The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Electricity Corporation (BEC) exceeded its overtime budget by between 27-38 per cent during its last three financial years, with almost two-thirds of the 2012 overruns incurred in the Family Islands.

The internal audit report on BEC’s overtime for the year to end-September 2012 shows that breaching budgeted estimates has been a regular occurrence, or standard practice, at the Corporation for some years.

For BEC’s 2010 financial year, the report by Edgar Moxey, BEC’s internal auditor, showed that the Corporation exceeded its overtime budget by $2.019 million or 32.02 per cent. Total overtime spend for the year was $8.324 million, compared to a forecast $6.305 million.

The pattern was repeated in 2011, a year that included Hurricane Irene, although the overshooting declined slightly to 27.46 per cent.

For the year to end-September 30, 2011, BEC’s actual overtime was $10.462 million compared to a forecast $8.208 million - a $2.254 million overrun.

The overshooting appeared to get worse in 2012, though, with overtime beating budgeted projections by 38.21 per cent or $3.272 million. The overtime budget for the year was $8.563 million, and the actual spend $11.835 million.

While numerous details from the internal audit report were previously made public, this information never has.

It sheds a slightly different light on the ‘back-and-forth’ on the overtime issue between Leslie Miller, BEC’s executive chairman, and the union representing the Corporation’s line staff.

Effectively, it shows that ‘overtime’ is a regular contingency item that BEC budgets for every year, rather than an unusual, one-off phenomenon that some of the dialogue had indicated.

While putting the debate in a slightly different context, there is little doubt that BEC overtime is being abused, the report noting that “some extreme cases of high or excessive overtime ‘worked....seem physically impossible, highly dangerous or simply questionable, when one considers the law of diminishing marginal productivity”.

The ‘budgeted overtime’ and ‘actual overtime’ also appear to be increasing every year with not explanation, meaning Mr Miller is correct to focus on this area as one means to deliver cost savings for Bahamian electricity consumers.

There is little surprise, though, in that the Family Islands accounted for 65.4 per cent of the overtime overruns for 2012.

Some $2.569 million worth of Family Island overtime had been budgeted for the 12 months to end-September 2012, but the actual figure was $4.709 million - a $2.141 million or 83.3 per cent overrun.

The Family Islands, in some cases with hundreds of miles of wire and transmission/distribution lines, will likely incur frequent problems that require the call-out of BEC’s relatively small workforces in these locations. They are also far from the oversight of head office in Nassau.

“Particular attention should be given to the Family Islands, energy supply, customer services, field operations, supply chain and information technology areas,” the BEC report said.

Energy supply incurred a 37.7 per cent or $946,334 overtime overrun in 2012, providing the next biggest overshoot at $3.454 million.

Customer services, too, saw a 69.2 per cent overtime overshoot to $886,133, compared to $523,777 in the budget, Information technology saw a 100 per cent overrun at $31,049.

Yet, bizarrely, field operations - the area likely to see most overtime - came in UNDER BUDGET for 2012. Some $2.058 million worth of overtime was incurred here, below the forecast $2.431 million.

Elsewhere, the BEC internal audit report said there was a $15,539 discrepancy between the total overtime cost produced by the accounts and payroll department, which was $11.835 million, and the $11.851 million logged by the IT department.

This, the report said, “calls into question the integrity” of BEC’s systems, “as no logical explanations were given for the difference”.

The document revealed that BEC had “for years” failed to properly define overtime - whether it was incurred due to workers being absent or on holiday, unpredictable emergencies or “manageable overtime”.

Pointing to management and system failures, the BEC report said frequent overtime analysis was required to manage these costs.

The accounting and chief financial officer’s department, the report added, “no longer produces” monthly summaries that highlighted “escalating overtime costs and adverse budget variances” broken down by department.

“The timely production of overtime reports in a manner which meets the user/manager needs and facilitates timely corrective action is needed for the proper management of overtime,” the BEC report said.

“The proper management of overtime represents a good opportunity for the Corporation to realise some savings and increase its profit margin.”