The 2018 Auditor General’s Report has once more highlighted several shortcomings including overpayments, errors on various accounts and discrepancies in lending to state-owned enterprises that are unable to repay.
The recently-released report, which looks at the financial year April 1, 2017 to March 31, 2018, pointed out that several concerns highlighted in past reports remained unchanged or unresolved.
Pointing to what he said were “errors” on certain accounts, Auditor General Leigh Trotman said while the bank account of a department or agency should be represented by a positive (or debit) balance in the accounting records, a number of bank accounts were represented by credit balances in the ledger.
This, he said, would suggest that the accounts were in “overdraft” positions.
“This suggests that there are errors in the accounts that need to be addressed,” said Trotman.
A total credit/overdraft balance of $937,740.95 was recorded for the reporting period on several bank accounts belonging to consulate general offices and secondary schools.
Of note were the credit balances recorded for bank account of the Consulate General New York office ($256, 546.82), Consulate General office Toronto ($186,512.02), Barbados Liaison Service Miami ($106,415.60); and that of the Combermere School ($204,520.42).
In response, the Accountant General said, “The Treasury is in agreement and is working on getting the reconciliation statements up to date.”
The damning report also pointed to discrepancies in relation to short-term advances to state-owned enterprises, which amounted to some $535 million.
In fact, Trotman said loans made to several enterprises, including the Barbados Water Authority (BWA) and the National Housing Corporation (NHC), were in breach of the law.
“The majority of these advances were made to state enterprises which are not in a position to repay,” he said.
These state enterprises include the NHC ($114 million), the Barbados Agricultural Management Co. Ltd. ($75.1 million), BWA ($54.9 million) and the financially-strapped Barbados Transport Board ($76.6 million).
“In accordance with the Financial Management and Audit Act, loans made to Government enterprises are to be made from a capital contribution approved by Parliament. These loans should be secured by a debenture mortgage or loan agreement approved by the Cabinet,” said Trotman.
“However, it should be noted that Parliament did not approve these advances from any capital contribution and they were therefore not in compliance with the law. In addition, there were no loan agreements in place,” he added.
An amount of $49.5 million was advanced to the Barbados Port Inc., which the Ministry of Tourism had indicated was a capital injection and that the necessary steps would have been taken to have the necessary Parliamentary approval to facilitate the injection.
“This, however, was not done resulting in the amounts being recorded as a loan in the accounts of the Government, while at the same time being recorded as an equity contribution by the Barbados Port Inc. This matter needs to be regularized by obtaining the Parliamentary approval that is required for such capital injections,” Trotman advised.
Meanwhile, advances totalling $36 million were made to the University of the West Indies to assist that institution with its financial challenges during the year, while $124 million was advanced to the Government-owned company Clearwater Bay, to settle a loan guarantee made in respect of the Four Seasons project a number of years ago.
In the case of the UWI, Trotman said the Ministry of Finance had indicated that the necessary supplementary provisions would have been sought to facilitate this advance, but the relevant action was not taken resulting in an “unauthorized” advance.
As for the Clearwater Bay loan, Trotman said that was “not from an appropriation as required by law”.
“It should, however, be noted that there is uncertainty as to what securities are owned by the Government to cover this loan. In addition, due to the deterioration of the premises it would be quite doubtful whether the full value of this loan could be realized and the carrying value of this ‘asset’ may need to be adjusted in the books of the Treasury,” he recommended.
The accountant general’s office in a response said the advances referred to were “based on instructions sent from the Ministry of Finance to the Treasury”.
According to the auditor general, the Treasury has also recorded $621.7 million in long-term advances.
The 163-page document, also pointed out that the financial statements provided by the Treasury to the Auditor General for audit, did not comprise of information on all entities owned and controlled by Government.
“They only encompassed the financial activities of all ministries and departments, and excluded statutory boards and Government-owned companies which report the results of their operations separately,” said Trotman.
“It should however be noted that under International Public Sector Accounting (IPSAS) standards under which Government’s financial statements are prepared, there should be a consolidation of the accounts of ministries and departments and all entities controlled by Government,” he pointed out.
Trotman also noted that there was a difference in the records of the Barbados Revenue Authority (BRA) and the Treasury in respect to the Value Added Tax (VAT) for the reporting period.
“This difference of $78.8 million was as a result of the Treasury recording mainly cash amounts as revenue. Amounts which were assessed as revenue but for which no funds were received were omitted from the Treasury records.
“Government accounts are prepared on the accrual basis, that is, in the case of revenue, it should be recorded in the period due irrespective of whether the cash was received. Revenues were therefore understated in this instance,” Trotman explained.
The Accountant General in response said “A decision will have to be made as to how these receivables should be treated in the Treasury’s books.”
The report also pointed out that ministries and departments were not reporting on the outstanding costs of contracts as required by financial rule 229 (3).