Auditor General: Murky world of public investments worth millions uncovered

The Auditor General has raised a series of red flags, including the potential for fraud, in Government’s accounting practices and procedures.

In a 113-page report for 2020, Leigh Trotman expressed concern about instances involving millions of dollars in taxpayers’ money wrapped up in transactions that lacked full disclosure, not fully accounted for, misstated, understated, lacked supporting documentation or could not be verified.

Trotman’s annual report which covers the financial year ending March 31, 2019 called on the Government to properly explain its involvement in the controversial Four Seasons Hotel project where millions of dollars of taxpayers’ money were at stake.

“The treatment of the investment in Clearwater Company needs to be further explained. The investment in this Government-owned company was recorded at a value of $124 million investment in prior years. It represented an investment by Clearwater in the Four Seasons Hotel project. The value of this investment remained unchanged on the books of Government for several years even though the property on which the investment was based was significantly impaired,” the Auditor General reported.

“In the 2018-2019 financial year, the entire investment was written off. It has not been clearly established what was the basis for the entire write-off of the investment. It was also not clear what was the nature of the investment relationship Clearwater had with the hotel owners. The investment and subsequent write-off could not, therefore, be verified by the auditors,” he added.

Trotman also identified the case of the collapsed British American Insurance Company (BAICO), in which he said the Government issued $101.7 million in bond support and created a new investment account.

“It was however unclear what actual asset was represented by this investment account. It was not stated whether any assets from this former company were acquired by Government and represented this investment. The absence of this supporting information casts doubt on the accuracy of information recorded for the investment transaction,” he declared.

The Auditor General again raised credibility issues regarding Government’s issuance of a Series ‘A’ Amortization Bond totalling $74.807 million as part of its Domestic Debt Restructuring exercise.

According to him, there was a lack of written instruction which made it difficult to verify the authorization of this issue.

“There are disclosure requirements as noted at IPSAS 19 (International Public Sector Accounting Standards) which indicate that provisions in relation to restructuring should be accounted for. The disclosure of these provisions would enhance the credibility and understandability of the financial statements.

“It was not clearly stated in the accounts what were the overall gains and losses from the debt restructuring process. This information should have been provided to users of these financial statements,” Government’s chief auditor wrote.

Trotman also indicated the department remains in the dark about why $48,941 in overdrawn salaries was written-off to the Equity Account.

“This represents amounts due from public officers and it is unclear why these amounts were written off. No approval for these write-offs was provided for audit inspection,” he complained.

Trotman also reported on another major Government project which he determined was inappropriately classified and for which no evidence was provided to justify the millions involved.

“Documentation to support the amount of $133.337 million being classified as equity in Whitepark Development Limited was not provided for audit inspection. This company, which was established to own the Judicial Centre under a Public-Private Partnership Project, was subsequently acquired by the Government.

“However, a memorandum from the Permanent Secretary of the Ministry of Finance & Economic Affairs … indicates that Government had purchased the property. This would support its classification as Property, Plant and Equipment rather than as an investment in a company. Given this conflicting information, there is some uncertainty as to the correct recording of the acquisition. This matter needs to be rectified and the asset appropriately classified since accounting for a building is different to accounting for an investment in a company,” the Auditor General contended.

There was also an issue relating to the Treasury’s accounts and that of a local bank account that saw the Government’s chief auditor raising the matter of potential fraud.

He noted that bank reconciliations for the Treasury accounts with the Central Bank of Barbados and the commercial bank were not completed up to March 31, 2019.

Trotman said the commercial bank account was last reconciled in May 2018.

“Statements should be reconciled monthly as this is an important internal control that can detect fraud or errors in the account,” he warned.

He also referred to a number of “outstanding issues” which need to be addressed regarding cash in hand.

Trotman pointed to the sum of $474,550.47 which is recorded as cash in hand for the Barbados Licensing Authority as at March 31, 2019. He said that figure has remained unchanged in the general ledger since March 31, 2012.

The Auditor General was also concerned about Government’s dishonoured cheques totalling some $6.7 million which were not seen in the dishonoured cheques register.

According to him, the law requires that an accounting officer examines the Dishonoured Cheques Register of the department not less than once a month and ensure that clearances of the cheques are pursued and recoveries are effective.

“The omission of pertinent information from the Dishonoured Cheque Register impedes the department’s ability to determine whether the dishonoured cheques are actually outstanding,” the Auditor General contended. (emmanueljoseph@barbadostoday.bb)