The Tribune

• $38m allocated to COVID healthcare

• But also to prop up WSC, Bahamasair

• Some SOEs breaking law on disclosure

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Governance reformers yesterday renewed demands for more transparency around state-owned enterprises (SOEs) after they collectively consumed $70m of last year’s $250m IMF loan to The Bahamas.

Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, told Tribune Business that the government needed to provide Bahamians with greater understanding of how it will move the likes of Bahamasair and Water & Sewerage to a sustainable “cost recovery” position given that $423m annual drain they impose on taxpayers.

He spoke out after the Office of the Auditor General, in a report on how the government used the $250m “emergency loan” proceeds received from the International Monetary Fund (IMF) in June 2020, revealed that the greatest percentage - some 28 percent - was allocated to supporting SOEs.

The greatest percentage of that sum, some $37.977 or 54 percent, went to a combination of the Public Hospitals Authority ($34.31m) and National Health Insurance Authority to help them cope with the demands imposed by the COVID-19 pandemic.

However, much of the balance went to propping up loss-making SOEs. Some $7.925m of the IMF loan proceeds was disbursed to the Water & Sewerage Corporation, while another $5.367m went to Bahamasair. With aviation all but shut down, the Airport Authority received $2.894m and the Bahamas Civil Aviation Authority a further $2.531m. Even Nassau Flight Services was the recipient of $669,000.

The University of the Bahamas was issued some $6.35m, and the Bahamas Technical and Vocational Institute a further $1.277m. The Office of the Auditor General, though, pointed out that not all SOEs were complying with the legally mandated requirements of the Financial Administration and Audit (Amendment) Act 2020 to submit quarterly and financial reports to the government within 30 days of period end.

“With respect to SOEs governance, we noted that improvement was warranted relative to timely submission of audited financial statements and reporting to Parliament,” it said. “The SOEs are non-compliant with reporting in a timely fashion.

“Non-compliance is a risk, and the implications include inadequate governance and accountability for efficiency; unavailability of pertinent financial data for decision-making; and the inability to rationalise, thus more funding could be provided than needed.....

“Notably, within the Ministry of Finance, a ‘unit’ has been established to review the monthly and quarterly financial reporting of the SOEs. The reporting process has begun; however, all of the SOEs are not complying with the legislation. Compliance with this process is mandatory for effective decision-making and management of scarce resources.”

Disclosing that the SOEs were reporting their financial data using manual means, the Office of the Auditor General called for this to be converted to electronic with accounting and reporting management information software. Calling for the use of ‘Big Data Analytics’ and “reconciliation checks”, it called for such reports to be published on the government’s website once they are tabled in Parliament.

Mr Aubry, meanwhile, said the amount of IMF loan funds that went to the non-health SOEs represented “a big red flag”. He added: “That’s not anything new in terms of having to prop those entities up, but they continue to under-perform and continue to suck up a lot of resources.

“The government made a dictate that it will be pushing to achieve their sustainability and cost recovery but, unfortunately again, we’ve taken out a loan that we need to repay where a substantial amount has been used to pay other bills and prop these entities that are still not producing like they need to.

“This process of getting the SOEs in line will be one of the biggest the country will face in the coming years. We cannot push them off. With the amount of debt they are carrying, I don’t think many are an attractive proposition to be privatised. The Government wants to make them financially sustainable, but that process has to be above board.”

Describing the Office of the Auditor General as “right on target”, given that SOEs financial information has historically not been available or there has been “a more opaque approach to disclosure”, Mr Aubry added: “We need more transparency to understand how we will make these entities more sustainable or revenue-generating.

“They have to generate their own revenues, and with everything the Government has to deal with post-COVID, it’s harder to make the argument to prop them up. We’re taking future resources and propping them up even though they are not generating sufficient revenue.”