By NEIL HARTNELL
Tribune Business Editor
A prominent Bahamian accountant yesterday said he “completely disputes” a forensic audit report’s conclusion that he and his firm “neglected their obligations” over a $10.8m government housing loan.
Philip Galanis, the HLB Galanis & Company principal, told Tribune Business the company was “absolutely compliant with the due diligence we were required to do” as administrator for the $10.8m facility advanced by the National Insurance Board (NIB) to the Ministry of Housing and the Environment.
He hit back after a forensic investigation performed by the BDO accounting firm (see other article on Page 1B) suggested that up to $1.119m “improper payments” to Bahamian contractors for home construction work that was never performed “may have been avoided” if HLB Galanis had “conducted its work in a thorough and professional manner”.
Of that sum, BDO said $300,693 concerned “unauthorised mobilisation prepayments” for contractors, while a further $417,249 was paid out for work building that was never done.
Of that latter figure, some $269,690 in such “improper payments” went to contractors in Abaco, while the $147,559 balance related to Grand Bahama. The report also identified $118,025 worth of “duplicate payments” made to contractors, while $283,264 was defrauded by an employee at the HLB Galanis & Co accounting firm who subsequently made a “plea bargain agreement” in the courts.
BDO produced a chart allegedly showing that Mr Galanis and his firm were in full compliance with just one of their 19 obligations, which was to open a bank account. The company had been selected for the administrator role because it was the lowest bidder at $25,000, although it ultimately received an approved budget of $124,700.
“The administrator performed little or no due diligence and otherwise neglected his obligations under his agreement,” the BDO report, completed in January 2020 and laid in the House of Assembly yesterday, said.
“We learned through our discussions with Mr Philip Galanis of HLB Galanis & Company, that in processing contractor payments for the programme that the administrator did nothing more than look to see that the contractor requests received from the Ministry of Housing and the Environment contained an approval from the (ministry).
“Thus the administrator made payments to contractors without reviewing contracts, payment schedules or change order files. We also learned from our discussion that the administrator was not provided with a list of personnel authorised to approve contractor work or copies of their signatures,” it continued.
“The inappropriate payments identified in this report may have been avoided had the administrator conducted its work in a thorough and professional manner.”
The BDO report also accused HLB Galanis & Company of “ignoring its contractual obligations” to provide monthly financial status reports on the use of the loan proceeds, and construction progress to all parties - especially NIB.
The first report from HLB Galanis & Company, for the period May 1, 2014 to August 31, was dated September 11, 2014. Subsequent reports were issued quarterly, and only provided to the Ministry of Housing and the Environment. NIB only informed the administrator that it had received one report in 18 months on March 6, 2016.
Mr Galanis, while asserting that he has yet to be provided with a copy of the BDO report, denied the allegations that his firm had failed to conduct adequate due diligence on the contractor payments.
Noting that he was not in the construction industry, he added that HLB Galanis & Company relied upon the Ministry of Housing and the Environment to inspect the housing work, verify that it was properly completed and approve the necessary payments.
“The due diligence we were required to do, we were absolutely compliant with that,” the former PLP and Senator told Tribune Business. “That entailed ensuring the contractor receiving the payment was approved by the ministry, that their business licence was vetted by the ministry before we made any payments to them, and that the actual amounts were consistent with what the ministry advised us.
“We received the change orders and payment amounts from the ministry. I would never say we never did due diligence. We’re not a contractor or quantity surveyor, so we did not know if the work was being done and relied on the ministry. I don’t understand that comment at all.”
As for the failure to meet the monthly reporting obligation to NIB, Mr Galanis said that criticism was “fair enough”. However, he said his firm was working for the Ministry of Housing and the Environment, not NIB, and was not reporting to the latter.
And while the contract required monthly reports, he added that these were effectively a waste in periods where no activity was occurring. Some nine reports were provided over the project’s lifetime, Mr Galanis said.
Acknowledging there had been “some deficiencies” with how his firm’s role was structured, he added: “I dispute completely that we didn’t do due diligence or were deficient in reporting to the persons who engaged us.”