The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Neither the Government nor the Inter-American Development Bank (IDB) knew a worker helping to execute a $20m COVID-related loan project had been convicted for fraud in the US.

The BDO Bahamas accounting firm, in an October 28, 2021 report, uncovered the lack of personnel vetting in its audit of the cash receipts and disbursements for an IDB-funded project that aims to strengthen the public healthcare system’s resilience against the deadly COVID-19 virus that has claimed more than 700 Bahamian lives.

“On our independent check of the members of the project execution unit (PEU), it was noted that a person under the PEU has a history of previous conviction for fraud in the United States,” BDO Bahamas revealed, “in which the management and the bank were not made aware of.”

The report, which did not identify the person concerned, also made no mention of any improprieties that were uncovered or missing funds. However, it raises serious questions over the effectiveness of staff vetting procedures carried out both the Government and IDB, and whether they are consistently applied or initiated at all in an effort to safeguard taxpayer funds and ensure value for money.

Given that it was not a full audit, BDO Bahamas said it “considered this matter as a reportable condition for the lack of background investigation on personnel but not a material weakness”. It defined “reportable condition” as a “significant deficiency” in internal controls that could endanger the project’s successful outcome. The PEU is a unit within the Ministry of Health.

The report, which was signed-off by Colin Higgs, the Ministry of Health and Wellness’ permanent secretary, and Lindon Nairn, the $20m loan project manager, revealed that the $8m received from the IDB between March 17, 2021, and end-June this year had already been spent.

The funds, which were initially placed in an account at the Central Bank of The Bahamas, were used to purchase COVID-related supplies, medicines and personal protective equipment (PPE) through the COVAX facility while also better equipping healthcare units.

Another $2m was advanced by the IDB on September 1, 2021, with “contracts for individual consultants of the PEU) signed on September 15 - one day before the general election and made retroactive to September 6.  Some $1.39m was also used to finance the purchase of 57,330 Pfizer vaccine doses.

However, the $20m COVID loan was not the only IDB-funded project that BDO Bahamas voiced concern about as a result of its audit findings. Reporting on the $25m credit facility being made available to support micro, small and medium-sized enterprises (MSMEs) over a five-year period, the accounting firm said it had uncovered weaknesses in how these monies were being handled.

“The unutilised funds of the programme are invested in an investment management account with CFAL (the former Colina Financial Advisors) and the remainder is maintained in a Royal Bank of Canada (RBC) bank account,” BDO Bahamas said. 

“The RBC account is under the name of the executing agency (the Small Business Development Centre) and is restricted to being utilised solely for the programme. In disbursing the expenses, however, we have noticed that payments are being made through a separate bank account of the [SBDC] and will then be reimbursed by the RBC bank account.

“The above approach defeats the purpose of maintaining a separate bank account for operating the programme as it is not being utilised upon actual payment of expenses. Consequently, expenses were not recorded in the period of actual payment but only until reimbursed.”

The $25m is supposed to be distributed by the SBDC via five equal $5m annual installments. Some $22m is provide “partial guarantees to financial institutions” to entice them to lend to MSMEs, while the $3m balance is to provide “institutional strengthening” to the SBDC.

Some $2.604m was transferred by the IDB to the SBDC’s RBC account on December 17, 2020. And, on April 20, 2021, a $1.996m sum was transferred to CFAL to establish an investment management account that was to support $1.439m in guarantees issued on behalf of MSMEs to financial institutions in return for credit.

Those companies are Alvernia Business Consultants; Drive Green Car Rentals; The Cookie Caterer; Dynasty Café; Rip Tyd Bahamian Craft Beer; Kevco Printing; Discount Distributors; More Play Entertainment; Fowlco Ltd; Le Pavillion Boost Educational Services; Pampered By Promise; and Strawd Paper Straws.

Another $1.5m was received by the SBDC on July 29, 2021, for “investment purposes”. And, of the $2.683m received from the IDB on October 4, 2021, some $2.142m went into CFAL’s investment management account.

Meanwhile, the $30m initiative to enhance the Government’s digital transformation and enhance The Bahamas’ overall competitiveness, did not escape BDO Bahamas’ scrutiny either.

“The loan drawdowns for the programme are received in an account at the Central Bank of The Bahamas from the IDB,” the accounting firm found. “Once funds have been cleared, the Ministry of Finance submits a request to the Central Bank of The Bahamas to transfer the funds from the account to the Government’s Consolidated Fund, where all payments related to the programme are then disbursed.

“There is no specific bank account restricted for programme disbursements. It shows that the programme management does not have direct control and custody of the account balance. We are also unable to confirm the balance as at June 30, 2021. As a result, a qualified audit opinion was issued.”