HDC's $9.5b hole

FOR 13 years, since the Housing Development Corporation (HDC) was incorporated, the state agency has struggled to account for the billions passing through its hands.

The financial accounts are being reviewed by auditing firm KPMG. HDC was forced to "re-create" its finances from 2005-2009 after several documents to account for the $9.5 billion they received in that period were missing. The accounts from the first five years of the company remained a “qualified opinion,” HDC’s managing director, Brent Lyons, told Business Day.

Lyons said for the past two years, extensive time and resources have been spent trying to rebuild the accounts, find the records and make sure everything is proper in the hopes that by December 2019, HDC will be up to date with its audited statements.

"The HDC has not had any audited financial statements and has spent the last five to six years trying to rebuild the accounts, find the records and make sure everything is proper. By December 2019, we will be current up to 2018. From 2005-2009, we received a qualified opinion, which means that the documents could not be confidently relied upon. We are now working on 2010-2013, which should be completed by the end of the year and we have written to the Auditor General for permission to proceed with 2014-2017. Next year, we will apply to have this year audited and continue the process going forward as required on an annual basis. I am not taking any credit for that because this is work that started prior to me. We are just continuing and making sure it does not happen again."

While the bulk of the work for the first five years has been done, HDC was advised to review two main reasons for their negative report – inventory and mortgage receivable accounts. According to the Financial Statement Audit Update, dated October 2015, obtained by Business Day, HDC met with representatives of KPMG "to discuss any unresolved issues which would require adjustments to the unexplained and unreconciled balances between the general ledger and supporting records to the financial statements."

The inventory account is listed as an asset on HDC’s book and includes the cost of housing projects that have yet to be allocated and is transferred to another account when the houses are completed and allocated. The mortgage receivable account is another asset account used to record a loan to another party for which real estate is the collateral. The report showed both accounts lacked proper vetting, at least for the first five years of HDC's existence.

The report stated that HDC reconciled 20,581 mortgages in order to determine a more accurate mortgage receivable balance for 2005-2009. HDC, like all state entities, is duty bound to submit audited financial statements annually to the Auditor General. Officials at the Auditor General's office would not say what penalty, if any, would be imposed on HDC for failing to file audited financial statements since its evolution from the National Housing Authority (NHA) in 2005.

Former managing director Jearlean John, who was appointed to HDC in 2009 and remained until 2015 when she was fired, said she did all she could to rectify the books. She said while she was there she began liaising with the Auditor General to have the HDC’s finances properly vetted and reflect proper stewardship of state funds. John said she was constantly in contact with KPMG and the Auditor General to seek approval to continue with the audit and by the time she left a “considerable” amount of work was done but she was not sure if any of the audited financial statements were submitted.

Noel Garcia, who was managing director from HDC’s inception to 2009, now chairman of the Urban Development Corporation, (Udecott), did not respond to Business Day's requests for comment as calls went unanswered and WhatsApp messages were left without response.

Business Day spoke with former housing minister Emily Gaynor Dick-Forde who began the auditing process in 2008. She said there were “billions of dollars” in unwritten contracts that predated her as housing minister and the HDC’s incorporation.

Dick-Forde, who became housing minister in 2007 after replacing current PM Dr Keith Rowley, said: "I am an accounting academic so one of the first things I took note of was the finances and the accounting system. I was advised that the HDC accounts were unaudited from as far back as far back as 1999 (as NHA). This was sometime in 2008 I was told this. This is horrible."

Dick-Forde said the financial problems facing HDC was one of many plaguing the public sector, which is caused by a lack of competent people in influential positions. Dick-Forde’s successor, Dr Roodal Moonilal, who held the portfolio for five years, said the state of HDC's finances was brought to his attention and he continued the work started under Dick-Forde. Work was done to bring the books up to date but with missing records there was very little that the external auditors, KPMG, could have done.

"We could not find documentation for several years, incidentally when Dr Rowley was the Housing Minister," Moonilal said.

Business Day texted Housing Minister Edmund Dillon and Rowley last Friday but did not receive a response up to the time of this publication.

Former housing minister, Randall Mitchell, said he was made aware of the issue and relayed instructions he received from Rowley that the audited financial statements were completed.

Mitchell said Udecott was also failing to submit timely audited statements and he could recall the last period filed was in 2005. He said he had no recollection of any statements submitted to the Auditor General. He said Udecott’s challenge was that they claimed their documents were handed over to the commission of inquiry into the construction sector and they could not retrieve the documents to submit them to the auditors. The Professor John Uff chaired commission began in 2008 and a report was submitted in March 2010.

“Udecott found what they could have and by the time I left they were up to 2012. HDC has to go through a lot of records from NHA into HDC. A lot of payments were made manually so the auditors have to go and check every single document,” Mitchell said.