Questions raised on Govt’s loan guarantee
A $120 million question now hangs over the stalled Four Seasons Development.
In his just-released 2014 report, Auditor General Leigh Trotman raises serious concern over a loan guarantee, which was provided by the Democratic Labour Party-led Government during the financial year 2011-2012, after the project hit a major financial snag.
“This guaranteed debt was called during the financial year 2013-2014 by the lenders. As Government had guaranteed the debt, an amount of $124,329,766, which entailed principal plus interest, was paid through its company Clearwater Bay. This amount was subsequently recorded in the accounts of the Treasury as an account receivable,” the Auditor General noted.
However, he expressed concern that to date there was no information available to show that any monies have been repaid.
The revelation comes amid a reported resurgence of investor interest in the Clear Water Bay development, which went belly up back in 2009.
Well-placed sources say a short list of investors has been reviewing data on the US$200 million hotel and villa project with a view to taking the proposals forward.
In total, the auditor general drew attention to over $400 million in loans to individuals and Government agencies, including car loans to parliamentarians and registering Officers who are not public servants.
Specific mention was made of a loan issued to the Barbados Tourism Investment Inc. (BTII) for which no formal contract seems to exist between the Government and the BTII for sums advanced.
Furthermore no repayments were received from the BTII during the year under review, with $141.5 million said to be owing with accrued interest of $19,351,206.
“No further information was produced to verify the status of the BTII receivables which had been reduced by $97,885,949.83 in July 2011. The Audit Office was therefore unable to verify the accuracy of this account since no adequate explanation was provided for this reduction,” the auditor general said.
In his 209-page report, Trotman also zeroed in on an agreement signed back in April 2007 between Government and the Small Business Investment Fund for a loan of $28 million with annual interest at a rate of 2.5 per cent to be used for the Small Hotel Group Refurbishing Scheme.
“The terms of the agreement required that the repayment of the loan commence December 31, 2010.
However, up to March 31, 2014, the auditor general said no repayment had been made by the Small Business Investment Fund in settlement of the loan for which interest receivable still needs to be quantified and the relevant bad debt provision established for any portion of the loan that is deemed uncollectible.
The auditor general also pointed out that pensions were paid by the Treasury on behalf of certain state agencies. However, he said “no agreement was on file which indicated the arrangements for the repayments”.
“Also, there is no evidence that the recovery of these funds was being rigorously pursued; therefore action should be taken to recover these amounts and this could be through an adjustment to any subventions due by Government,” Trotman recommended.
The auditor general also highlighted errors recorded in Government’s accounts receivables to the tune of over $1.2 million. The figure includes a credit balance on the Fair Trading Commission’s account in the amount of $1,083,113 and $112,500 on the Licensing Department’s books.
The report also highlights a several other glaring shortcoming in the accountability process in Government as well as a number of issues of lack of compliance with statutory requirements by state agencies in their annual reports and through other correspondence. However, the auditor general in a number of cases there was little evidence that relevant corrective action had been taken.
Please also see From the Auditor General’s Report 1.