Falmouth pier, downtown transport centre add to UDC money woes
MONEY owed for work on the downtown transportation centre and the Falmouth Cruise Shipping Pier in Trelawny is partly being blamed for the cash shortage now being faced by the Urban Development Corporation (UDC).
The explanation came Tuesday from the entity's Deputy General Manager Donald Hamilton during a response to the Public Accounts Committee of Parliament examining the Performance Audit report conducted by the Auditor General Pamela Monroe Ellis on the entity.
According to the auditor general, cash generated from operating activities of the entity have declined by 167 per cent moving from negative $409 million as at March 2010 to negative $1 billion as at March 2012.
In addition, the report said total cash balances decreased from $718 million as at March 2010 to $221 million as at March 2012. The report said that as at March 31 last year the UDC's current liabilities exceeded current assets by $367.7 million moving from a positive $898.7 million at March 2011. Furthermore, unaudited statements show that non-current liabilities increased from $751 million as at March 2011 to $945 million as at March 2012 due mainly to increases in bank borrowings and debt issuance. The auditor general also found that customers' land deposits are used to finance UDC operational activities.
Tuesday, Hamilton said the over $1-billion impairment bill included project receivables that did not materialise.
"For example, we did work on the downtown transport centre under the agreement that we would get significant resources to assist; however, in trying to get the resources we have run into challenges in terms of reconciling with the provider example PetroCaribe. We were under the understanding that we would get some resources, we didn't get it so we are in the process of negotiations," he told the Committee.
The UDC general manager in charge of finance also said there were outstanding "receivables in relation to the Falmouth project where UDC expended on the understanding that some of this would be refunded".
"We had challenges in terms of getting the documentation correct so we are in the process of negotiating. However, in doing the accounts we had to provide for this because it has been there for some time. We are in the process of either writing off some of them and trying our best to recover where possible," he told the committee.
"You sound like you are the rich cousin in the family who, when everybody else bruk dem go to you and don't pay you back. You opened up a can of worms because I would love to understand what those agreements were with respect to Falmouth and the downtown transport centre," Government committee member Julian Robinson said.
However, the Opposition's Karl Samuda was in no mood to be diplomatic.
"This is an insolvent company.This company, in real terms, ought not to be permitted to handle funds in its present form because of the inadequacy of the manner in which it has handled funds. The company is insolvent and in the private sector this company would be competing for bankruptcy because its current liabilities exceed its current assets," he said.
"That in and of itself is bad, but what compounds that problem is the fact that the auditor general reports that there is 167 per cent decline in cash flow income. Now how in God's name? We can't go any further until the team is in a position to indicate the way forward in terms of cash flow because you are going south.The cash flow is a negative $1 billion. In addition, the company is delinquent in addressing the question of receiving income from its receivables," Samuda noted.
Committee chair, the Opposition's Audley Shaw, also wanted to know the steps the UDC was taking to invoke those agreements.
Hamilton, in replying, said in cases where there were formal agreements, a special small committee of the current board is investigating the expenditure that was incurred to see whether or not the expenditure was under the agreement and whether or not the UDC can recover costs.
General manager of the UDC Desmond Malcolm, in admitting that the entity had "ended up holding the bag", said the entity was, by no means, "pretending to be the rich cousin". He, however, noted that based on several actions being taken by the UDC, it was " making progress and things are much better".
The construction of the Falmouth Cruise Shipping Pier was a US$222-million joint effort of the Royal Caribbean Cruise Line and the Port Authority of Jamaica. As part of the preparatory work, the UDC spent more than $50 million to carry out infrastructure works in Falmouth. The initial cost of $160 million for the downtown transport centre balloned to $400 million because of design errors and other issues.
The audit was conducted to determine whether the UDC was managing its operations effectively and efficiently to achieve its core business objectives. The audit found that the UDC is failing in its objective to assure the financial viability and solvency of the corporation.