australian and New Zealand universities. It was also an “enigma in the way that they are expressed as a percentage of salary rather than being a fixed sum as they will continue to increase each year in line with any salary increase.”

Twenty-four employees over three years shared $2,152,305.86 in “responsibility allowances” and $828,806.67 for “acting allowances.”

BDO said they had observed situations where these allowances were being abused.

“For example, we have noted some staff members who have benefitted from numerous Responsibility and Acting Allowances (at the same time) for long periods.”

Academic staff were providing “consulting” services through USP but with the staff taking 70 percent of the revenue earned. There was no formal policy behind the take.

BDO looked at the “unusual situation” of a senior academic in the School of Business and Economics. They say their “high level review” suggested his consultancy arrangements contravened USP policy, and recommend a full forensic audit of consultancy fees paid to the academic from 2013 to 2019. “The audit should focus on the nature of each arrangement, whether they were appropriately (independently) authorised, whether the correct policies had been followed, and whether the correct documentation exists.” 

BDO said the academic was paid five Responsibility Allowances as well as his substantive salary: “How is one person able to complete all these roles at one time competently?”

BDO said one of the Responsibility Allowances involved a conflict of interest as the role was responsible for the renting of university residences, and that the academic “owns properties which are rented out to students in Suva... hence creating the conflict.”

BDO said the academic’s total remuneration far exceeded that of other academic staff.

“We are of the view that while the allowances that have been paid may have been approved per USP policy and by Professor Chandra, the quantum and amount that has been paid…for the number of roles appears unrealistic in their ability to be performed,” BDO said.

The reports states “we do not understand” why the academic “continues to be paid an inducement allowance since 2002.”

Another senior figure who is suing USP over his recent removal from office, was promoted without reference to Ahluwalia, which BDO “partially substantiated.”

The report shows when he first received an advertised post in 2015 he was on a salary of $69,258.  He was then offered his most recent post: “The salary now went to $202,810,” said BDO. “There was no advertisement or any appointment committee or selection committee established.”

By 2019 the executive’s salary had again jumped, to $228,936.

“There are some very serious breaches noted in the appointment, review, promotion and responsibility payments” to the executive, said BDO. “It should be noted that his position titles have been changed at rapid pace without any advertisement and formal recruitment or selection process.

“This is very peculiar for USP renewal processes.”

Another senior administrator was identified to be “breaching his salary band which is unusual…” for receiving various allowances totalling over $106,000. BDO repeated there seemed no formal policy in paying out allowances but added that the multiple allowances being paid to the administrator “are fiscally irresponsible and that it would be very difficult to deliver all these roles adequately.”

Chandra himself was at the centre of controversy when he wrote to Thompson to request professional development leave so he could spend time writing a book on USP at RMIT University in Melbourne.

He took four weeks of professional development leave at the end of his employment contract and received professional allowance totalling $20,041.07. In short, BDO says this should not have been paid and he was not entitled to it: “Professor Chandra is effectively performing consulting work by writing a book with the intention of personal commercial gain…. We consider there is potential for profits to be generated from the sale of the book written during USP time. Arguably this is property of the USP that has not been fully considered or addressed.”

Staff hirings were made that appeared improper. One of the more detailed cases examined by BDO was of a middle manager.  BDO noted “serious irregularities” in her promotion and so-called “back payments” made as she started the job: “The position was not advertised and the backpay she got was never discussed with her supervisor.”

She started work with “backpay” of $63,008 and an annual salary of $77,748.

BDO said the high-level managerial involvement in the appointment was a misuse of position “and a breach of USP policies.” It said it did not understand why the highest levels of USP management were involved in the payroll affairs of a mid-level staff member when  “there are supposedly adequate processes in place.”

This week’s decision to stand down the Vice Chancellor and investigate counter-claims against him, has angered several Pacific governments, with Nauru’s President Lionel Aingimea saying the university had been “hijacked’. Australia’s Foreign Minister, Marise Payne, has called for a special Council meeting in the wake of the leadership saga.

Ends

*All dollar amounts are in Fiji dollars

While the BDO report names specific individuals, Islands Business has chosen not to publish specific names on legal advice.
Last modified on Thursday, 11 June 2020 11:57
Annotation 2020 06 29 143441
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