REPORT OF THE DIRECTOR OF AUDIT, GRENADA ON THE · OFFICE OF THE DIRECTOR OF AUDIT ... An audit includes examining, on a test basis, evidence supporting the amounts and disclosures

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OFFICE OF THE DIRECTOR OF AUDIT

AUDIT REPORT NO. 2 of 2009

REPORT OF THE DIRECTOR OF AUDIT, GRENADA

ON THE

“HOME OWNERS SOFT LOAN SCHEME”

Audit Report No. 2 of 2009

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AUDIT DEPARTMENT

Report of The Director of Audit, Grenada on the Financial Statements

of

MINISTRY OF HOUSING, LANDS AND COMMUNITY

DEVELOPMENT

“HOME OWNERS SOFT LOAN SCHEME” For the year ended 31 March 2008 and Nine months (9mths) to

31 December 2008

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The Director of Audit

Audit Department

Report of the Director of Audit on the Financial Statements for the year ended 31

March 2008 and Nine months (9mths) to 31 December 2008

Anslem JosephAnslem JosephAnslem JosephAnslem Joseph Director of Audit Audit Report No. 2 of 2009

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TABLE OF CONTENTS Pages Auditor’s Report 1 Balance Sheet 2 Statement of Income and Expenditure 4 Notes to the Financial Statement 5 Additional Notes 9

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CERTIFICATE OF THE DIRECTOR OF AUDIT TO THE HOUSE OF REPRESENTATIVES

I have audited the accompanying Income Statement and Balance Sheet of The Ministry of Housing, Lands & Community Development “Home Owners Soft Loan Scheme” for the twenty-one (21) months period 31 March 2008 to the 31 December 2008. These financial statements are the responsibility of Management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted the audit in accordance with International Standards on Auditing. Those Standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements give a true and fair view of the financial position of The Ministry of Housing, Lands & Community Development “Home Owners Soft Loan Scheme” for the year ended period 31 March 2008; and the nine months (9mths) to the 31 December 2008 and of the results of its operations for the year then ended in accordance with International Accounting Standards. GRENADA

…..………..…………… Anslem JosephAnslem JosephAnslem JosephAnslem Joseph

Director of Audit Audit Report No. 2 of 2009

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MINISTRY OF HOUSING, LANDS & COMMUNITY DEVELOPMENT


BALANCE SHEET AS AT 31 March 2008; and Nine months (9mths) to 31 December 2008

CURRENT ASSETS

Notes 31 Dec 2008 31 Mar 2008

Bank Cash Accounts receivable

3

FIXED ASSETS

4

Long term Assets

720,255 2,734 17,438 740,427 48,528 6,572,069 7,361,024

469,054 1,933 17,438 488,425 16,878 6,860,327 7,365,630

FINANCED BY:

Liabilities – Accrued Expenses Equity 5 Accumulated Loss Profit or (Loss) for the year

8,445 7,504,260 (146,113) (5,568) 7,361,024

7,463 7,504,280 (182,518) 36,405 7,365,630

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BALANCE SHEET AS AT 31 March 2007 (Restated)

Notes 2007 2006 CURRENT ASSETS

Cash on hand and at bank

Loan installments receivable within one year 3x

431,460

686,453 1,117,913

6,286

979,751 986,037

CURRENT LIABILITIES Accrued charges

WORKING CAPITAL

18,041

1,099,872

7,500

978,537

LOANS RECEIVABLE

Long term installments 3x

FIXED ASSETS 4x FINANCED BY: CAPITAL CONTRIBUTION ACCUMULATED LOSS

5x

5,939,520

20,178

7,059,570 7,500,000 (440,430) $7,059,570

4,317,763

23,478

5,319,778 5,475,971 (156,193) $5,319,778

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STATEMENT OF INCOME FOR THE YEAR ENDED

31 March 2008; and Nine months (9mths) to 31 December 2008 December March 2008 2008 2007 INTEREST INCOME Assessment Income

149,121 7,800 156,921

198,090 156,939

Less: EXPENDITURE Salaries & Wages 122,359 140,116 155,864 NIS Contributions 3,266 3,633 3,155 Assessment Expenses 2,200 Audit Accounting Fees 6,492 6,600 Bank Charges 325 408 586 Computer Maintenance 1,633 1,794 1,672 Depreciation 10,350 3,300 3,300 Office Expenses 7,259 740 2,506 Stationery 1,303 535 1,246 Telephone 5,491 4,500 8,930 Transportation 108 167 3,733 Travel & Accommodation 1,384 Bad debts 250,000 Gas 1,932 Vehicle Insurance 4,029 Vehicle Maintenance Total Expenses Net (loss) or Profit

4,434 162,489

- (5,568)

- 161,685

- 36,405

- - -

(284,237)

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NOTES TO THE FINANCIAL STATEMENTS AT 31 March 2008; and Nine months (9mths) to 31 December 2008

1. PRINCIPAL ACTIVITY

The Government of Grenada following the destruction of property by “Hurricane Ivan” to enable homeowners to reconstruct houses damaged by the hurricane created the soft loan scheme. The loans bear interest at the rate of 3% per annum and are repayable over ten years after a moratorium period of up to one year.

2. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Accounting

These financial statements are expressed in Eastern Caribbean Currency Dollars and have been prepared on the historical cost convention in accordance with International Financial Reporting Standards.

(b) Fixed assets and Depreciation

Fixed assets are stated at cost. Depreciation is provided on the straight-line basis at rates estimated to be sufficient to write off the cost of the assets over the period of their estimated lives. The rates used are as follows: Per annum Computer 16.6% Office equipment 10% Motor Vehicle 25%

(c) Income and Expenditure

Income and expenditure transactions are accounted for on the accruals basis.

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(d) Balance Sheet

The Balance Sheet for the previous year 1 March 2006 - 31 April 2007 was shown separately. The comparison for the Balance sheet for the previous year was not reflected on the same page since the content shown was deviated from, as a result of material misstatement in the Balance Sheet, for the current Asset stated as Loan Installments receivable within one year. For 2006 the figure used was $979,751 and for 2007 the figure used was $686, 453. The figure for 2006 was calculated at 10% of loans receivable of $4,797,514 should be $479,751 but it appears as if a typographical error occurred and was stated as $979,751. Moreover, reviewing the use of 10% of long-term installments and showing a percentage of it, as current asset appears to be a duplication of the same asset, since long-term Installment would have included that portion of the asset for the same year.

3. Accounts Receivable

Amount due from Housing Authority of Grenada for instalments paid directly to their accounts.

4. Fixed Assets Computers

$

Office Equipment

$

Vehicle

$

Total

$

Cost Depreciation 31 Mar 2008 Accumulated Depreciation Net Book Value 31.03.08

9,336 1,556 4,668 4,668

17,442 1,744 5,232 12,210

26,778 3,300 9,900 16,878

Cost Depreciation for 31 Dec 2008 Accumulated Depreciation

9,336 1,167 5,835

17,442 1,308 6,540

42,000 7,875 7,875

68,778 10,350 20,250

Net Book Value 31 Dec 2008

3,501 10,902 34,125 48,528

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5. Equity Capital Contribution Net Contribution Stale Cheque

5,475,971 2,023,811 4,478

5,475,971 2,023,831 4,478

7,504,260 7,504,280

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NOTES TO THE FINANCIAL STATEMENTS AT 31 March 2007 (Restated)

3x. The amount due by the Housing Authority of Grenada was subsequently repaid in full. 4x. 5x. CAPITAL CONTRIBUTION – Government of Grenada

ACCOUNTS RECEIVABLE 2007 2006

Loans receivable Housing Authority of Grenada

6,864,530 14,614

6,879,144

4,797,514 500,000

5,297,514 Less: Installments receivable within one year Unallocated receipts Less: Provision for bad debts

686,453 3,171 6,189,520 250,000 5,939,520

979,751 -

4,317,763 -

4,317,763

FIXED ASSETS

Computers Office Equipment

Total

Cost Balance at March 31 2007 Accumulated Depreciation

9,336 17,442 26,778

Balance at April 1 2006 Charge for the year Balance at March 31 2007 Net Book Value - 2007

1,556 1,556

3,112 6,224

1,744 1,744

3,488 13,954

3,300 3,300

6,600 20,178

Net Book Value - 2006 7,780 15,698 23,478

Balance at April 1 2006 Net Contribution Balance at March 31 2007

2007

5,475,971

2,024,029

7,500,000

2006

-

5,475,971

5,475,971

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ADDITIONAL NOTES While the accounting records of the soft loan scheme had been properly kept and without material misstatement, the management of the loan itself is grossly inadequate, the following are some of the issues raised during the audit.

1. The staff of the Soft Loan Scheme were not given letters of appointments or contracts and the terms of their employment were not stated (e.g. holidays entitlement, pay increments and retroactive payments etc.). In most cases, the terms of engagement of staff of Housing Authority of Grenada were adopted.

2. The payment made to the manager, for holiday and gratuity is not in

keeping with his terms of contract. There is no provision in his contract for holiday/vacation. The manager should be asked to refund the payment to him. Since this arose as a result of false supporting documentation to support the claim paid to him.

3. There were no proper criteria consistently followed in approving the loans.

There was no evidence that the committee set up to approve the loan actually met to do so.

4. Generally, there was no security held for the loans granted. However, the

“security” held in some instances such as; land documents or insurance policies only photocopies of these were held on file. In cases where there were original copies, these were not assigned to the Scheme.

5. In many instances, loans were approved for clients employed by the

Government of Grenada or other establishment where salary deductions would have been appropriate forms of repayment of the loan but cash repayments were accepted and most of those clients defaulted on their loans.

6. In some instances, there were loans granted for the purchase of property

from the Housing Authority of Grenada or to construct a new home. This was not in keeping with the purpose for which the Scheme was established.

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7. Figures quoted on the promissory notes were not always accurate. It is usually rounded up and does not include the assessment fee. In some instances, there were changes to the value, which were not initialed rendering it invalid.

8. A client’s employer had a cheque for $33,065.73 written to Housing

Authority of Grenada (H.A.G) after the termination of his appointment, towards his indebtedness; but not credited to his account. Further enquires showed that the client was refunded $28,433.73 on 8 June 2006. No reason was given for taking this action.

9. Another client applied as a Police Officer with impending retirement in May

of 2005 and asked that the balance on the loan be deducted from her gratuity from the Government by sending a letter to the Accountant General with her permission. This was not done, neither was a reply to this request made. The loan has an outstanding balance and even though it is being serviced this is not consistent with the client’s request.

10. Generally, the delinquent accounts were not aggressively followed up.

There were also instances where clients believed they should not re-pay the loan. One client inferred that her husband died on the job and there were no compensations paid to her. So she did not think she ought to pay. Another, believed she got a grant rather that a loan. Others simply did not pay back without any reason given.

11. Out of about two hundred and sixty-five clients and about $7.88m total

loans given out, only eleven have fully repaid the loan before its due date, representing 4% of the total. However, quite a lot were delinquent about one hundred clients representing 39% of the total, which translates to about $2.8 million in uncertainties.

Documents

REPORT OF THE DIRECTOR OF AUDIT, GRENADA ON THE · OFFICE OF THE DIRECTOR OF AUDIT ... An audit includes examining, on a test basis, evidence supporting the amounts and disclosures