An audit reveals a financial mess at the UDC
The JAMINTEL building in downtown Kingston is one of a number of properties mentioned in the Auditor General’s Department report on the Urban Development Corporation.
In the 10 years since the Auditor General made a number of recommendations to the Urban Development Corporation (UDC) to improve efficiency, the entity has implemented only a few. , continuing to fight to collect the hundreds of millions of dollars owed to it by other government entities. , while accumulating losses and cost overruns in its property management portfolio.
That’s according to the report of a follow-up audit of the SVP filed Friday in the House of Representatives.
UDC also disposed of three properties below market value, in violation of its Wealth Management Policy, and accrued cost overruns, losses and additional costs totaling $156.39 million, primarily due to of “poor planning, lack of proper monitoring and framing of contracts,” Auditor General Pamela Monroe Ellis reported.
The November 2012 audit focused on whether the company was managing its operations effectively and efficiently to achieve its key business objectives. This audit revealed significant weaknesses, including several corporate governance lapses, as well as financial issues and internal control deficiencies that impacted the UDC’s ability to effectively and efficiently manage resources under his control. Weaknesses were found in UDC’s management of its investments in subsidiaries and joint ventures.
The 2022 audit aimed to determine the adequacy, effectiveness and timeliness of the actions taken by the UDC to correct the weaknesses reported and to assess whether the company was profitably optimizing the return on its assets.
The Auditor General’s Department found that only six of the 16 recommendations it made in the 2012 report had been fully implemented, six partially implemented, and four had not been implemented at all.
In addition, Monroe Ellis noted, his team had been forced to rely on unaudited financial statements and other reports in order to conduct a financial assessment of UDC because the entity had no audited financial statements and annual reports for the past three years to confirm its financial and operational performance.
The cost overruns of $156.39 million applied to a number of properties, including the JAMINTEL building in downtown Kingston. According to the report, the UDC honored claims submitted by the seller (National Housing Trust) for insurance, electricity and security costs due to a delay in handing over possession due to non-compliance. by the SVP of contractual payments despite two payment extensions.
The buyer of a property at 10-12 Harbor Street in downtown Kingston from UDC was allowed to determine the sale price and paid less than the amount approved by the UDC council . The report pointed out that part of the Ocho Rios cruise ship pier — 22.01 square meters of land — was transferred at no cost due to incorrect valuation and measurement, while the scope and planning of the squatter removal from the Forum Hotel complex in Portmore was poor, resulting in a one-year time overrun and a $40 million cost overrun on the relocation cost estimated at $59 million.
The Auditor General’s Department said the UDC attempted to collect monies owed to it by initiating legal proceedings from which it obtained judgment for four private tenant accounts totaling $11.1 million and $43,200. In February this year, the UDC collected net legal fees of $179.58 million in proceedings against the Commissioner of Lands for property occupied by the Department of Health and Welfare.
The Auditor General said that although the UDC had made efforts to improve its financial viability during the reporting period by seeking to recover rent arrears, debt management remained a challenge, rent arrears, in June of this year, reaching more than 120 days, and totaling $467.49 million, or 81% of old receivables. This figure should be compared to arrears amounting to 76% of old receivables in May 2012.
As of March 2022, the government owed the UDC $7.23 billion in unpaid compensation for land transferred to the National Road Operating and Constructing Company (NROCC).
The transfer is linked to a Cabinet decision in June 2015 to provide land for the development of hotels, accommodation and other facilities as a condition of the 50-year concession agreement between the government and the NROCC.
“Review of UDC records showed that the value of land transferred to the NROCC currently stands at $9.36 billion for which the Ministry of Finance and the Civil Service have provided compensation totaling $2.13 billion. dollars,” the report said.
Additionally, in May 2021, Cabinet gave approval for the properties owned by Petroleum Corporation of Jamaica to be transferred to the UDC as additional compensation, but to date the properties have not been appraised and transferred. at UDC.