AUDITOR General Pamela Monroe Ellis has urged the Public Accounts Committee of Parliament to take more time to examine proposals to reduce the interest on bonds for delinquent teachers who owe the Government some $400 million, as a sweetener to get people to pay.

The issue of teachers who forfeit on the study leave with pay arrangements has been like a recurring decimal for the committee. Last week Tuesday, director of school personnel and administrative services, Andrene Hawthorne, told the committee that of the $410 million owed to government as at March 2012 the Ministry had so far recovered $25.6 million from 98 people. Hawthorne said that as of April this year, 180 teachers had still not paid and are owing over $173 million. She, however, noted that of the overall amount $378 million is interest with a “mere $94 million (being) the principal”.

At that point, committee members questioned the 23 per cent interest applied to those loans which they said further made the loans “uncollectable”.

“Everybody knows my position on interest rates. I am a single digit man,” committee Chairman Audley Shaw noted in questioning whether the 23 per cent interest rate had been reviewed by the Ministry of Finance with a view to recommending to the Government that it be reduced in line with current government Treasury Bill rates.

“Of the $400 million, less than $100 million is owed in principal, and what worries me is that when you go to the poor retired person you are going to want to take out high interest rate penalties as well and that to me might very well be uncollectable or unconscionable or both,” Shaw said.

Government committee member Julian Robinson was of a similar mind.

“It’s a question of whether we could look at writing off certainly some of the interest accumulation, given that it represents about 78 per cent of the total and using that as an incentive to offer to those who are delinquent to repay primarily the principal because the level of interest makes no sense,” he said.

Permanent secretary in the education ministry, Elaine Foster-Allen, said that the ministry was concerned not only about the rate of the interest but also about the origin of a decision to compound that interest.

“We, too, were very concerned about the interest that was being accumulated and so we thought to find out from the ministry why and when this compound interest was applied and we also looked back at our records to see where the authority came from,” she told the committee.

Heidi Gordon, legal consultant to the ministry, said that the decision to provide loans to public officers at commercial lending rates was a 2009 Cabinet decision while the now Opposition Jamaica Labour Party was in power.

Questioned further by Shaw who said he was not familiar with the decision which supposedly took place under his watch, Foster-Allen made a startling disclosure.

“The truth of the matter is, we don’t know, we inherited it, it goes back to September 1990. We have found no authority for the application of this compound interest so this is where we are at. What we found were letters to teachers on study leave and the bonding instrument saying 23 per cent but we have no authority from any policy document or decision,” she told the committee.

However the committee’s decision to propose ‘a sharp reduction of interest rates in line with current government Treasury Bill rates and recommend that the new rates should apply to the portfolio of delinquent loans as well to try to make it more collectable,’ was stalled by Monroe Ellis.

“There is one thing I am somewhat concerned with and I am looking primarily at the objective of the study leave and the bonding arrangement. The aim of the interest rate in my mind is somewhat of a penalty, it is somewhat of a deterrent and an encouragement to serve your bonding period and I am not suggesting we keep it at the 23 per cent but I also believe we should examine the history,” she said.

“It is quite likely that at the time the 23 per cent was set it was somewhat reflective of the prevailing rate. I am not weighing in on the side of any of the interest rates proposed, I am saying that this decision is not one that should be taken here this morning. It requires further exploration,” the auditor general added.

Furthermore, she said, there was a need to look at the issue of the compounded interest, to see if it can be enforced since it was thought that in this instance it should have been simple interest and there is no document to support the compounding.

“It seems to me then that the best thing the committee can do is put the matter back in the hands of the minister and Cabinet and the Ministry of Finance,” Shaw said in acquiescing. The minutes of the meeting are to be sent to the relevant people so the views raised during the discussion can be seen.