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Banana Board BIIF 2013 Audited Financial Statements Delayed

The Banana Board’s Comments

on Gleaner Article on page C7 of September 3, 2014:

Grant-funded Banana Board lacks vitality

by AC Countz, Guest Columnist


Delay in Presentation of 2013 Banana Board and Banana Insurance Fund Audited Financial Statements


The Banana Board is a public body instituted by an Act of Parliament and as such it is statutorily accountable to the House of Parliament. The Board is required to produce audited financial statements for each year by March 31, three months after the end of the reporting period. Commendably, the Banana Board has been one of the few public organizations that have complied with this obligation to report every year from 1953 to 2012. The 2012 audited financial statements were submitted to the Ministry of Agriculture on time, in-spite of the fact that there were no formal meetings of the Board of Directors after the death of the appointed Chairman Samuel Lawrence. The contract for the external audit of the 2013 financial statements was awarded in February 2014 and the Auditors have completed their assessments of the accounts and had produced draft reports.


However, the Board of Directors, in their effort to finalize the noted vexed issues of qualification of the audits due to outstanding loans and the questionable assignment of assets, had requested and are awaiting responses from the responsible authorities to clarify these matters, once and for all. The qualification of the Banana Board audited accounts had persisted for many years. Hence, the board of directors is holding to its resolution to end that unholy situation and devised strategies to resolve the issues the outstanding special loans and address the inactivity of the Banana Industry Insurance Fund.


Special Loans

The records of the Banana Board show no documentation regarding agreements, access to or payments for these special loans totaling J$42.9M. The only records of the special loans in the Board are those placed by the External Auditors in the audited financial statements. The Board and External Auditors during recent years had written repeatedly to the Ministry of Agriculture and Fisheries, Ministry of Finance (who would have represented the Government of Jamaica in loan agreements). The Board had not received any prior response to clarify the matter. The loans which dated as far back as 1983 appeared to have been paid off. Nonetheless, the Board is committed to finalizing these matters for the 2013 financial report and is pursuing them relentlessly, which has caused a delay in the publishing of the audited accounts. Is that irresponsible of the Board of Directors?


Surplus and Grant Funding

The Banana Board has complied with other fiduciary responsibilities and has consistently paid over all statutory payments. An examination of payable accounts accounts will reveal this. Therefore it is inconceivable that the Board should be chastised because its balance sheet shows a surplus of J$18M in 2012, which is due to good stewardship and prudent management. The European Union (EU) grant funds are not used to pay the General Manager or the core human resource staff of the Board. The General Manager also performs the functions of Project Manager and Director of Research, and does not have an executive assistant. Only four special project officers who are contracted specifically project activities are paid from grant funds. The Corporate Secretary to Board of Directors works part-time. To imply that the EU provided the Board with a grant to make a profit is very defamatory.


The Banana Board meticulously carried out all of its obligations to provide technical and operational services to the target group using EU funding and had implemented the contracts very successfully. The Banana Board’s Technical Services Contract was executed in the period from December 1, 2009 to July 31, 2011 and the Banana Board Grant Contract for Technical Services was implemented from December 17, 2010 to January 15, 2013. The EU provided installments of pre-financing that were used over precise periods. EU grant funds will be seen on the balance sheet at the end of Banana Board’s statutory reporting period but it will be used after that for project activities which were not completed within the statutory reporting period. Clearly, the project periods do not end at the same time as the organizations financial year. Further, projects are allowed up to six months to make accrued expenditure.


The Board provides a very detailed financial report to EU, which is supported by an expenditure verification report from KPMG. The EU had paid interim and final payments on the contracts only upon detailed scrutiny of expenditure, narrative report and monitoring by the Project Management Unit representing the Government of Jamaica.


Production


Banana exports fell by 21% and overall production from 47,000 tonnes in 2012 to 37,000 tonnes in 2013 because of the damage from Hurricane Sandy, which occurred in October 2012. Tropical Storm Nicole in 2010 and Hurricane Sandy in 2012 had set back increased production which was being targeted by deliberate strategies being implemented since 2009.

 


 


We are reminded also that based on the 35% damage to existing areas in production by Hurricane Sandy in 2012, there was a projection that this would result in at least 33% reduction in production in 2013, if there were no support interventions to help to rehabilitate the Industry. However, the interventions by the Banana Board, which to complemented the resilience of the farmers included: quick damage assessment of damage and payment to affected members from the Banana Industry Catastrophe Fund; on-going distribution of new high-yielding FHIA varieties (that were not severely affected by that hurricane); technical service support to manage diseases, pest and other production practices in pre-existing varieties; the appropriate allocation of grant material supplies that were provided by the EU; and the partial success of the Banana Resuscitation Loan Programme.


The Banana Resuscitation Loan Programme


The Banana Resuscitation Loan Programme was an import substitution project that was administered by the Banana Board, to assist banana and plantain farmers that were severely affected by Hurricane Sandy, mainly in eastern Jamaica Portland, St Mary and St Thomas. Over 90% of the area in production these parishes were severely damaged. The MOAF had accessed a total loan of J$100M from the Development Bank of Jamaica (DBJ) and also provided J$13.5M to reduce the prevailing loan interest rate from 8.5 to 5%. The farmers were targeted to supply participating chips manufacturers with fruits at a price of J$15 per pound. In return the chips factories would reduce importation of chips by 25% of the previous year’s volume. However, the chips factories withdrew their participation. Without a dedicated and approved market for the fruit (crop lien) many farmers were unable to access the loan as they had no other collateral. Subsequently, the project was redirected to farmers wanting to supply other markets but with collateral, resulting only J$33.3M of loan being disbursed.


Banana Industry Insurance Fund (BIIF)

Banana Industry Insurance Fund was instituted by the Banana Insurance Act, 1956. The Fund is promulgated specifically to support farms exporting to the United Kingdom, which are affected by storm damage but had supplied export volumes in the calendar year prior to the year of damage. With the suspension of exports to the UK since 2008, the Fund has been depleted and became inactive. Nonetheless, it cannot be wound up by the Board but the House of Parliament. Consultations with the farmers and stakeholders of the Industry resulted in specific requests not to repeal the Banana Insurance Act.


Therefore in 2013, with the endorsement of Cabinet, the board of directors at the Banana Board has formulated a Banana Insurance Committee (BIIC) which includes an actuary, crop insurance specialist representatives of the All Island Banana Growers Association (AIBGA) and Jamaica Producers Group and two members of the board of directors. The purpose of the BIIC is to examine the industry risks, existing legislation, operations, functionality and relevance of the Banana Industry Insurance Fund (BIIF) and Banana Catastrophe Fund (BCF) and propose a composite modern but effective solution to manage the environmental and other risks affecting the banana and plantain industry and its stakeholders. The Committee has been working for the past six months and will document its proposal by year-end, which will include a sustainable financial plan and advise the Ministers of Agriculture as well as Finance and Planning on proposals for inclusion within the National Adaptation Strategy for the sector. These proposals will address significant anomalies in the current BIIF and Catastrophe Fund risk management strategies, and make recommendations for legislative changes. The proposal will include amendments but not a repeal of the Banana Industry Insurance Act 1956, with the objective of formulating one composite fully operational risk fund.


Leasing of the Board’s Properties


Another commitment of the current board of directors of the Banana Board is to increase efficiencies in the management of its properties, including the Banana Industry Building in Kingston. Properties are leased to lessees at market rates, with the exception AIBGA and the Canteen Concessionair, who had pre-existing agreements. The Banana Industry Building houses the Banana Board’s corporate offices, the Research Department laboratories, offices, chemical stores, which are used to carry out sampling and testing required for international standards of farm operations. The Board occupies approximately 15% of floor space in the building the remaining 85% is leased by the Board to several businesses. The AIBGA and the Canteen have cumulative occupancy of approximately 10% of the total floor space.


The building earns revenues of up J$7M yearly resulting in an increase from a loss of J$1.29M in 2009 to a surplus of J$10M in 2012. This is being achieved with good stewardship. Upon what basis does Mr. Countz conclude that the building should be sold?


Vitality of the Banana Board


By what standards is the Banana Board being judged as not vital or lacking vitality? The banana and plantain farming communities in Jamaica are benefitting from the technical services provided by Banana Board. The Banana Board in Jamaica is one of the leading scientific resources in the management of Black Sigatoka disease of banana and plantain crops in the region. The Board is also successfully managing Moko disease in Jamaica. The disease was eradicated in eastern Jamaica and only now exists in St James, where it is curtailed to less than 5% of the farms affected. By international standards that is excellent. Moko was the disease that wiped out commercial banana production in Trinidad, Guyana and Grenada.


The Board provides scientific support to farmers to manage black Sigatoka disease on banana and plantain crops. The cost of disease control to farmers is less than 30% of cost to control the disease in Central America. The strategies recommended are executed and has prevented the disease from becoming resist to the chemicals used. Compare no more than 26 chemical applications per year in Jamaica to a range of 52 to 70 in Central America. Applications in Jamaica includes researched natural products for a more protected and sustainable environment.


The Banana Board is not a commercial entity but its technical services are vital to support the commercial viability of farms and agri-business in the industry. The highly specialized scientific services are provided to all levels of banana and plantain production and value-added manufacturing. From the large St Mary Banana Estate to the small farmers who earn a weekly cash flow from less than a half of a hectare and also provide a staple for their families. The services are needed by farmers who supply both the domestic and export markets. After all, the diseases that affect the banana crop do not discriminate based upon farm size, yet once established they pose a threat to all farms. The Banana Board is not only vital to the mitigation of existing crop disease but also those of quarantine importance such Panama Disease (Tropical) Race 4 PDR4 and Banana Bunchy Top Virus. Some the new varieties that are being distributed by the Board are also extremely tolerant to PDR4, which has no cure but is not yet in Jamaica. The execution of this forward planning is way ahead of many other banana growing countries in the region. This may not be vital to urban dwellers but is extremely important banana and plantain farmers.


The Board provides regulatory service support in the area of banana and plantain production standards. The Board’s Research Department is the only Central Technical Function in Jamaica that has achieved Global Good Agricultural Practice (GlobalG.A.P.) Certification for small, medium and large banana farms. It is these certified farmers that who currently are able to satisfy the requirements of hotel market in Jamaica. In addition, the small farmers were only months away from being audited for Fair Trade Labeling Organization (FLO) certification in 2008 when Tropical Storm Gustav suspended exports indefinitely. Supplies to FLO would have guaranteed the farmers a premium price above his cost of production. But it is never too late for a shower of rain. Alas, the MOAF has launched its export platform to increase exports, including bananas.


Banana exports, which had restarted in 2011 to regional markets, is being facilitated by the Banana Board, and will re-engage traditional but to supply fruits for ripening in niches such as FLO and new markets for green fruits for cooking and by-products. The expertise in the Banana Board is vital to this thrust. This may not be vital to urban dwellers but is extremely important banana and plantain farmers. After all, the millions of dollars spent to achieve diversification in the banana zones have failed but the technical services provided by Banana Board continue to support the banana and plantain farmers.

 

The Banana Board may not be vital to the rare few who do not eat a banana a day to keep the doctor away but it is extremely important to banana and plantain farmers, for agri-businesses development, future export earnings and import substitution.

 

 

________________________

Janet Conie, MBA MPhil BSc

General Manager

The Banana Board

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