Auditor General questions some write-offs
here are still unanswered questions surrounding the failed Four Seasons Hotel Project, with the Auditor General Leigh Trotman noting in his 2020 report that “the treatment of the investment in Clearwater Company needs to be further explained”.
According to the Auditor General’s Report, during the 2018-2019 financial year, the entire investment made by the Government into Clearwater was written off, but the report said that due to a lack of some details, that could not be confirmed by the auditors. The report explains that the Government had previously made an investment in Clearwater, a Government-owned company, to the tune of $124 million, which represented an investment by Clearwater in the Four Seasons Hotel project. It went on to note that the value of the investment remained unchanged on the Government’s books for quite a few years, despite the fact that the property on which the investment was based was “significantly impaired”.
“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,” it stated.
This information was contained in the section of the 2020 Auditor General’s Report which looked at the Government’s debt restructuring programme. The report notes that there was also the write-off of debt due to the Crown by the state-owned enterprises, and the auditors took issue with how some of these matters were “brought to account”.
“There was a write-down of various instruments issued by Government and held by the National Insurance Department. The write-down of these instruments, which resulted in gains to Government totalling $1.268 billion, should have been reflected in the Statement of Financial Performance. These gains were instead brought to account by a direct credit to the Equity section of the Consolidated Fund which was incorrect.”
The report continued, “There was also a write-down of the value of certain instruments held by the Central Bank. According to the instructions given by the Director of Finance, $1.182 billion in Treasury Bills and Notes and Debentures should have been written off. Based on the information provided, it was difficult to assess what was written off since the amounts were not clearly identifiable in the accounts.
The resultant gains were also not brought to account in the Statement of Financial Performance as required. These were instead adjusted to the Equity section of the Consolidated Fund.”
‘The difference is significant’
Under the section, ‘Accounting for Assets’, questions were raised about overdrawn salaries, the share register, tax receivables and public officers loans and travel allowances (POLTA). The report stated that an amount of $48,941 related to overdrawn salaries, due from public officers, was written-off to the Equity Account. But the auditors said it was unclear why they were written off, adding that no approval was provided for audit inspection. It was also indicated that the Treasury Department did not present schedules for POLTA and overdrawn salaries for audit inspection to support the general ledger balance of $16.279 million as at March 31, 2019, which the auditors explained made it impossible to determine if the general ledger balance was accurate.
The report went on to state that in terms of revenue, the account balances recorded for revenue in the SmartStream general ledger did not match the balances reported by the Barbados Revenue Authority (BRA). The total revenue recorded in the SmartStream general ledger was $1.852 billion, as opposed to the amount submitted by BRA to the Treasury Department reflected a total of $1.999 billion, a difference of $147 million.
“This difference is significant and needs to be explained,” the report concluded.
It also spoke to the provision for doubtful debts and the overdraft facility. Regarding the former, it stated that there is a provision for bad debt of two per cent made for uncollected revenue, but no explanation was provided on how the percentage was derived and the auditor could not assess the “reasonableness of this provision”. On the matter of the overdraft facility at the Central Bank, it was stated that it exceeded its limit of 10 per cent of estimated revenue – $323.303 million, twice between April 1, 2018 and July 31, 2018.
“In these two instances, the balance was exceeded by $10 million. This was contrary to the legislation, which stipulates that the overdraft facility should not exceed 10 per cent of net revenue,” the report said.