The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Post Office Savings Bank did not know how much money it held in customer deposits when examined by the Auditor General for the 2014-2015 fiscal year.

The Government's financial watchdog, in a report tabled in the House of Assembly on Wednesday, revealed that Savings Bank staff were unable to determine the amount of funds held in both active and dormant accounts.

Calling, with deft understatement, for the Post Office to calculate these sums, the Auditor General's report said: "We were informed that the dollar value for both the active and inactive accounts could not be determined by the staff of the Post Office Savings Bank.

"Further, we were also informed that there are no rules governing when an active account becomes inactive." Some 33 percent, or 9,044 of the Post Office Savings Bank's total 27,143 accounts, were said to be inactive or "dormant" at the time of audit, with 18,099 or two-thirds still active.

The Auditor General's report called for dormant accounts, which had been inactive for seven years, to be transferred to the Central Bank of The Bahamas to bring the Post Office Savings Bank into compliance with the latter's governing Act.

The Post Office Savings Bank must be one of the few, if any, banks worldwide not to know how much money it is holding on behalf of depositors. Not only does this inhibit its efficient operation, but in an era of greater regulatory scrutiny represents a potential supervisory weakness for The Bahamas.

The Auditor General's report also revealed that the last audited financial statements for the Post Office Savings Bank were produced in 2010 for the 2002 fiscal year - some 13 years prior to the watchdog's latest audit.

It called for the Post Office Savings Bank to be modernised through the introduction of debit cards, Automated Teller Machines (ATMs) and online banking, while the institution had breached its mandate by failing to calculate and pay annual interest at 6 percent (capped at $6,000) on customer accounts for seven years. Nothing had been paid since 2008.

"Deposits and withdrawals are still being transacted with the use of passbooks as the only source of reference in a 21st century banking environment," the Auditor General's report found. "Also, the banking system is not modernised to enhance the efficiency and effectiveness of operations electronically."

Turning to other aspects of the Post Office's operations, the Auditor General found that 380 post box renters had retained their facilities without paying the necessary fees. It recommended that management repossess and lock rental boxes "immediately after the March 31 extension deadline" to ensure owed monies were repaid.

The Auditor General's report also showed why the Road Traffic Department's ongoing modernisation is necessary, with $662,705 of vehicle stickers and other revenue-generating documents unaccounted for at its Abaco office.

It also found that revenue for new licence plates issued over the three-year period to June 2015 was "under recorded" by $234,018. The Auditor General's Office calculated that $747,000 should have been generated, but only $512,981 was recorded in the Road Traffic Department's records.

Several instances of fraud were uncovered, including the misclassification of vehicles according to their weight, with some drivers paying less in licensing fees than they should.

"There was a specific case where a truck was brought in for licensing," the Auditor General's report found. "The sales agreement and the insurance certificate identified it as a Ford F-250. However, the inspector identified the vehicle as a Ford F-150 per the inspection certificate.

"If the vehicle class is not precisely determined the Road Traffic Department stands to lose a minimum of $400 per vehicle between Class A and B, and $150p per vehicle between Class B and C.

"In the instance outlined herein, it appears as if the inspector intentionally identified the incorrect vehicle giving rise to a lower fee to the customer. This type of circumstance presents a great risk for the Road Traffic Department in that the department would be susceptible to manipulation of the vehicle classes without any knowledge of the same.

"When proper controls are lacking in the inspection process it provides an opportunity for fraud and graft to be perpetrated."

The Auditor General's report said it also identified "numerous instances of what appeared to be fraudulent insurance certificates", saying these were "especially seen being perpetrated" on one insurance company's letterhead - although the company in question was not named. The issuance of a fraudulent licence was also uncovered.