• Tue. Nov 29th, 2022

Audit Commission denounces Cultural Industry Fund for conflict of interest transactions

ByChad J. Johnson

May 13, 2022

*By Therese Tu

The Audit Commission (CA) has found that some projects funded by the Cultural Industry Fund (CIF) have carried out blatant transactions with related parties involving a cumulative amount of more than MOP 23 million (2.84 million of dollars).

The Cultural Industries Fund (CIF) is subordinate to the Bureau of Social and Cultural Affairs and is responsible for supporting the development of cultural industries in the SAR and promoting moderate economic diversification.

During the period October 2013 to June 2020, financial support was granted by the CIF to 316 projects, for a total amount of MOP 517.8 million.

According to the audit report released by the AC yesterday (Thursday), in nine projects, FIC-subsidized companies carried out several related transactions, including the rental of rooms belonging to shareholders of the same company, the purchase of services of their own companies and hiring shareholders or their spouses as employees.

In five projects involving a total of MOP 6 million, the FIC carried out expenditure recognition without checking whether there were related party transactions, the AC said.

The report also said that a company had been found to lease a property at a price of MOP 4.30 per square foot and then lease two of its floors to the company-funded ‘brand incubation and promotion platform’. by the FIC as a place of operation, at a triple price of approximately MOP 10.34 to MOP 11.62 per square foot.

According to company registration information, the two co-owner shareholders of this subsidized platform also own about 48.15% of the shares of the tenant company, while both are members of the administrative bodies of the two companies.

As of June 2020, 12 of the 16 projects that received funding for leasing and were involved in subletting violated subletting law because they failed to submit landlord consent documents for the sublet, the report says.

However, the FIC still amortized rental expenses for the finance projects, involving a housing allowance of MOP 15.3 million.

The audit report pointed out that since July 2017, the FIC has waived the requirement for companies to report related transactions and only requires projects with a funding amount above MOP 5 million to submit a report. .

Some mechanisms put in place by the FIC have been faulty since its creation, and the foundation has not had them rectified in time, the Board underlines in the report.

Moreover, the FIC “turns a blind eye to many obvious problems”, and this passive and negative management is the main cause of the troubles, the audit report points out.

In response, the FIC said it had now changed the regulations and stipulated that the grant could not be used to pay the salaries of corporate shareholders, and would require companies to report related transactions.