Hiding in Plain Sight Our elected officials are tasked with running the affairs of our country in an efficient, effective manner, ensuring the prudent, transparent and accountable management of our limited resources for the greatest good. When the above actions come into question, it is the duty of the Auditor General to investigate and issue a report. The Auditor General conducted a special audit into the construction of low-income, high-rise housing projects at Valerie and the Grotto, St. Michael; based on the report, three Ministers of the Crown were summoned to appear before the Public Accounts Committee of the Parliament of Barbados, to clarify the circumstances surrounding the awarding and execution of relevant contracts. The Ministers have refused to appear before the Committee, citing the “illegality of the summons” issued by the Public Accounts Committee. The following is a condensation of the Auditor General's findings in this matter. In January 2011, the Board of the National Housing Corporation (NHC) and the Cabinet of Barbados approved the construction of 72 housing units at Valerie in Collymore Rock (approved cost $15.799M) and 76 units at the Grotto at Beckles Road ($18m). These projects were ostensibly slated to be high-rise, low-income units, designed to address the needs of applicants from urban districts where space for housing is limited. The projects are located in and on the border of the constituency of St Michael South, for which the MP is Freundel Stuart. The regulations state that the approval of the NHC Board should be obtained before Cabinet approval is sought for housing projects. It should be noted that Cabinet approval for these projects was dated January 10th, 2011, 10 days before the NHC Board had completed its process of approval. On January 20th, 2011, the Permanent Secretary, Ministry of Housing (Acting), issued letters of award to 3 contractors, including the original contractor approved by Cabinet, to carry out "aspects of the Grotto project" at a cost of $6M each - a total of $18M. There was no explanation offered for the sub-division of this project, nor was there any documentation from any of the three contractors expressing interest in the project. It should be noted that the role of of awarding contracts is the responsibility of the NHC Board. The Permanent Secretary (Acting) had no authority to issue letters awarding contracts on behalf of the NHC. The two contractors who had not been originally approved by Cabinet, to whom contracts had been awarded, subsequently declined to take up the offer and the original contractor carried out the work on both projects. The two housing projects, totaling more than $33M initially, were approved without competing bids and without the benefit of advice from the technical staff of the NHC, due to the absence of supporting documentation. Further, the NHC's stated range of low-income housing construction cost is between $125,000 and $195,000 per unit. The final cost of construction at Valerie and the Grotto was between $300,000 and $450,000 per unit. The two projects exceeded the original amount approved by Cabinet to the tune of $17.55M. Valerie The Valerie project incurred an increase of $7.7M over the original quoted price of $15.799M, for which, incidentally, there had been no public tender. The increase was associated with items that should have been included in the original price - design consultant fees, legal and finance fees, and a waste water plant - but had been omitted. Upon completion of the Valerie residences, the contractor presented the invoice to the NHC for payment in July 2012. The Corporation indicated to its parent ministry, the Ministry of Housing, that it was unable to meet the payment. As neither the NHC nor the Ministry of Housing had budgeted funds for the project, the Ministry of Housing made a request to the Ministry of Finance for funding for both projects. The Ministry of Finance settled the invoice after some 10 months, incurring the penalty of $240,000 for late payment. The payment for the Valerie residences was made from proceeds of the sale of Government's remaining shares in Republic Bank (Barbados). All of the 76 units in this project were allocated to low-income earners at a monthly rental of $700 per unit. As of May 2016, 47% of the tenants occupying these units were in arrears with rent. The Grotto The Grotto, the other un-tendered high-rise project, a mile away from Valerie and given to the same contractor, has also come under the Auditor General's scrutiny. This was a project for which Cabinet approval had been given on January 13th, 2011 for a budgeted cost of $18M, with the provision that the chosen contractor submit a proposal for the construction of 76 units in 3 blocks by March 2011. The date passed without the requested submission. However, on October 10th, 2012, some 19 months later, a proposal was received from the said contractor for construction of 80 units in 5 blocks and 84 car-parking spaces, for a cost of $27.85M - some $9.85M more than Cabinet and the NHC had approved. N.B. The cost of the 84 car-parking spaces requested by the Chief Town Planner was $856,919. There was an approved reduction of these parking spaces to 43, but no related adjustment to the construction cost was made. Based on the additional cost of $9.85M for the Grotto project, the NHC requested the approval of the Cabinet and the Ministry of Finance, via the substantive Permanent Secretary of the Ministry of Housing. On December 4th, 2012, the Permanent Secretary requested from the contractor a cost-breakdown of both the original quotation of $18M and the increased costing of $27.85M. There was no submission of the requested break-down; instead, a letter was sent indicating that the increase was due to "a re-design of the site at the request of the Chief Town Planner, as the site now accommodates 5 buildings in different locations and additional parking”. The Permanent Secretary deemed this response unsatisfactory and requested the detailed proposal, along with the Bill of Quantities, as a matter of urgency. According to the Auditor General’s report: "On the 14th May 2013, the Permanent Secretary received 'an elemental breakdown' of the $27.85 million but no evidence was seen that a cost breakdown for the $18 million was received from the Developer. By this time, according to the evidence seen, the contract had been signed and the project had already commenced on 1st April 2013. The Ministry of Finance had not yet commented on the price escalation, nor identified the source of funding from which the NHC would have met its obligations to the Developer." A certificate for full payment for the Grotto project - $27.85M - was issued on October 14th, 2014. There were no funds available to facilitate payment. As a result of the delay in full settlement, a penalty of $784.746 was incurred. Settlement was subsequently arranged through the Housing Credit Fund, administered by the Central Bank of Barbados, which declared a $30M dividend to the Government of Barbados. Settlement was made in two payments - $24,215M in March 2015 and $3.635M in July 2015. The Housing Credit Fund (administered by the Central Bank, with the Governor as trustee), was established to provide housing for middle and low-income households through approved financial institutions. The NHC is not qualified to borrow from the Housing Credit Fund, as it is not an approved financial institution. Central Government is only entitled to receive any proceeds of this fund if the fund is terminated. The transfer of proceeds from the Housing Credit Fund to Government cannot therefore be substantiated in law. ——————————————————————————————————————— The Auditor General has noted that since the NHC has been facing financial challenges for a number of years, arrangements could have been made with the contractor to receive payment in installments, as is usual with Public-Private Sector Partnerships. Because of the lack of financial planning, over $1M in penalties and interest have been incurred on the two projects. In addition, despite the NHC having a legal team in place to provide advice to the Board, the Board engaged a private Attorney to provide legal advice on the Condominium Act and contract services on Urban High Rise Apartment projects. The attorney's fees were $741,581.15. After objection and negotiation by the Board, the fees were reduced to $50,000.00. How is it possible, in a country that has spent the past 8 years in recession, to have engaged in a house-building spree without accurately tying construction to timing, needs, means, budgets, correct demographics and cost effectiveness? How can the Ministers of the respective ministries preside over these irregularities, and also refuse to be called to account to explain this reckless expenditure of public funds? The blatant disregard for rules and correct procedure and the resultant cost to the taxpayers of this country are scandalous. This shocking situation is all the more distressing when so many areas of national importance are starved of adequate financial resources: sanitation services, the maintenance of roads and public buildings, street lighting, and the public transport system are a few of the obvious ones. The refusal of key elected officials to appear before the Public Accounts Committee to justify their actions in respect of the irregularities of the two housing projects under the Auditor General's scrutiny speaks to the contempt for accountability from those who choose to hide in plain sight. They will not, however, be able to escape the court of public opinion, a court in which the people of Barbados sit in ultimate judgement.