BVI Treasury Department Audit by BVI Beacon

Forensic Services

Government of the British Virgin Islands Treasury Department Forensic Examination Report Strictly private and confidential Final 22 March 2013

At a glance – our views

Executive report

Supporting information

Appendices Glossary

Government of the Virgin Islands Ministry of Finance Central Administrative Complex Road Town Tortola Dear Mr. Gaskin, Subject: Forensic Examination of the financials of the Treasury Department of the Government of the Virgin Islands

Brian Hackett Partner T: +1 868 299 0700 (ext 4009) M: +1 868 392 7922 brian.hackett@tt.pwc.com Kofi Boxill Director T: +1 868 299 0700 (ext 4026) M: +1 868 391 3333 kofi.boxill@tt.pwc.com David Thompson Director T: +1 441 299 7656 M: +1 441 535 7656 david.b.thompson@bm.pwc.com

Government of the BVI Treasury Department PwC

We are pleased to report on our findings regarding the Forensic Examination of the financials of the Treasury Department of the Government of the British Virgin Islands (the “BVIGOV”) in accordance with our contract dated 27 September 2012 . Enclosed herein is our final report. Save as described in the contract or as expressly agreed by us in writing we accept no liability (including for negligence) to anyone else or for any other purpose in connection with this report, and this report may not be distributed to any parties other than members of Cabinet of the BVIGOV without our expressed written consent. We would like to place on record our appreciation to you and the staff of the BVI Treasury Department and Ministry of Finance for the hospitality, courtesy and assistance afforded to our team during the course of its work. Yours faithfully,

Brian Hackett Managing Director

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22 March 2013 2

Table of Contents Page

Financial Reporting Process

Quality and Accuracy of Financial Reporting

Restated Net Fiscal Position

Debt Obligations

Evolution of Net Fiscal Position

Examination of Major Contracts

High-Level Assessment of Treasury Operations

7.1

Recommendations and Suggested Next Steps

Proforma Statement of Affairs

Compliance with Protocols for Effective Financial Management

Reported Assets & Liabilities

Reported Income and Expenditure

Recurrent Revenue Analysis

Table of Contents Page

Recurrent Expenditure Analysis

FY2011 Abstract Statement

Year-end Commitments / Unrecorded Liabilities

Litigation Listing

Major Contracts awarded in FY2011

Listing of Contract Payments

Outstanding Audit Requests

At a glance – our views

Executive report

Supporting information

Appendices Glossary

Summary of Engagement Background

Engagement Background

Scope of Examination

The Government of the (British) Virgin Islands issued a Request for Proposal for the conduct of a forensic examination on the financials of BVI’s Treasury Department (“the Treasury ”). The examination was primarily requested to obtain additional insight into the fiscal standing of the BVIGOV.

The scope of the Treasury examination included and was limited to the following (as summarized):

Additionally, the Ministry of Finance required an examination of potential abnormal activities and irregularities regarding the award of contracts at values that exceeded $100,000 prior to the election of the new government in November 2011. The Treasury Department falls under the Ministry of Finance and is headed by the Accountant General. The Accountant General is responsible for the accounting of public monies and reporting on the Government’s accounts as set out in statutory instruments of the Constitution, Public Finance Management Act and Regulations, financial circulars, and financial instructions issued by the Ministry of Finance and Financial Secretary.

On 27 September 2012 the BVIGOV engaged PricewaterhouseCoopers Advisory Services Limited (“PwC” or “PwC Trinidad”) to conduct the forensic examination of the financials prepared by the Treasury Department, and to review the award of certain Major Contracts during 2011, with a focus on the specific areas outlined at right.

Government of the BVI Treasury Department PwC

1. Examination of the financial statements prepared by BVI Treasury for the 2008 through 2011 fiscal years to assess the fiscal status of BVIGOV’s accounts as at December 2011, and to understand how this fiscal status evolved; 2. Examination of the bank statement cash balances at December 2010 and 2011 to compare and verify these amounts to the balances reported by BVI Treasury, and to identify any irregular activity; 3. Review of the Major Contracts (greater than $100,000) entered into by the BVIGOV between January 1 and December 31 2011 with a focus on compliance with approved procurement policies; analysis of amounts spent by BVIGOV against these contracts; and any other irregularities identified; 4. Examination of the purpose, nature, and authority for all cash transactions that exceeded $100,000 between January 1 and December 31 2011 including compliance with required payment approval procedures; 5. Conduct of a high-level assessment of the overall BVI Treasury operations with a focus on key internal controls and financial reporting procedures.

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At a glance – our views

Executive report

Supporting information

Appendices Glossary

Summary of Engagement Scope

Our scope

Limited

Extensive

Our work was focused on and limited to analysis of the historical results for the four (4) years ended 31 December 2011 and the net asset position of the BVIGOV as at December 2011; analysis of bank statement cash balances and reconciliations as at December 2010 and 2011; examination of the process of award and review of the Major Contracts entered into by the BVIGOV between January 1 and December 31 2011; examination of the purpose, nature and authority for all cash transactions that exceeded $100,000 during 2011; and a high-level assessment of the overall BVI Treasury operations and certain key internal controls. Our scope did not include, and we did not perform, a financial statement audit in accordance with International Auditing Standards where an opinion is rendered as to whether the accounts are fairly stated in accordance with a specific international financial reporting standard. The Auditor General of the BVIGOV performs this function. Further details of our scope limitations and restrictions are presented on the next page and throughout our report where appropriate.

Access to management

None

Good

Access to information

Limited

Overall, the information provided has given us a reasonable basis to execute our scope of procedures. However, certain information has not been provided in a timely manner and remains outstanding as at the date of this report. This information is included in the Appendices. Extensive

Clarity of information

Poor

Government of the BVI Treasury Department PwC

Our access to management was good while onsite in the BVI. We held meetings with the Acting Accountant General, Accounting Manager, and other personnel within the Treasury Department. We also met and held discussions with the Auditor General, Acting Director of Internal Audit, Manager – Procurement Unit, various Ministry of Finance personnel, as well as a representative from the Attorney General’s office.

Good

The information provided, together with our access to management, has allowed us to gain insight and understanding of the fiscal status and procurement practices of the BVIGOV, as well as high-level understanding of the operations of the Treasury Department. However, weaknesses in the quality of the financial information provided; challenges with the extraction of payment information from the JD Edwards system in the form we requested, and the non-centralized retention of certain records adversely affected the clarity of some of the information provided. Confidential Information for the sole benefit and use of PwC’s Client. Final

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At a glance – our views

Executive report

Supporting information

Appendices Glossary

Scope Limitations and Restrictions

General We have set out in this report the scope of examination procedures undertaken by us and our findings thereon. Our examination did not constitute an audit where an opinion is rendered as to the accuracy of the financial information presented, as defined by International Financial Reporting Standards (“IFRS”). We have not attempted to audit or otherwise verify the information presented to us beyond the expressed scope of services and related procedures stated in this report. We have not sought external verification of the information provided to us except as expressly stated herein. Our work was conducted over a fourteen (14) week period ended 17 January 2013. Should further information come to our attention, the results and conclusions expressed herein could change. This report must be considered in its entirety by the reader, as selecting and relying on only specific portions of the analyses of factors considered by us, without considering all factors and analyses together, could create a misleading view of the processes underlying the analysis. It is not appropriate to extract partial analyses or make summary descriptions of the report and any attempt to do so could lead to undue emphasis on a particular factor or analysis. Our report is not intended for general circulation or publication, nor is it to be reproduced or used for any purpose other than that outlined in our engagement letter, without our prior written consent in each specific instance. We will not assume any responsibility or liability for losses occasioned to you as a result of the circulation, publication, reproduction or use of our report contrary to the provisions of this paragraph. Scope of work and examination of records 1. Due to the limited scope and time constraints involved in completing our work, this report has not considered all areas which might be relevant to you. We have identified those areas where we consider further investigation would be required to deliver more detailed findings. 2. The scope of our work was limited to a review of documentary evidence made available to us. We have not verified the authenticity or validity of the records and documents made available to us unless otherwise stated. Our work was based on limited procedures which may not necessarily identify all items which should be brought to your attention, and the period of focus as requested by you was the twelve months ended December 2011. 3. We cannot guarantee that we have had sight of all relevant documentation that may be in existence and therefore cannot comment on the completeness of the documentation made available to us. Any documentation or information brought to our attention subsequent to the date of this report, which would affect our findings detailed herein, may require our findings to be adjusted and qualified accordingly. 4. Although we have conducted a review of certain Major Contract procurement practices our scope also did not include an investigation of the quality of work or Value for Money derived from any of the Major Contracts or a background investigation of the contractors. Government of the BVI Treasury Department PwC

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At a glance – our views

Executive report

Supporting information

Appendices Glossary

At a glance – our views

The BVIGOV has serious deficiencies with the timeliness and accuracy of financial information prepared for decision making, and with the adequacy of procurement practices for Major Contracts. Urgent remedial action is immediately required to present fiscal results that accurately reflect the economic reality of the net fiscal position of the BVI; to address the decline in the net fiscal status, and to minimize potential mis-management of public funds.

! Timeliness of Financial Reporting

@ Accuracy of Reported Net Fiscal Position

# Major factors contributing to decline in Net Fiscal Position

The timeline for finalization and reporting the BVIGOV’s annual accounts has taken 14 to 17 months for the last three (3) fiscal years (see table below).

The reported Statement of Assets and Liabilities do not provide an accurate presentation of the economic reality of the BVIGOV’s fiscal position.

Our analysis of the historical financial statements and supporting detail indicated a significant decline in the BVIGOV’s restated estimated net fiscal position from $4.8 million at December 2008 to $(75.5) million at 2011, excluding the value of fixed assets. This decline was primarily due to :

This lengthy process for submission of final accounts to the FS and the Minister of Finance does not facilitate informed financial and strategic decision making, including allocation of scarce resources.

Significant account balances (such as the Fund or Reserve balances) are incorrectly presented; and material obligations including public debt, yearend commitments, guarantees, and pending litigation liabilities, are either omitted entirely or not presented on the face of the Statements.

Best practice for submission of final audited accounts to facilitate proper public sector financial management is three (3) to four (4) months after year-end.

An estimated restatement of the FY2011 Statement below illustrates that the BVIGOV’s net fiscal deficit equalled approx. $(75) million, excluding the value of fixed assets and contingent liabilities.

•

Increased Public Debt by $41 million (net);

•

Development expenditure that exceeded the contributions for this expenditure from the Consolidated Fund by $25.6 million in aggregate for 2009, 2010, and 2011; and

•

A reduction in the operating surplus in 2009 and 2010 as revenues declined given the global economic challenges in 2008 and 2009.

Time Taken to Submit Final Audited Accounts Financial Year-End

Submission of accounts to Auditor General

Financial Statements completed in final form

Duration since year-end

Reported vs Restated Statement of Assets and Liabilities

US$

Dec 2008

1 May 2009

15 February 2010

14 months

Dec 2009

1 May 2010

12 May 2011

17 months

Dec 2010

25 July 2011

1 May 2012

17 months

Dec 2011

24 April 2012

Not certified to date

> 11 months

Source: PwC Analysis, Management Information

Government of the BVI Treasury Department PwC

Assets Cash and cash equivalents Advances and current accounts Property, plant and equipment Total Assets (Excluding Fixed Assets) Liabilities Other Deposits Total Public Debt Estimated Year-end Commitments Estimated Pending Litigation Liability Total Liabilities Net Assets / (Liabilities)

Reported Restated/Proforma Dec-11 Dec-11 Unaudited Unaudited 51,551,979 5,910,330 NQ 57,462,309

51,551,979 11,343,599 NQ 62,895,578

(23,220,828) Excluded Excluded Excluded (23,220,828)

(15,742,360) (113,473,556) (7,411,139) (1,786,274) (138,413,329)

34,241,481

(75,517,751)

Source: PwC Analysis, Management Information

Restated Estimated Assets & Liabilities: 2008 to 2011 Dec-08 Proforma

Dec-09 Proforma

Dec-10 Proforma

Dec-11 Proforma

85,124,378

49,164,877

44,282,816

57,462,309

Total Liabilities per Financial Statements

(29,308,353)

(19,191,023)

(21,493,867)

(23,220,828)

Total Net Assets / Fund Reserves - As Reported

55,816,025

29,973,854

22,788,949

34,241,481

Total proforma adjustments

(51,055,609)

US$ Assets - as reported Total Assets per Financial Statements Liabilities - as reported

Net Proforma Fiscal Position [(Deficit)/Surplus] Contingent Liabilites Loan Guarantees

(122,242,069) (116,364,029) (109,759,232)

4,760,416

(92,268,215)

(93,575,080)

(75,517,751)

(28,191,949)

(23,491,717)

(23,140,726)

(21,306,990)

Source: PwC Analysis, Management Information

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At a glance â&#x20AC;&#x201C; our views

Executive report

Supporting information

Appendices Glossary

At a glance â&#x20AC;&#x201C; our views (continued)

$ Procurement process for award of Major Contracts

% Additional Major Contract Issues Identified

^ High-Level Review of Treasury Operations

We identified an increasing trend of the award of Major Contracts over the last four years via Cabinet waiver of the public tendering process and sole source selection of suppliers. As illustrated in the table below, there has been a steady decline in the number of contracts awarded via public tender while the total contract amounts have increased.

A number of additional concerns and control weaknesses were identified during our examination of Major Contract awards in 2011, and the process for issuing payments on these contracts, including but not limited to:

Our overall assessment of the current status of the Treasury operations, based upon our high-level review, is that it falls within the lower end of the maturity scale of what represents poor and good practice, as indicated in the table below.

Non-acceptance of the recommendation of the Public Tenders Committee for one of the three contracts that were publicly tendered during 2011;

ii.

Award of Major Contracts that were not included in the budgeted estimates or Supplementary Appropriation Provisions for 2011;

iii.

Contracts signed prior to the date of approval by Cabinet;

Significant improvement in all of the key areas for effective Treasury management is required particularly regarding relevance of the department as a source of support for financial and strategic decision making, the development of internal resources, and risk management particularly regarding controls over the collection of cash by revenue generating state entities. See Section 7 for further detail.

iv.

Splitting of contracts to several vendors;

Payments in excess of $100,000 to vendors where no contracts for these vendors were included in the Major Contracts listings for 2009, 2010, and 2011;

vi.

Payments on contracts with no evidence of proper approval via a Payment Approval Form; and

BVI legislation provides Cabinet with the authority to select suppliers on a sole source basis. However, we observed that there was no documented basis or rationale for waiving the public tendering process in the Cabinet minutes provided for any of the contracts awarded on sole select basis in 2011, including a $30.8 million contract signed in November 2011. Major Contracts Awarded via Public Tender 2008

2009

2010

2011

Total Major Contracts Amount

$6.1M

$16.3M

$18.2M

$46.4M

No. Of Major Contracts Tendered Publically

Total No. of Major Contracts

Source: PwC Analysis, Management Information

Government of the BVI Treasury Department PwC

vii. The unavailability of key documents that should be retained for the contracts that were publicly tendered by the Procurement Unit.

Maturity of the Treasury Department

Source: PwC Analysis, Management Information

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At a glance – our views

At a glance –Summary of Recommendations: The BVI Government should respond to the issues identified in this report as an urgent priority and put in place, and deliver on, an action plan to remedy and improve the current situation. As noted herein there is a great deal of work to be completed if the Treasury Department is to become a high performing unit. We have summarized some key recommendations below into immediate, short and medium term remedial actions. In our view, and given the constraints of the department’s daily requirements, these actions are achievable but will require prioritization, and technical support to accomplish in a timely manner. We recommend that a small intervention team be mobilized to work with the Accountant General for a specified period of time with the objective of taking forward the above actions in the form of a Project Management Office (PMO). Immediate Actions 1. Strictly enforce a monthly accounting timetable, including protocols for proactive resolution of issues between the Accountant General and Auditor General under instruction from the FS, to ensure audited accounts are published within 3 to 4 months after year-end 2. Consider amendment of relevant legislation (such as the Audit Act) to mandate the completion and submission of audited accounts to the FS and Minister of Finance within 3 to 4 months 3. Conduct a detailed investigation and reconciliation exercise to adjust, reclassify, and/or eliminate all unsubstantiated or incorrect asset, liability, and Fund balances for the 2010, 2011, and 2012 accounts. 4. Ensure that public debt, year-end commitments, and contingent liabilities (where applicable) are reported on the face of the Statements of Assets & Liabilities as at December 2012 Government of the BVI Treasury Department PwC

Executive report

Supporting information

Appendices Glossary

PwC view: Remedial actions to correct accounting issues and quality of financial reporting, strengthening procurement controls over Major Contracts, and improvement of the overall Treasury operations are critically required. Immediate actions and a longer term performance improvement plan should result in noticeable improvements. Immediate Actions (continued) 5. Conduct quarterly reviews of the viability and internal net cash flows of all state entities with loans guaranteed by the BVIGOV, and include this review in a redesigned quarterly management accounting package for submission to the FS. 6. Complete a detailed review of key internal controls such as safeguarding of revenue/cash collections, and implement a policy of conducting daily reconciliations of cash revenue collected vs bank deposits at all revenue collection agencies. These reconciliations should be conducted by or reviewed by Treasury personnel. 7. Implement and enforce a policy that all cash revenue collections should be deposited in the bank within 24 hours 8. Implement policies to strengthen controls over the award of Major Contracts including introduction of a clear basis or rationale for the award of contracts without public tender by Cabinet. Consider amending the relevant legislation to mandate this clear basis under which Cabinet may award contracts on a sole source basis.

9. Implement actions to strengthen controls over the authorization of payments on all Major Contracts, and contract monitoring and management including authority for signing of contracts, as well as coding of all payments in JDE with the contract no to ensure that the payment amounts can be compared against the contract amounts in the system and not only on a manual basis . 10. Conduct forensic investigations into the facts and circumstances surrounding the award of contracts for construction of the new Peebles Hospital; the Installation of Closed Circuit Television, and unallocated costs on the North-South and Anegada road projects.

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At a glance â&#x20AC;&#x201C; our views

At a glance â&#x20AC;&#x201C;Summary of Recommendations: The BVI Government should respond to the issues identified in this report as an urgent priority and put in place, and deliver on, an action plan to remedy and improve the current situation.

Executive report

Supporting information

Appendices Glossary

PwC view: Correcting the accounting issues and quality of financial reporting, strengthening procurement controls over Major Contracts, and improvement of the overall Treasury operations are critically required. Immediate actions and a longer term performance improvement plan should result in noticeable improvements.

Short-Term Actions (completion within 3 to 6 months)

Medium Term Actions (completed within 6 to 9 months)

11. Assign adequate, trained resources to the Procurement Unit given the increase in the number of Major Contracts awarded annually

18. Complete the Treasury Department Organizational Review

12. Assign adequate resources to complete the exercise to identify and value all fixed assets owned by the BVIGOV, and include same on the revised Statement of Assets & Liabilities 13. Issue instructions to the Procurement Unit to improve the retention of all required tender documents to ensure evidence of a transparent process exists 14. Prepare a Financial Instructions Manual, circulate and train all staff with finance related responsibilities within government 15. Continue strict implementation of revised budgetary control planning and monitoring procedures, particularly with respect to development expenditure

19. Prepare a Treasury Department Business Plan 20. Complete the Training Needs Analysis for all Treasury staff, and provision of the necessary time off work to obtain proper accounting training and qualifications 21. Prepare a documented methodology and/or accounting manual for the completion of quarterly and year end accounts under accrual based accounting Further details of each of these suggested improvement actions are included in Recommendations Section of this report, and the related issue/findings are included throughout the Executive Report section and Supporting Information.

16. Develop and implement a financial monthly and quarterly reporting package with key management metrics including a financial scorecard, supporting narrative for major variances etc, as well as robust account balances under a commitment accounting approach. [Such a package will also assist with a reduction of the time taken complete final year-end accounts as only the final quarter should require detailed work to complete] 17. Prepare a documented workplan and methodology for the transition to accrual based accounting, after Treasury personnel are properly trained and knowledge has been transferred by the proposed outsourced accounting team / Project Management Office.

Government of the BVI Treasury Department PwC

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At a glance â&#x20AC;&#x201C; our views

Executive report

Government of the BVI Treasury Department PwC

Executive report

Supporting information

Appendices Glossary

Executive report

Financial Reporting Process

Quality and Accuracy of Financial Reporting

Restated Net Fiscal Position

Debt Obligations

Evolution of Net Fiscal Position

Examination of Major Contracts

High-Level Assessment of Treasury Operations

7.1

Recommendations and Suggested Next Steps

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At a glance – our views

1 Financial Reporting Process

Quality of Financial reporting– The BVIGOV financial statements are not completed in a timely manner and cannot properly inform financial and strategic decision making including formulation of budgets. Financial Reporting Process The Public Finance Management Act 2004 (Section 35) dictates that “The Accountant General shall, within four months after the end of a financial year or such longer period as the Minister may approve in writing, transmit to the Auditor General accounts showing the financial position of the Legislative Council and all Government departments and offices, including the Public Service Commission, at the end of that financial year”. During our investigation, we noted that the Accountant General (Acting) typically submits draft accounts to the Auditor General within the four month window after year-end (except for the 2010 accounts which were not submitted until July 2011 as indicated in the table at right). However, the Auditor General responds with several queries on the draft accounts and various correspondence is shared back and forth between the Accountant General and the Auditor General that take several months to resolve. A number of adjustments to the draft accounts are often required before the accounts can be finalized, certified as audited, and submitted to the Financial Secretary (FS) and Minister of Finance.

Executive report

Supporting information

Appendices Glossary

PwC view – The process for completion and submission of annual financial statements to the Minister of Finance (the current Premier) has taken 14 to 17 months for the last three (3) fiscal years. This process requires urgent remedial action to support the Government’s initiative to improve Public Sector Financial Management. The table below indicates the actual timeline noted for submission and finalization of the BVIGOV’s Financial Statements over the last four years: Financial Year-End

Submission of accounts to Auditor General

* Financial Statements completed in final form

Duration since yearend

December 2008

1 May 2009

15 February 2010

14 months

December 2009

1 May 2010

12 May 2011

17 months

December 2010

25 July 2011

1 May 2012

17 months

December 2011

24 April 2012

Not certified to date

> 11 months

* Certified by the Auditor General

The Public Finance Management Act 2004 and the Audit Act 2003 do not provide a specific timeline under which the Auditor General must complete the audit of the accounts and issuance of an opinion. This open-ended timeline does not allow for the execution of an efficient audit process and is a likely contributor to the long delays. The audited financial statements are then included in an Annual Report on the Accounts. This Report is compiled by the Accountant General’s office and includes the Accountant General’s commentary as well as the statements certified by the Auditor General. The latest available Annual Report (as at the date of our report) is for the 2009 fiscal year as preparation of the 2010 annual report is still in progress, and the 2011 report has not yet commenced because the financial statements were not yet finalized.

Government of the BVI Treasury Department PwC

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At a glance – our views

2 Quality and Accuracy of Financial Reporting

Quality of Financial Reporting – The reported Statements of Assets and Liabilities are misleading and therefore cannot present a fair statement of the economic reality of the BVIGOV’s financial position

ASSETS

Current Assets

Consolidated Fund Balance B/F Surplus/Deficit 2011

Advances and Current Accounts 62,202,763 4,625,354 66,828,117

Public Officers Advances

1,652,788

Other Advances

3,833,185

Current Accounts

424,357 5,910,329

Other Funds Development Fund Contingency

Investments (56,050,117)

Emergency/Disaster Fund

3,669,312

Transportation Improv Fund

3,794,308

Car Loan Revolving Fund

715,086

Debt Service Fund

100,000

Loan Revolving Fund Pension Fund Repairs & Renewal Reserve Fund

Certificates of Deposits & Savings

35,882,286

238,470

35,882,286

100,000 6,799,555 600,000 7,446,751 (32,586,636)

LIABILITIES

Cash

Current Liabilities Cash at Banks

15,669,693

Deposits Postmaster Other Deposits

15,669,693 (47,152) 23,267,980 23,220,828 57,462,309

57,462,309

Note: This statement does not include the following:Public Debt as of 31st December 2011 amounting to US$113,473,556 Source: Unaudited Statement of Assets and Liabilities as at December 2011 - provided by the Treasury Department

Government of the BVI Treasury Department PwC

Supporting information

Appendices Glossary

PwC view – Significant account balances are incorrectly presented and material obligations of the BVIGOV are either omitted entirely or not presented on the face of the Statement of Assets and Liabilities.

Quality of Financial Reporting

BVIGOV Statement of Assets and Liabilities as at December 2011 (Unaudited) - AS REPORTED FUND BALANCES

Executive report

Reported Statement of Assets and Liabilities The current method of accounting used by the Treasury Department of the BVIGOV is a hybrid of cash and accrual accounting. The Abstract Statements which present income and expenditure items represent cash inflows and outflows, except for the transfers to various funds. See Appendices for a replica of the FY2011 Abstract Statements. The Statement of Assets and Liabilities as at December 2011 is replicated in the table at left - in the actual form that it is submitted to the Auditor General for certification, and submitted to the FS in draft. This Statement at left, which should present the net fiscal position of the BVIGOV is inadequate and misleading. The Statement presents $51.6 million in cash and cash equivalents as the major asset, as well as certain advances amounting to $5.9 million as at December 2011. The total liabilities, which are a mixture of cash and accrued items, equal $23.2 million and the Fund balances include a Consolidated Fund amount of $62.6 million. However, during our analysis we noted that all of the Fund balances except the Reserve Fund are based on a mixture of budgeted and not actual amounts and/or balances that are not updated so that they can be agreed to actual cash balances. These Fund balances are not reconciled to reflect the result of actual transfers in and expenditure from these Funds. There is also no reconciliation to actual cash available for expenditure from these funds. The $66.8M Consolidated Fund balance presented (for example) is grossly overstated when compared to the actual cash available for expenditure from this Fund. We also identified inaccuracies within the Advances and liability balances, and significant Government obligations and commitments at yearend are omitted from this Statement. Therefore, the Statements misrepresent the BVIGOV’s net fiscal position and economic reality.

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At a glance – our views

2 Quality and Accuracy of Financial Reporting

Executive report

Supporting information

Appendices Glossary

Accuracy of Reported Net Fiscal Position – Ten (10) of the eleven (11) reported Fund balances, which should represent amounts actually appropriated, transferred, and available for specific uses, were incorrectly reported over the FY2008 to FY2011 period.

PwC view – The sole account balances on the Statement of Assets and Liabilities that appeared to be fairly stated at December 2011 was Cash and Cash Equivalents at $51.6 million, Public Officers Advances of $1.7 million, and the Reserve Fund balance of $7.4 million.

Financial Reporting Presentation and Accuracy

The historical Statements of Assets and Liabilities are reformatted by the Auditor General in the form replicated in the table at left. The Auditor General’s Audit Certificate or opinion states that the accounts “present fairly the financial operations” of the Government except as otherwise stated and “subject to the comments, exceptions, and reservations contained therein”.

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Liabilities Deposits - As Reported Postmaster Deposits Other Deposits Total Liabilities - As Reported Fund Balances - As Reported Consolidated Fund Development Fund Emergency/Disaster Fund Reserve Fund Contingency Fund Transportation Improvement Network Fund Car Loan Revolving Fund Debt Service Fund Loan Revolving Fund Pension Fund Repairs and Renewal

73,032,163 65,364,007 62,202,762 66,828,117 (37,265,266) (56,311,797) (60,346,875) (56,050,117) 4,382,776 4,384,325 4,067,355 3,669,312 5,557,414 5,593,489 5,619,691 7,446,751 200,000 200,000 200,000 238,470 1,669,213 2,477,357 2,757,149 3,794,308 640,171 666,918 689,312 715,086 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 6,799,555 6,799,555 6,799,555 6,799,555 600,000 600,000 600,000 600,000

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

However, the inaccuracies and omissions noted during our investigation are significant and may be considered material. These errors and omissions result in a distorted presentation of the BVIGOV’s operations and fiscal position and are summarized below: 1. Fund balances: Fund balances do not represent actual amounts contributed to the Fund for the purpose the Fund was established. (such as Development Expenditure or Pensions). There are eleven (11) Funds and only one, the Reserve Fund, represented a year-end position that is the result of actual transfers to and expenditure from this Fund. The other Fund balances included in the Statement represent a mixture of budgeted amounts or amounts that have not been updated to reflect actual inflows and expenditures.

2. Fixed Assets: government-owned assets such as land and buildings have historically not been valued and included in the Statements. An exercise to identify and value these assets has been initiated but these amounts are not yet available, and significant work and resources are required to complete this exercise. 3. Advances & Current liabilities: various balances included in the Advances (i.e., accounts receivables) and current liabilities (Deposits) are not accurately accounted for or properly presented, and do not represent a true asset recoverable by the BVIGOV or a liability owed by the BVIGOV.

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At a glance – our views

2 Quality and Accuracy of Financial Reporting

Accuracy of Reported Net Fiscal Position – US $113.5 million in public debt as well as other significant obligations and commitments are not reported on the face of the Statement of Assets and Liabilities. Therefore, these obligations are not reflected in the presentation of the BVIGOV’s net fiscal position. Financial Reporting Presentation and Accuracy (continued) BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

Executive report

Supporting information

Appendices Glossary

PwC view – The inclusion of public debt and other year-end commitments such as unpaid purchase orders or invoices, and pending litigation judgements provide a more realistic view of the BVIGOV’s net fiscal position and will enable more informed decision making. 4. Central Government Public Debt: US $113.5 million in public debt (as at December 2011) related to loans issued to the Central Government from various lending agencies are not presented on the face of the Statement of Assets and Liabilities. This debt info is presented as a footnote schedule in the Annual Report. [As stated previously, it is important to note that this Annual Report is not publicly available until more than a year after the fiscal period has ended.] 5. Commitments not yet paid: since the accounts are not presented on a “full” accrual basis various obligations that existed at the year-end, which were not paid by December 31, 2011, are not included in the Statements. These obligations or commitments include amounts owed to suppliers under purchase orders generated near to year end (such as in December) that are not paid until the following year. 6. Contingent Liabilities - Pending Litigation: Court judgements in favour of claimants against the Government are not included in the Statements or footnotes. Pending litigation against the Government that are quantifiable and the likelihood of success is probable are also not included. 7. Contingent Liabilities – Debt Guarantees: government guaranteed borrowing by state agencies such as the BVI Electricity Corporation, Development Bank of the VI, and the Scholarship Trust Fund Board, are not presented on the face of the Statements. These liabilities may not represent a direct obligation of the central Government but this potential exposure should be clearly presented, and the status of the debt and borrower should be actively monitored and mentioned. An assessment of contingent liabilities will be required to determine the probability of a liability crystallizing.

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At a glance – our views

2 Quality and Accuracy of Financial Reporting

Actual Fund Balances Available– The reported Fund balances, except the Reserve Fund balance at December 2011, misrepresent the actual Fund cash balances available for Government expenditure. The actual Development Fund cash balances declined each year while the Reserve Fund cash balances were relatively flat and increased in 2011.

Executive report

Supporting information

Appendices Glossary

PwC view –The reported Fund balances are not reconciled to record actual transactions and cash balances, and budgeted contributions to Funds are reported as actual although no actual transfer occurred . The Reserve Fund balance of $7.4 million at December 2011 was the only Fund account that accurately represented resources available to the BVIGOV.

Reported Fund Balances versus Actual Bank Balances by Fund Type for the four (4) years ended 31 December 2008 to 31 December 2011 Dec-08 Fund Type Consolidated Fund Development Fund Disaster/Emergency Fund Reserve Fund Pension Fund Transportation Network Improvement Fund Car Loan Revolving Fund Repairs and Renewal Fund Contingency Fund Debt Service Fund Loan Revolving Fund Total Bank Balances

GL As Reported 73,032,163 (37,265,266) 4,382,776 5,557,414 6,799,555

Dec-09

Bank Balance 43,092,254 21,780,191 3,156,606 1,337,514 -

GL Difference As Reported (29,939,909) 65,364,007 59,045,457 (56,311,797) (1,226,170) 4,384,325 (4,219,900) 5,593,489 (6,799,555) 6,799,555

Dec-10

Bank Balance 23,627,459 15,667,872 3,233,156 1,373,589 -

GL Difference As Reported (41,736,548) 62,202,762 71,979,669 (60,346,875) (1,151,169) 4,067,355 (4,219,900) 5,619,691 (6,799,555) 6,799,555

Dec-11

Bank Balance 20,435,776 14,093,499 2,615,360 1,399,791 -

GL Difference As Reported (41,766,986) 66,828,117 74,440,374 (56,050,117) (1,451,995) 3,669,312 (4,219,900) 7,446,751 (6,799,555) 6,799,555

Bank Balance

Difference

29,151,315 12,660,054 2,293,859 7,446,751 -

(37,676,802) 68,710,171 (1,375,453) (0) (6,799,555)

1,669,213

(1,669,213)

2,477,357

(2,477,357)

2,757,149

(2,757,149)

3,794,308

(3,794,308)

640,171 600,000 200,000 100,000 100,000

(640,171) (600,000) (200,000) (100,000) (100,000)

666,918 600,000 200,000 100,000 100,000

(666,918) (600,000) (200,000) (100,000) (100,000)

689,312 600,000 200,000 100,000 100,000

(689,312) (600,000) (200,000) (100,000) (100,000)

715,086 600,000 238,470 100,000 100,000

(715,086) (600,000) (238,470) (100,000) (100,000)

55,816,026

69,366,566

29,973,854

43,902,076

22,788,949

38,544,426

34,241,481

51,551,980

13,550,540

13,928,222

15,755,477

17,310,498

Source: Reported Statement of Assets and Liabilities, Management Bank and Fund analysis and PwC analysis

Fund Balances / Reserves The table above illustrates the Reported vs. Actual (cash) Fund balances. These balances were determined by examining the year end reported Fund balances per the General Ledger (G/L) to the respective actual Bank Balances (operating and investment accounts created and associated to a specific Fund). As indicated, there were significant differences for each fund balance except for the Reserve Fund at December 2011. As shown above, out of the eleven reported Funds, only the first four Funds have actual cash balances and bank accounts.. The other seven Fund Balances did not have any associated cash balances and Bank facilities to reconcile to their reported amounts, and no actual cash inflows or outflows. The Consolidated Fund and Development Fund in particular were significantly misstated and do not represent economic reality. These G/L Fund balances are not updated regularly and reconciled to cash. Therefore, any cash to book differences as well as other irregularities or discrepancies within the Funds are not identified and adjusted in a timely manner. During further investigation we noted this issue dates back to several prior periods and a major contributor to the incorrect balances is that budgeted amounts (appropriated for contribution to and expenditure from these funds) are reported as actual inflows, outflows, and ending balances and not subsequently updated. Government of the BVI Treasury Department PwC

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At a glance – our views

3 Restated Net Fiscal Position

Restated Net Fiscal Position (estimated) – Adjusting for the inaccuracies and omissions identified during our analysis resulted in a net fiscal position where total liabilities (excluding contingent debt) exceeded total assets (excluding fixed assets) by $75.5 million at December 2011. BVI Government Statement of Assets & Liabilities (Reported vs Restated) For the financial year ended 31 December 2011

US$

Reported Restated/Proforma Dec-11 Dec-11 Unaudited Unaudited

Assets Total Cash Advances and Current Accounts Public Officers Advances Other Advances Current Accounts Fixed Assets Property, Plant and Equipment Total Assets (Excluding Fixed Assets)

51,551,979

1,652,788 3,833,185 424,357 5,910,330

1,652,788 9,219,302 471,509 11,343,599

NQ 57,462,309

NQ 62,895,578

(23,220,828)

(15,742,360)

Liabilities Deposits Other Deposits Total Public Debt

Excluded

(113,473,556)

Estimated Year-end Commitments

Excluded

(7,411,139)

Estimated Pending Litigation Liability Total Liabilities

Net Assets / (Liabilities)

Excluded (23,220,828)

(1,786,274) (138,413,329)

34,241,481

(75,517,751)

Excluded

(21,306,990)

Source: Treasury Dept Unaudited 2011 Statements and Pw C Analysis NQ - Not quantified

Contingent Liabilites Loan Guarantees

Government of the BVI Treasury Department PwC

Executive report

Supporting information

Appendices Glossary

PwC view – The Statement of Assets and Liabilities should be restated and/or adjusted to include public debt and year-end commitments in order to provide a meaningful representation of the BVIGOV’s fiscal status. Restated Net Fiscal Position (Proforma Estimate)

We have compiled a Restated/Proforma Statement of Assets and Liabilities in order to present an estimated net asset/liability or net fiscal position that is more akin to economic reality (see table at left). The Restatement is the result of adjustments for the aforementioned inaccuracies and omissions identified during our investigation. It is important to note that we did not conduct a financial statement audit in accordance with International Auditing Standards and the Restatement at left is not meant to capture and adjust for all issues or to present the BVIGOV’s accounts in accordance with International Reporting Standards. However, we have examined the BVIGOV’s cash balances, Fund balances, debt and other and year-end obligations in detail. We also performed a high-level analysis of the other account balances such as Advances and Deposits. During this analysis we noted the following (in summary): •

The current assets and liabilities included certain misstatements that required reclassification or elimination, such as an insurance payable that was in a receivable position and cash received from an IPOC legal settlement that was incorrectly reported as a liability.

•

Public debt, pending litigation (primarily judgments not yet paid), and year-end commitments amounting to $122 million have also been included as a liability in the Restatement.

The resulting net asset position equalled $(75.5) million as at December 2011 (excluding the value of fixed assets which is currently unknown) and contingent liabilities of $21.3 million.

Details of our adjustments to derive the Restated position are provided in the “Supporting Information” section of this Report.

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At a glance – our views

3 Restated Net Fiscal Position

Restated Net Fiscal Position (estimated) – The BVIGOV’s net fiscal status (on an adjusted/restated basis) declined from $4.8 million at December 2008 to $(75.5 million) at December 2011.

Restated / Proforma Statement of Assets & Liabilities For the four (4) years ended 31 December 2008 to 31 December 2011 US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

Assets Cash and Cash Equivalents Consolidated Fund Development Fund Emergency/Disaster Fund Reserve Fund

Advances and Current Accounts Public Officers Advances Other Advances Current Accounts Fixed Assets Property, Plant and Equipment Total Assets (Excluding Fixed Assets)

43,092,254 21,780,191 3,156,606 1,337,514

23,627,459 15,667,872 3,233,156 1,373,589

20,435,776 14,093,499 2,615,360 1,399,791

29,151,315 12,660,054 2,293,859 7,446,751

69,366,565

43,902,076

38,544,426

51,551,979

1,583,420 17,472,323 283,574 19,339,317

1,431,055 7,465,265 184,248 9,080,568

1,583,275 7,731,012 416,242 9,730,529

1,652,788 9,219,302 471,509 11,343,599

88,705,882

52,982,644

48,274,955

62,895,578

(10,097,052) (10,097,052)

(12,574,269) (12,574,269)

(15,742,360) (15,742,360)

Liabilities Deposits Postmaster Deposits Other Deposits Total Public Debt Estimated Year-end Commitments Estimated Pending Litigation Liability Total Liabilities Proforma Net Assets (Estimated) Contingent Liabilites Loan Guarantees

(220,712) (9,757,410) (9,978,122)

(72,008,782) (134,251,314) (126,713,341) (113,473,556) (1,958,564)

(902,492)

(2,562,425)

(7,411,139)

(1,786,274)

(83,945,468) (145,250,858) (141,850,035) (138,413,329) 4,760,415

(92,268,214)

(93,575,080)

(75,517,751)

(28,191,949)

(23,491,717)

(23,140,726)

(21,306,990)

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Executive report

Supporting information

Appendices Glossary

PwC view – The decline in the net fiscal position was primarily due to a significant increase in public debt in 2009 and historical fiscal deficits as development expenditure exceeded the operating surpluses available to fund this expenditure internally.

We have provided the estimated Adjusted/Proforma net asset statements on a restated basis over the four year period for comparative purposes in the table at left. This analysis indicated a steady decline in the cash held in the Consolidated Fund from 2008, until 2011 where an improvement in the trend was noted. In 2011 an operating surplus (net income before development expenditure) was generated while deficits occurred in the previous three years (see page 22 for details). The Reserve Fund was also increased in 2011 after a contribution was made to increase unallocated liquid assets given the significant debt obligations. The decline in cash from 2008 to 2010 was largely due to deficit spending where development expenditure exceeded net operating income/surpluses. This excess expenditure was funded via incremental debt or use of savings in the form of Consolidated Fund balances. Additionally, the BVIGOV raised $95 million in debt from Banco Popular and the BVI Social Security Board in 2008 and 2009. This debt was secured to finance construction of the New Peebles Hospital. This hospital is still under construction (5 years after work commenced), and the corresponding value of this asset is currently unknown and not reported. Therefore, the significant decline in the BVIGOV’s restated/proforma net fiscal position from $4.8 million at December 2008 to $(75.5) million at December 2011 was primarily a result of: • Increased Public Debt by $41 million (net); • Development expenditure that exceeded the contributions for this expenditure from the Consolidated Fund by $25.6 million in aggregate for 2009, 2010, and 2011; • A reduction in the operating surplus in 2009 and 2010 as revenues declined given the global economic decline in 2008 and 2009. Revenues did not recover to the 2008 levels until 2011. See page 22 for further details.

NQ – Not Quantified (the value of fixed assets owned by the BVIGOV is currently unknown)

Government of the BVI Treasury Department PwC

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At a glance – our views

4 Debt Obligations

Executive report

Supporting information

Appendices Glossary

Evolution of Net Fiscal Position – Debt Obligations -The BVIGOV’s public debt increased to $113.5 million at December 201, and guaranteed debt equalled $21.3 million, while unallocated reserves equalled $7.4 million. $86.9 million of this debt was raised to finance construction of the New Peebles Hospital.

PwC view – The BVIGOV secured $95 million in debt for construction of a new hospital in 2008 and 2009. $63 million was paid to the former contractor but a new $30.8 million contract was issued in 2011 (without public tender) to complete the project. This project should be investigated further given the significant fiscal impact of this expenditure and delay.

Government of the Virgin Islands Statement of Public Debt

The BVIGOV’s net fiscal position changed significantly in 2009 after $95 million in debt was secured to construct the new Peebles Hospital. However, the construction has faced significant challenges and is still in progress five (5) years after construction commenced in 2007.

Loan Description

Lender

Dec-08

Dec-09

Dec-10

Dec-11

Fort Hill Water Project

European Development Fund

164,627

125,041

110,960

101,602

East End Water Project

European Development Fund

457,651

382,199

353,069

306,639

Hurricane Rehabilitation (Sea Defense)

Caribbean Development Bank

1,485,828

1,301,881

1,117,849

1,062,083

Port Development CDB**

Caribbean Development Bank

249,248 2,131,200

Port Development EIB**

European Investment Bank

Virgin Gorda/Tortola Water Supply

European Economic Community

Road Improvement Maintenance Project (RIMP)

992,191

1,516,976

1,705,373

1,623,080

1,572,527

Social Security Board

800,000

600,000

400,000

200,000

DBVI Capital Increase

European Investment Bank

600,000

474,855

337,273

237,100

Airport Feasibility Study

European Investment Bank

143,582

Social Security Board Scotia Bank European Investment Bank

2,607,500 1,218,760 2,380,866

2,309,500 941,974 1,105,678

2,011,500 671,142 776,723

1,713,500 389,731 264,510

12,412,237

18,962,980

16,889,949

14,380,379

Beef Island Airport Terminal

Runway

Caribbean Development Bank

Road Improvement and Infrastructure Development

Social Security Board

New Peebles Hospital

Social Security Board Social Security Board Banco Popular

Supply of Greenhouses Total

9,848,116

6,682,912

6,075,375

5,315,828

35,000,000 -

35,000,000 15,000,000 45,000,000

32,812,500 13,875,000 45,000,000

29,895,833 12,375,000 44,250,000

4,658,921

1,408,824

72,008,782

134,251,314

126,713,341

113,473,556

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Construction was initially financed from the Consolidated Fund under a contract with the original developer (Carimex). However, this contract was discontinued prior to completion of the construction after several delays. This contractor was paid $62.9 million in total through 2009. We understand the reason for the ceasing of this contract has been disputed by the contractor. An assessment of whether any potential liability may arise from this dispute may be warranted if such an assessment has not yet been completed. In November 2011, a $30.8 million contract and $4.1 million contract was awarded to James Todman Construction (without public tender) to complete the construction. $6.8 million and $2.5 million have been paid on these two contracts as at October 2012, respectively. We also noted variations to increase the $4.1 million contract by $275 thousand have already been approved in 2012. We have commented further on the procurement of the latter contract later in this report. However, although our scope did not entail a forensic investigation of the hospital construction, the facts and circumstances surrounding this hospital project may warrant further investigation given the significant negative fiscal impact to the BVIGOV, and the fact that the project is still not complete after approximately 5 years and in excess of $70 million has been spent. The lessons learned from such an investigation should be documented and debated, and procedures should be put in place to avoid a repeat of the issues identified on major capital projects going forward.

Government of the BVI Treasury Department PwC

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At a glance – our views

4 Debt Obligations

Debt Obligations & Borrowing Capacity – The Reserve Fund would require additional contributions of approximately $57 million to satisfy the Liquid Assets guidelines executed with the UK Government (based on December 2011 balances).

Government of the Virgin Islands Statement of Public Debt Loan Description

Lender

Fort Hill Water Project

European Development Fund

Dec-08 164,627

Dec-09 125,041

Dec-10 110,960

Dec-11 101,602

East End Water Project

European Development Fund

457,651

382,199

353,069

306,639

Hurricane Rehabilitation (Sea Defense)

Caribbean Development Bank

1,485,828

1,301,881

1,117,849

1,062,083

Port Development CDB**

Caribbean Development Bank

249,248 2,131,200

Port Development EIB**

European Investment Bank

Virgin Gorda/Tortola Water Supply

European Economic Community

Road Improvement Maintenance Project (RIMP)

992,191

1,516,976

1,705,373

1,623,080

1,572,527

Social Security Board

800,000

600,000

400,000

200,000

DBVI Capital Increase

European Investment Bank

600,000

474,855

337,273

237,100

Airport Feasibility Study

European Investment Bank

143,582

Social Security Board Scotia Bank European Investment Bank

2,607,500 1,218,760 2,380,866

2,309,500 941,974 1,105,678

2,011,500 671,142 776,723

1,713,500 389,731 264,510

12,412,237

18,962,980

16,889,949

14,380,379

Beef Island Airport Terminal

Runway

Caribbean Development Bank

Road Improvement and Infrastructure Development

Social Security Board

New Peebles Hospital

Social Security Board Social Security Board Banco Popular

Supply of Greenhouses Total

9,848,116

6,682,912

6,075,375

5,315,828

35,000,000 -

35,000,000 15,000,000 45,000,000

32,812,500 13,875,000 45,000,000

29,895,833 12,375,000 44,250,000

4,658,921

1,408,824

72,008,782

134,251,314

126,713,341

113,473,556

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Executive report

Supporting information

Appendices Glossary

PwC view – The BVIGOV’s borrowing capacity is limited due to insufficient liquid assets but debt service costs appear manageable at $13.2 million annually or 5% of total revenues.

Debt Capacity We further noted that the borrowing limits in the Protocols for Effective Financial Management (signed with the UK Government in 2012) require minimum Liquid Assets of 25% of recurrent expenditure. Therefore, these assets should amount to a minimum of approximately $63 million at year-end 2011, as the 2011 recurrent expenditure equalled $251 million. Our understanding is the Reserve Fund is the only unallocated Liquid Asset. When compared to the total annual expenditure of $251 million in 2011 the $7.4 million Reserve Fund balance at year-end equalled 3% and was well below the 25% minimum. In order to satisfy this protocol clause, the BVIGOV would need to increase the Reserve Fund by approximately $57 million as at December 2011. The total public debt was also approximately twice the total reported assets at $113.4 million vs. $57.5 million (excluding fixed assets). However, debt service costs appear somewhat manageable at $13.2 million in 2011 or 5% of total recurrent revenues and the total net debt ratio was also less than the 80% of annual recurrent revenue. We also noted that $50 million or 44% of the $113.5 million in public debt was provided by the BVI Social Security Board for construction of the hospital. We have no information on the total assets and investment policies of this statutory body; however this loan amount appears to be significant for one project from an entity that would be expected to have a low risk profile. An investigation into the impact of these loans on the BVI Social Security Board’s financial status may be warranted. It is also important to note that our scope did not include analysis of the debt terms such as loan covenants, reporting requirements, and repayments terms. We did not obtain details of the current portion of the public debt owed. Our work was limited to identification of the public debt as a major contributor to the BVIGOV’s net fiscal decline and a review of the profile of this debt.

Government of the BVI Treasury Department PwC

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At a glance – our views

5 Evolution of Net Fiscal Position

Evolution of Net Fiscal Position – The BVIGOV generated annual net fiscal deficits each year over the four year period reviewed except 2011, as the total annual expenditure (including Development Expenditure) exceeded the total income generated.

Executive report

Supporting information

Appendices Glossary

PwC view – The BVIGOV’s declining net asset position was also due to development expenditure that exceeded annual operating surpluses, which resulted in net fiscal deficits each year (except 2011) and the funding of this expenditure via debt or depletion of savings by use of Consolidated Fund reserve balances.

BVI Government Annual Financial Statements Statement of Income & Expenditure For the four (4) years ended 31 December 2008 to 31 December 2011 Dec-08 US$ Recurrent Activity Recurrent Revenue Less: Recurrent Expenditure Operating Surplus - As Reported

Budgeted

Dec-08 Actual (Audited)

Dec-09 Budgeted

Dec-09 Actual (Audited)

Dec-10

Dec-10 Actual (Audited)

Budgeted

Dec-11 Budgeted

Dec-11 Actual (Unaudited)

284,605,000 278,580,199 279,841,000 268,644,829 273,603,000 272,960,807 287,884,000 287,479,526 (264,222,785) (248,352,177) (260,946,500) (253,665,085) (253,692,675) (256,396,051) (260,808,200) (251,006,071) 20,382,215 30,228,022 18,894,500 14,979,744 19,910,325 16,564,756 27,075,800 36,473,455

Contributions to Other Funds Development Fund Emergency/Disaster Fund Pension Fund Reserve Fund Contingency Fund Repairs and Renewal Fund Total Fund Contributions - As Reported

(32,667,900) (1,000,000) (2,200,000) (1,000,000) (500,000) (200,000) (37,567,900)

(35,342,879) (1,000,000) (2,200,000) (1,000,000) (200,000) (39,742,879)

(30,399,300) (1,800,000) (500,000) (200,000) (500,000) (500,000) (33,899,300)

(22,647,900) (22,647,900)

(19,726,000) (300,000) (2,000,000) (300,000) (300,000) (100,000) (22,726,000)

(19,726,000) (19,726,000)

(21,076,200) (300,000) (4,000,000) (2,300,000) (300,000) (100,000) (28,076,200)

(30,068,000) (1,780,100) (31,848,100)

Consolidated Fund Surplus/(Deficit)

(17,185,685)

(9,514,857)

(15,004,800)

(7,668,156)

(2,815,675)

(3,161,244)

(1,000,400)

4,625,355

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Extracts of the Abstract Statements compiled by the Treasury Department (see Appendices for full version) are summarized in the table above. These statements provide budgeted and actual income and expenditure annually. The recurrent income and expenditure are presented on a cash basis. However, as previously discussed the Contributions to Other Funds do not represent actual cash transfers except for the Consolidated Fund transfer amounts presented in each year above and the Reserve Fund in 2011. There are no actual funds available in the Pension Fund, Contingency Fund, and Repairs & Renewal Fund – based on our review of the bank accounts and G/L details. The statement above indicates the BVIGOV has generated recurrent operating surpluses over the review period although actual revenues have fallen short of budgeted revenues each year. However, timely accurate reporting is critical to ensure proper financial management of scarce resources particularly since revenues are seasonal while a significant portion of recurrent expenditure are fixed, as payroll accounts for in excess of $90 million of the annual expenditure. FSC fees, which account for approx. 60% of total revenues, are paid twice per year by registered businesses, and tourism related revenues are highest during the winter seasons. The development expenditure practices also requires greater control and improved fiscal management. We analyzed the actual development expenditure each year over the last four years, as compared to funds available, and noted development expenditure exceeded the budgeted amounts each year and supplemental appropriations were required to approve the excess expenditure. This practice has contributed to the decline in actual Consolidated and Development Fund balances and the overall decline in the net fiscal position at December 2011. Government of the BVI Treasury Department PwC

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5 Evolution of Net Fiscal Position

Evolution of Net Fiscal Position (continued) – Annual development expenditure significantly exceeded the budgeted funding available and supplementary appropriations of $67.7 million were approved towards meeting the expenditure shortfall in 2009 and $55.1 million was approved via revotes in 2011.

Executive report

Supporting information

Appendices Glossary

PwC view – In aggregate, Development Fund payments from local resources (Consolidated Fund) exceeded the total inflows by $25.6 million between FY2009 to FY2011. The weaknesses in budgetary control over development expenditure was a significant contributor to the decline in the BVIGOV’s net fiscal position at December 2011.

Summary of Development Fund Activity

Grants Loans Other Local Resources Total

Balance Jan-08 $ (1,790,135) (2,234,515) 6,699,333 (40,011,301) (37,336,618)

Grants Loans Other Local Resources Total

Balance Jan-09 $ (1,710,359) (1,472,222) 6,699,333 (40,782,021) (37,265,269)

Grants Loans Other Local Resources Total

Balance Jan-10 $ (1,704,780) (4,412,296) 6,699,333 (56,894,058) (56,311,801)

Grants Loans Other Local Resources Total

Balance Jan-11 $ (1,690,429) (4,412,296) 6,699,333 (60,943,487) (60,346,879)

Receipts

Payments

$ 101,462 18,021,200 560,114 35,542,879 54,225,655

$ 21,686 19,272,719 34,859,901 54,154,306

Receipts

Payments

$ 10,586 15,000,000 23,327,866 38,338,452

5,007 17,940,074 39,439,903 57,384,984

Receipts

Payments

$ 40,989 2,055,407 24,623,932 26,720,328

$ 26,638 2,055,407 28,673,361 30,755,406

Receipts

Payments

14,178,887 30,096,091 44,274,978

8,596 4,459,595 35,510,029 39,978,220

Source: Treasury Management Information, PwC Analysis

Government of the BVI Treasury Department PwC

Balance Dec-08 $ (1,710,359) (3,486,034) 7,259,447 (39,328,323) (37,265,269)

Balance Dec-09 $ (1,704,780) (4,412,296) 6,699,333 (56,894,058) (56,311,801) Balance Dec-10 $ (1,690,429) (4,412,296) 6,699,333 (60,943,487) (60,346,879) Balance Dec-11 $ (1,699,025) 5,306,996 6,699,333 (66,357,425) (56,050,121)

Development Fund Inflows and Expenditure The tables at left indicate the actual cash inflows to and outflows from the Development Fund, and the source of the cash inflows. In 2009, the budgeted contribution of $30.4 million to the Development Fund could not be met by the Consolidated Fund operating surplus. Therefore, $22.6 million was actually contributed from this Fund (and $23.3 million in total from Local Resources) per table at left and a net deficit or shortfall of $7.7 million occurred (see prior page). Consequently, additional funding for the Development Fund was obtained primarily from Loans of $15 million. On a cash basis, the shortfall in the Development Funds was significant in 2009 as $26.7 million was initially appropriated for transfer to this Fund; however, an additional $67.7 million in supplemental appropriations was approved. With respect to actual amounts transferred as indicated at left, in 2009 the Development Fund received $38.3 million in cash (including $22.6 million from the Consolidated Fund and $15 million in debt funding) but $57.4M was spent, which resulted in a shortfall of $19.1 million. In 2010 total expenditure of $30.75 million exceeded total inflows by approx. $4 million. In 2011, total expenditure was less than the total inflows as loan proceeds were not all utilized. However, the disbursement of Local Resource funds exceeded the inflows in 2011, as well as 2010 and 2009. In aggregate, Development Fund payments from local resources (Consolidated Fund) exceeded the total inflows by $25.6 million between FY2009 to FY2011. This deficit financing via debt or Consolidated Fund reserves contributed to the net fiscal decline as at December 2011..

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6 Examination of Major Contracts

At a glance â&#x20AC;&#x201C; our views

Executive report

Supporting information

Appendices Glossary

Examination of Major Contracts

Government of the BVI Treasury Department PwC

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At a glance – our views

6 Examination of Major Contracts

Executive report

Supporting information

Appendices Glossary

Procurement of Major Contracts on a Sole Source Basis – There were serious deficiencies in the manner in which major contracts for development expenditure were procured, approved and awarded during 2011. 24 of the 27 Major Contracts executed during 2011 were awarded on a sole source basis by Cabinet without public tendering.

PwC view – The predominant practice of waving the public tendering process by Cabinet appeared to be motivated by a need to expedite service delivery. Cabinet should however document the rationale for sole selection of a supplier to ensure a measure off control and transparency is included in the procurement process.

Major Contracts Awarded - 2008 to 2011

The value of the three (3) contracts publicly tendered equalled $4.8 million (out of the $46.4 million awarded). Notably, the $30.8 million contract awarded to James Todman Construction to complete the hospital was not awarded via public tender.

There were 27 Major Contracts (contracts with values greater than $100,000) awarded during 2011 totalling $46.4 million, including a $30.8 million contract awarded to James Todman Construction signed on 4 November 2011. See Appendices for a full listing of these contracts The Public Finance Management Act Regulations 2005 (and related amendments) stated that “the procurement of all goods and services shall be procured by tender when the value of the goods and services exceeds $75,000, unless Cabinet otherwise directs”. This threshold was subsequently increased to $100,000 in the 2007 Amendment to the Public Finance Management Act Regulations 2005. We observed that only three (3) of the twenty-seven (27) Major Contracts executed in 2011 were awarded via a public tender process managed by the Procurement Unit. As indicated in the table below, there has been a considerable and steady decline in the number of contracts awarded via public tender – from 15 out of 16 in 2008 to 3 out of 27 in 2011. This decline occurred while the total value of contracts awarded has increased.

We were provided with evidence of Cabinet’s directive to waive the tender process for 22 contracts. However, we have not been provided with evidence of waivers or any other form of instruction by Cabinet for the five (5) contracts below: Major Contracts – No Evidence of Cabinet Waiver Provided Contract No.

Contractor

DGO/2/11

Solid Power Boats Inc

Amount (US$) 273,257.00

DGO/3/11

A. H. Parker & Sons

118,906.00

No contract number MC/001/11

Real Legacy Insurance

396,416.00

Tortola Carpet Sales & Services

185,808.00

No contract number Total

KPMG

300,000.00 1,274,387.00

Source: Treasury Management Information, Ministry of Finance and PwC Analysis

Major Contract Awards managed by the Procurement Unit Total Major Contracts Total major contract amount for the year Procurement

2008

2009

2010

2011

$6.1M

$16.3M

$18.2M

$46.4M

Source: Procurement Unit Information, PwC Analysis

Government of the BVI Treasury Department PwC

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At a glance – our views

6 Examination of Major Contracts

Cabinet Award of $30.8 million contract – The Cabinet waived the public tender process for the $30.8 million contract award for Internal Works of the New Peebles Hospital.

After spending $62.9 million through 2009 under a contract with Carimex for construction of the new Peebles Hospital, construction was not completed four years after work commenced in 2007. In February 2011 Cabinet waived the public tender process for a new contract for the Internal Works of the New Peebles Hospital. Cabinet decided that “the New Peebles Hospital Steering Committee be allowed to enter into negotiations on behalf of the Government with both Interhealth Canada and James Todman Construction Ltd and Hill International as a Joint Venture, simultaneously, on the contract to execute the Internal Works on the New Peebles Hospital”. On 31 August 2011, Cabinet decided that “the New Peebles Hospital Steering Committee be allowed to enter into further negotiations on behalf of the Government with James Todman Construction Ltd. Joint Venture with dck Worldwide, on the contract to execute the Internal Works on the New Peebles Hospital”. On 19th October 2011, Cabinet decided that a contract could not be awarded until the joint venture entity was formed. On 4 November 2011, a $30.8 million contract was executed between Mr. Ralph O’Neil (Premier) and James Todman for the internal works contract. We also noted that Cabinet waived the public tender process on the contract for the Building Envelope and External Works for the New Peebles Hospital, and a $4.1 million contract was also awarded to and signed with James Todman Construction Ltd. on 5 December 2011.

Government of the BVI Treasury Department PwC

Executive report

Supporting information

Appendices Glossary

PwC view – The basis and reasoning for the waiver of the public tender process and awarding of Major Contracts on a sole source basis should be clearly explained and documented by Cabinet, and should be an exception and not the norm. The reason for waiving the public tender process was not stated in the Cabinet Minutes extract. Given the problems that arose with the original construction; the fact that $95 million in loans were secured for this project; and the severe need for completion of the construction in a timely but high quality manner, the basis for not seeking tenders from a wide pool of local and international contractors should have been clearly documented. We also noted that $275,000 in variation order increases to the $4.1 million contract were already approved in 2012. The BVI legislation provides Cabinet with the authority to waive Major Contracts, and the award of contracts on a sole source basis is sometimes required in particular circumstances. However, none of the Cabinet Papers we examined that documented Cabinet’s instruction to waive the tender process stated the basis or rationale for waiving the process. The papers all stated that the contract award should be expedited. Proper governance and leading practice for management of public funds require a clear basis for decision making and appropriate contract management procedures should also be in place during the operation of the contract. The award process adopted in prior years, and during 2011 in particular, was subject to potential abuse and mismanagement.

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At a glance – our views

6 Examination of Major Contracts

Executive report

Supporting information

Appendices Glossary

Non-Acceptance of Recommendations from Public Tenders Committee: Cabinet also did not accept the recommendation of the Public Tenders Committee for one of the three contracts that were awarded via a public tender process managed by the Procurement Unit.

PwC view – The practice of awarding Major Contracts directly by Cabinet on a sole source basis, without any documented basis for waiving the public tender process, requires immediate correction that may necessitate an amendment to the current legislation.

The three (3) contracts that were awarded under a public tender process managed by the Procurement Unit are listed in the table below:

We also noted that the contracted amount of $308.7 thousand was lower than the amount originally included in Electronic Solutions’ bid, which was $408.4 thousand.

Contracts Awarded via Procurement Unit Tender Process Contract No. Contractor MNRL1/11

WDMO

MOF/1/11

James Todman Construction

DGO/1/11

Electronic Solutions (Trevor Blaize)

Total

Therefore, the selection process for one of the three contracts that did go through the Procurement Unit’s tendering process was overridden by Cabinet.

Amount (US$) 254,375.90 4,174,444.22

We were not provided with any documentation indicating Cabinet’s basis for setting aside the Public Tenders Committee’s evaluation and awarding the contract to Electronic Solutions.

308,682.00

4,737,502.12

Source: Treasury Management Information, Ministry of Finance and PwC Analysis

However, the contract awarded to Electronic Solutions (Trevor Blaize) for the Supply and Installation of Closed Circuit Television was also awarded based on a Cabinet directive . The Public Tenders Committee Evaluation team recommended that the contract should be awarded to Infinite Solutions but this recommendation was not accepted by Cabinet.

Further investigation into the facts and circumstances surrounding the award of this contract may be warranted.

Infinite Solutions scored the highest points by the evaluation committee and had the lowest bid amount, as indicated in the table below Bids submitted for Contract Number DGO/1/11 .Contract No. Infinite Solution

Price (US$) Points Awarded 257,652.00 454

Electronic Solutions (Trevor Blaize)

408,381.30

399

Vanguard Security Services & Supply Limited

334,513.00

200

650,000.00

118

Data Pro

Source: Treasury Management Information, Ministry of Finance and PwC Analysis

Government of the BVI Treasury Department PwC

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6 Examination of Major Contracts

At a glance – our views

Executive report

Supporting information

Appendices Glossary

Major Contracts Awards not Included in 2011 Budget – Five (5) of the 27 Major Contracts, totalling $2.1 million, were not provided for in either the budgeted capital expenditure estimates or Supplementary Appropriation Provisions for the year.

PwC view – The awarding of Major Contracts that were not budgeted for and retroactive inclusion in the subsequent budget is a major sign of inadequate controls over major contract expenditure.

We were advised by the Accountant General (Acting) that all Major Contracts must be provided for in the Estimates of Capital Expenditure in annual budget estimates or via Supplementary Appropriation Provisions (SAP) approved by the House of Assembly Resolutions for the year.

Major Contracts Excluded from 2011 Budgeted Capital Expenditure

We examined the 2011 budget estimates and SAPs and noted that 5 of the 27 Major Contracts awarded during 2011 were not listed in the 2011 budget or subsequent SAPs (see table at right). The Accountant General stated that the three contracts awarded to RAL Trucking Service, Real Legacy Insurance, and Tortola Carpet Sales & Services actually related to recurrent expenditure, hence the noninclusion in the Capital Expenditure estimates. However, the contracts awarded to KPMG and STO Enterprises Ltd were confirmed as unbudgeted for 2011 and were included in the 2012 budget based on Cabinet instructions to award these contracts under waiver.

Government of the BVI Treasury Department PwC

Contract Contract No. Date PO/1/11 3-Mar-11

Contractor

Description

Amount (US$)

STO Enterprising Ltd

Acquiring and construction of stadium at AO Shirley Grounds

Not provided to us

KPMG

SW/1/11

18-May-11

RAL Trucking Service

MOF

Not provided to us

Real Legacy Insurance

MOF

Not provided to us

Tortola Carpet Sales & Services

Job Proposal Analysis Collection of solid waste on VG Insurance coverage for Central Admin Building (renewal) Cleaning Service for Central Admin Building

Total

1,082,995

300,000 147,847 396,416

185,808 2,113,066

Source: Auditor General, Treasury Management Information and PwC Analysis

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6 Examination of Major Contracts

Major Contracts Signed before Cabinet Approval – The date of signature on three (3) of the Major Contracts awarded in 2011 were before the Cabinet approval date

We were advised by the Manager of the Procurement Unit (Ms HodgeRhymer) that a Major Contract should only be signed after Cabinet has approved the vendor selection or, in the case of a waiver, after they have waived the tender process and selected a vendor. We performed an analysis in order to determine whether any contract was signed before Cabinet approval/selection and noted three contracts were signed on 19 September 2011 while the Cabinet approval was dated 28 September 2011. These contracts were signed by Mr. Ralph O’Neil (former Premier) and the respective Directors or Owners of each company. See Appendix 8 for a listing of all contractors and Directors/Owners awarded Major Contracts in 2011. Contracts signed before Cabinet Approval Contract Number

PO/2/11 PO/3/11 PO/4/11 Total

Supplier

Tortola Concrete Products D & C Construction Anegada Concrete Products

Cabinet Approval Date

28-Sep-11 28-Sep-11 28-Sep-11

Date Contract Signed

Amount (US$)

19-Sep-11 1,071,914.00 252,689.06 19-Sep-11 500,346.00 19-Sep-11

Executive report

Supporting information

Appendices Glossary

PwC view – The procurement protocols of the BVIGOV were not adhered to in a consistent manner as Ministry officials were also approving Major Contracts without or prior to Cabinet approval. The Procurement Unit was also bypassed by Ministry officials and shortlisted tendering was conducted by various Ministries. Additionally, three of the Cabinet Minute extracts reviewed indicated that the relevant Ministries conducted their own selective tender process where certain contractors were shortlisted to bid on a contract. This selective tender process occurred under the Ministry of Education for the contract to supply furniture to the Francis Lettsome Primary School; the Ministry of Finance for the Red Bay Rehabilitation Project; and via a Steering Committee for the New Peebles Hospital project. These tender processes run by Ministries do not appear to be consistent with the Government’s Procurement Protocols, and bypass the Procurement Unit. The adherence to proper procurement practices requires urgent improvement. If timeliness of the management of the tender process is a deciding factor for the Cabinet waivers and bypassing of the Procurement unit by Ministry officials then sufficient resources should be assigned to the Procurement Unit to effectively manage the tender process in a expeditious but transparent manner.

1,824,949.06

Source: Ministry of Finance, PwC Analysis

Additionally, during our review of the Cabinet Paper Record and Extract from the Minutes of the Meeting of Cabinet dated 17th August 2011 related to the award of a contract to Qwomar Construction Ltd, we noted that the Acting Attorney General advised Cabinet that “if Ministry officials with no authority were making decisions, they must be warned to refrain from such actions”. Cabinet decided that “a strong warning should be issued from the FS to Ministry officials to refrain from giving approval for contracts, contrary to Procurement Protocols of the Government of the Virgin Islands”. Government of the BVI Treasury Department PwC

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6 Examination of Major Contracts

At a glance – our views

Executive report

Supporting information

Appendices Glossary

Splitting of Major Contracts: Two contracts totalling $5.1 million in 2011 were split and awarded to eight (8) different vendors. However, approx. $2 million of the total contract costs were not allocated to a specific subcontract or contractor.

PwC view – The practice of splitting contracts could adversely affect the quality of service delivery on major projects and Value for Money, unless a clear basis for splitting exists and proper oversight is put in place to manage the contractors.

We obtained evidence of the splitting of Major Contract awards to several contractors. The Cabinet Paper Record and minutes extract from the Cabinet meeting held on 6 January 2011 indicated that the $2.3 million contract for the Construction of the North Sound Alternate Road Infrastructure Network was disaggregated and awarded to five (5) different contractors

Contract Splitting Identified Project

Contractor

Construction of North Sound Alternate Road Infrastructure Network

Enchantment Holdings Ltd

$261,362.69

Virgin Gorda Concrete

$133,688.00

Ebony and Ivory Concrete Supply

$374,497.00

Leonad’s Concrete Products

$374,497.00

D&C Construction

$205,461.00

Unallocated Costs

$950,494.31

The Cabinet Paper Record dated 21 September 2011 indicated that the $2.8 million award for the Anegada Road Infrastructure Development contract was disaggregated and awarded to three (3) different contractors. The table at left provides a listing of these split contracts. The splitting of contracts may not result in Value for Money and challenges with the proper management of delivery by multiple suppliers could adversely affect the quality of the work provided. This practice of splitting contracts should be investigated further and ceased where appropriate. When contracts are legitimately disaggregated and awarded to various vendors contract monitoring controls and project oversight should be strengthened to ensure Value for Money from these contractors.

We also noted $950,494 and $988,630 of the total contract costs were not allocated to a specific sub-contract or contractor. The purpose and eventual recipients of these amounts under these two contracts should be investigated further.

Government of the BVI Treasury Department PwC

Anegada Road Infrastructure Development

Contract Value (US$)

Total Award by Cabinet

$2,300,000

Tortola Concrete

$1,071,914.00

Anegada Concrete

$500,346.00

D&C Construction

$252,689.06

Unallocated Costs

$988,630.63

Total Award by Cabinet

$2,813,579.69

Note: Unallocated Costs represent approved budgeted capital expenditure that were not allocated to a specific contract or supplier. Source: Treasury Management Information, Ministry of Finance and PwC Analysis

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6 Examination of Major Contracts

Potential conversion of Major Contracts to Petty Contracts: The practice of converting Major Contracts to Petty Contracts at values slightly less than $100,000 could adversely affect the quality of service delivery on major projects and overall Value for Money spent. We also noted the existence of a number of contract awards that equalled or were nominally less than the $100,000 threshold for tendering. Section 170(2) of the Public Finance Management Regulations of 2005, read with its amendment in 2007, states that goods or services that exceed $100,000 must be procured by tender unless otherwise indicated by the Executive Council (i.e., Cabinet). We extracted and analyzed a list of payments that were just under $100,000 during 2011.

We noted that none of the contract amounts identified in the table at left were awarded to the same contractor. We also conducted a search to determine whether a number of Petty Contracts were repeatedly issued to the same vendor during the year and did not identify any unusual activity regarding the volume or timing of awards of Petty Contracts to a particular vendor.

Executive report

Supporting information

Appendices Glossary

PwC view –Contracts may be deliberately priced to circumvent the threshold for public tendering. Therefore, controls should be implemented to deter this practice including limiting and/or continuously monitoring the number of petty contracts awarded to one vendor over a specified period of time. Contracts with Values Nominally less than $100,000 Vendor Name Lettsome, Ileta by National Bank of VI George, Ray Florida Hardware Company, llc Luis or Francisco Frometa Potter, Ernest E. By First Bank S & D Security and Alarms Systems Smartmart Total

Amount (US$) 98,850.00 97,809.21 96,425.91 95,426.48 95,193.45 92,957.76 92,260.68 668,923.49

Source: Treasury Management Information, Ministry of Finance, IT Department and PwC Analysis

However, our ability to detect whether deliberate circumvention of the threshold potentially occurred was limited to a review of the JDE database as our scope did not include interviewing all of the parties involved in the execution of these Petty Contracts or a review of all Petty Contracts. Therefore, further investigation of the contracts identified at left may be warranted based on your specific knowledge of the nature of the contracts and/or the vendors identified.

Government of the BVI Treasury Department PwC

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6 Examination of Major Contracts

At a glance – our views

Executive report

Supporting information

Appendices Glossary

Contract Payments vs. Contract Award Amount: The contract number is not consistently entered in the JDE system for all payments issued to a contractor. Therefore, controls over contract monitoring and payments are solely reliant on manual reviews of the prior amounts paid when a request for payment is received.

PwC view – The inclusion of the contract number on all contract payments will enable preventive system-based controls over the disbursement of funds, and will also facilitate improved report generation and subsequent auditing of all contract payments against the contract amount.

We attempted to conduct a review and comparison of all payments issued under each of the Major Contracts executed in 2011. However, we identified a major control weakness and system limitation that impeded our ability to conduct this exercise conclusively.

Contract Amount vs. Amount Paid

Although we could perform an analysis by searching for all payments by vendor name (as provided in the table at right), the contract number is not always recorded in the JDE accounting system as a reference number when payments are recorded. Therefore, each payment in the system is not currently assigned to a particular contract in every instance a contract payment is recorded. Consequently, as indicated, we identified three (3) vendors where the total payment amounts exceeded the 2011 Major Contract amount for the particular vendor. However, we cannot conclusively state that there were overpayments against the 2011 contract as we cannot determine whether this vendor also had a petty contract or another Major Contract from a prior year on which payments were made. Change orders or contract variations are also not recorded in JDE. [Note: a review of Petty Contracts was not part of our scope].

Pay m ents per JDE Vendor Nam e Sy stem ** ELECTRONIC SOLUTIONS 27 6,844 QWOMAR TRADING LTD. 88,963 JAMES TODMAN CONSTRUCTION LTD. [Combined Contracts] 8,395,91 5 D & C CONSTRUCTION 552,889 SOLID POWERBOAT INC. 27 4,987 A.H. PARKER & SONS (GT. BRITAIN) LTD. BY 1 7 8,861 ANEGADA CONCRETE PRODUCTS 1 41 ,1 63 TORTOLA CARPET SALES & SERVICES LTD 59,555

Contract Am ount 3 08,682 1 44,2 50 3 4,983 ,3 1 5 458,1 50 2 7 3 ,2 57 1 1 8,906 500,3 46 1 85,808

Difference (3 1 ,83 8) (55,2 87 ) (2 6,587 ,401 ) 94,7 3 8 1 ,7 3 0 59,955 (3 59,1 83 ) (1 2 6,2 53 )

** Note: Pay ments were rev iewed for the period 1 January 201 1 through 1 3 Nov ember 201 2 Source: JDE Sy stem ex tracted prov ided by Ministry of Finance IT Department and PwC rev iew of contract

Treasury personnel stated that the total contract amount and prior payments are reviewed manually before a payment is processed. However, the controls over contract payments would be improved if one of the fields for all payment records in JDE specified the contract number as a unique identifier. This would enable a preventive system based control where additional payments in excess of the contract amount are not allowed without approval from the appropriate senior officer (such as the FS or Accountant General). The consistent inclusion of the contract number in JDE could also facilitate improved report generation and auditing of all payments issued against a particular contract. Government of the BVI Treasury Department PwC

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At a glance – our views

6 Examination of Major Contracts

Payments without Contracts – There were eight (8) payments which exceeded $100,000 for which there were no contracts in the Major Contracts listings provided for 2009, 2010, and 2011.

Executive report

Supporting information

PwC view – The payments that exceeded $100,000 where no corresponding contract was identified should be examined further, and controls regarding the documented support required before payments are approved should be strengthened as necessary.

Payments without contracts

Payments >$100,000 with no Corresponding Contract

We performed an analysis to determine if all payments above $100,000 in 2011 were made in accordance with a duly signed contract as required by Public Finance Management Regulations 2005.

Vendor Name

Check Remark

Alun Jones Q.C

Wire transfer closeout

Caribbean Insurers Ltd. Fujitsu Caribbean (Barbados) Limited

The adjacent table contains a list of eight payments that exceeded $100,000 in 2011 for which there was no contract in the list of Major Contracts awarded in 2009 , 2010, and 2011, provided to us by the Auditor General and the Accountant General. This list excludes interdepartmental payments within the BVIGOV and retirement and compensation payments. Further investigation by the Ministry of Finance should be conducted to ascertain whether and why these substantial payments were apparently made without a corresponding contract.

Professional Roofing & Construction Co.

Government of the BVI Treasury Department PwC

Appendices Glossary

Check Date

Check Amount (US$)

2012-09-24

146,703.08

Fmu-185288

2012-03-15

198,213.00

Wire transfer closeout

2012-02-20

101,162.30

Min. Communications & works

2012-11-09

119,172.26

VI Festival & Fairs Committee

Mec doc dated 10/04/11 548622

2011-12-07

250,000.00

Virgin Island Festival & Fairs Committee

Culture dept. Inv. 002

2012-07-16

123,860.50

Virgin Island Festival & Fairs Committee

Culture dept. Inv. 001

2012-07-06

123,860.50

World Business Media and News

Wire transfer closeout

2011-07-12

103,047.09

Total

1,166,018.73

Source: Treasury Management Information, Ministry of Finance, IT Department and PwC Analysis

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6 Examination of Major Contracts

At a glance – our views

Executive report

Supporting information

Appendices Glossary

Payments without Proper Approval - Of the 42 payments reviewed, 14 were made without a Payment Approval Form indicating that the appropriate personnel signed off that the serve provided was adequate prior to the processing of payment.

PwC view – Lack of proper authorization for payments can lead to fraudulent payments and mismanagement of public funds. The required submission of signed Payment Certificates or Payment Approval Forms should be strictly enforced before a payment is issued.

Payment Approval Process

Payments without a Payment Approval Form

We were advised by the Accountant General that it is not necessary for invoices to be submitted for all contracts.

Supplier

However, she advised that all payments must have a Payment Certificate. The Payment Certificate requires a competent person (usually an employee of the relevant Ministry or Department) to verify whether the work was completed, and whether it was delivered to the satisfaction of the Government of the Virgin Islands. We inspected the payment documents in order to establish if a Payment Certificate was included for all payments. We observed that 33 of the 42 payments reviewed did not contain a Payment Certificate (see Appendices for detail of this payments analysis. We were further advised by Ms Kim Lennard, Senior Accounts Officer, (“Ms Lennard”) that all payments must also have, among other documents, a Payment Approval Form signed by the appropriate persons in order for a payment to be made. We requested the payment documentation for all payments on Major Contracts during the period under review in order to determine whether they followed the stated payment approval process The 14 payments in the table alongside did not contain a Payment Approval Form. On further examination we noted that RAL Trucking Service and Tortola Carpet Sales & Services Ltd provide routine recurring waste collection and maintenance/cleaning services. However, the lack of payment approval for the other vendors (in particular) should be further investigated and controls strengthened to ensure all payments are properly approved by appropriate personnel that can verify that the contracted work was adequately performed. Government of the BVI Treasury Department PwC

Cheque No.

Cheque Date

Amount (US$)

James Todman Construction Ltd.

43414

9-Nov-12 $

782,906.85

STO Enterprise Ltd.

40380

21-Jul-11 $

108,299.50

R.A.L Trucking Service

559789

8-Jul-11 $

7,979.16

R.A.L Trucking Service

556239

25-May-11 $

7,979.16

R.A.L Trucking Service

554923

14-Apr-11 $

7,979.16

R.A.L Trucking Service

553222

14-Apr-11 $

7,979.16

R.A.L Trucking Service

550516

3-Mar-11 $

7,979.16

Caribbean Insurers Ltd.

563131

17-Aug-11 $

132,142.00

Caribbean Insurers Ltd.

557696

15-Jun-11 $

50,050.65

Caribbean Insurers Ltd.

551044

17-Mar-11 $

35,523.55

Caribbean Insurers Ltd.

550250

3-Mar-11 $

16,985.90

Tortola Carpet Sales & Services Ltd.

560232

13-Jul-11 $

16,110.98

Tortola Carpet Sales & Services Ltd.

555756

17-May-11 $

7,837.00

Tortola Carpet Sales & Services Ltd.

553615

20-Apr-11 $

7,742.00

Total

$ 1,197,494.23

Source: Treasury Management Information, Ministry of Finance, IT Department and PwC Analysis

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At a glance – our views

6 Examination of Major Contracts

Executive report

Supporting information

Appendices Glossary

Retention of Tender Records– Procurement documentation was not properly archived/retained for the three (3) contracts awards that were managed by the Procurement Unit in 2011.

PwC view – The Public Tenders Committee Evaluation forms are the most critical documents indicating the scoring and evaluation process for each tenderer. These documents, at the least, should always be on file for every tender evaluation.

Retention of tender procurement documents

Tender Documents on file

According to the tender process explained to us by Ms Hodge-Rhymer (Manager - Procurement Unit ) and the provisions contained in Sections 173-175 of the Public Finance Management Regulations of 2005, we expected to see at least the following documents for each tender:

Documents Required

Notice of an invitation to tender published in the Gazette and at least one local newspaper Central Tenders Board Project Checklist for Opening of Bids Tender documents submitted by each tenderer Public Tenders Committee Evaluation Forms A document summing the totals recorded in the Public Tenders Committee Evaluation Form A recommendation by the technical evaluation team

DGO/1/11

MNRL/1/11

MOF/1/11

A recommendation by the Central Tenders Board to the Minister

A recommendation by the technical evaluation team, where applicable

Cabinet’s final decision

A letter of notification to the tenderer



A recommendation by the Central Tenders Board to the Minister

Source: Procurement Unit and PwC Analysis



Cabinet’s final decision



A letter of notification to the tenderer



Notice of an invitation to tender published in the Gazette and at least one local newspaper



Central Tenders Board Project Checklist for Opening of Bids



Tender documents submitted by each tenderer



Public Tenders Committee Evaluation Forms



A document summing the totals recorded in the Public Tenders Committee Evaluation Form indicating the total score for each tenderer



The adjacent table contains a summary of the tender documents on file as provided to us by Procurement.

Government of the BVI Treasury Department PwC

The summary table above indicates improvement in the documentation retention procedures for all tendered contract awards is required to ensure evidence of a transparent process is maintained. If the lack of available documentation indicated in the table above means the particular step was not performed then these are further examples of areas in the end-to-end procurement practices that require urgent improvement.

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At a glance – our views

6 Examination of Major Contracts

Executive report

Supporting information

Appendices Glossary

Document sequence for payments - The chronology of the steps required for the approval of payments were not consistently followed in all instances for the payments reviewed.

PwC view – Non-compliance with the sequence of steps for the approval and processing of payments on contracts can result in erroneous or fraudulent payments being made.

Document Sequence for Approval of Payments

Voucher created before the Payment Approval Form

We were advised by the Accountant General that the chronological sequence of steps for the approval and processing of payment on contracts should be as follows: 1. Signed contract; 2. Purchase Order (PO) generated and signed; 3. Invoice received / Payment Certificate generated and signed; 4. Payment Approval Form generated and signed;

Contract No.

DGO/001M/2011 MCW#1/2011 MCW#3/2011 MCW/MC#4/2011 No contract number Total

35891 40011 40010 40191 550250

Payment Approval Form

7-Feb-11 22-Dec-10 22-Dec-10 22-Dec-10 1-Mar-11

Voucher

7-Feb-11 12-May-11 12-May-11 17-Jun-11

Amount

2-Feb-11 5-May-11 5-May-11 15-Jun-11 18-Feb-11

$ 184,239.20 $ 235,226.42 $ 280,872.75 $ 249,303.93 $ 16,985.90 $ 966,628.20

Source: Treasury Management Information and PwC Analysis

5. Payment voucher generated and signed; 6. “Passed for payment” stamp and signature of Treasury officer; and

Payment Approval Form completed before the PO

7. Cheque issued

Contract No.

The tables opposite contain the 7 payments, out of the 42 payments examined, where the vouchers were created before the Payment Approval Form was signed or the Payment Approval Form was completed before the PO was created.

MCW/MC#3/2010 MOH/001M/2011 Total

Additionally, as previously stated, eight payments were identified where no contract was included in the contracts listing provided for the prior three years.

Government of the BVI Treasury Department PwC

Cheque No.

Cheque No. 40006 40187

13-Mar-11 17-Jun-11

Payment Approval Form 25-Feb-11 8-Jun-11

Voucher

23-Feb-11 21-Jun-11

Amount (US$) 74,980.08 63,002.26 137,982.34

Source: Treasury Management Information and PwC Analysis

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7 High-Level Assessment of Treasury Operations

High-Level Assessment of Treasury Operations

7.1

Recommendations and Suggested Next Steps

Government of the BVI Treasury Department PwC

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7 High-Level Assessment of Treasury Operations

High-Level Review of Treasury Operations – Various weaknesses identified in this report have been communicated in the past and although some progress has been made with addressing certain issues additional urgent corrective action is still required.

PwC view – Overall, whilst progress has been made over the past year a great deal of work is still required to strengthen the efficiency and effectiveness of the Treasury function so that it can fully satisfy the Protocols for Effective Financial Management.

Introduction The Government of the British Virgin Islands relies upon it’s Treasury Department within the Ministry of Finance to help support and deliver its objective for effective financial Management as set out in the Protocols signed on 23rd April 2012. Furthermore the function is expected to provide a financial management operation which adheres to accepted good practice so that there are effective arrangements in place for the planning, management and reporting of the use of public funds. The Treasury Department falls under the Ministry of Finance and is headed by the Accountant General. The Accountant General is responsible for the accounting of public monies and reporting on the Government’s accounts as set out in statutory instruments of the Constitution, Public Finance Management Act and Regulations, financial circulars, and financial instructions issued by the Ministry of Finance and Financial Secretary. As part of this review PwC held discussions with the Accountant General and members of her senior staff management team to ascertain the current status of the Treasury operations. Due to the limitations of time constraints placed upon us we were not able to conduct an indepth detailed assessment; rather the comments which follow are based upon an examination of the information provided to us and discussions with the Accountant General.

Background In recent years several reports have commented upon the operations of the Treasury Department. The most recent carried out by Oxford Policy Management in 2010 concluded that “the accounting and reporting functions of financial management systems deployed by the BVI Government [through the Treasury Department] are of concern.” The OPM report noted key weaknesses in the areas of financial planning, macro-fiscal forecasting and cash flow forecasting, and poor financial management information and reporting. It made several important recommendations which included: • Strengthening of financial governance and internal controls • The introduction of a multi-year budgeting framework • The introduction of accrual accounting over the medium term • Strengthening of procurement and contract management • Financial reporting within agreed timetables • The maintenance of an effective internal control framework • Greater powers given to the Internal Audit function Furthermore the report noted that financial data and reporting was poor, reconciliation processes needed to be improved, and the accounting technical system used needed upgrading or replacement. On the following pages we comment on the progress that the Treasury Department has made since the 2010 report and highlight the scope for further improvement that remains.

Government of the BVI Treasury Department PwC

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7 High-Level Assessment of Treasury Operations

Maturity of the Treasury Department – Key aspects of the operation of the Treasury Department fall well short of accepted good practice.

Poor practice

Good practice

Insight – is important in effective finance function delivery. It is about Finance adding value to the organisation and supporting the strategic and operational decision-making processes. Compliance & Control – this is about the need to optimise financial risk management, compliance and control to establish a sustainable cost effective control environment which meets today’s requirements as well as being flexible for future changes.

Insight Compliance & Control

Efficiency - in Finance this means performing tasks in a timely and cost effective manner. This is typically achieved through simplified and standardised processes that leverage technology and make improvements to the efficient delivery of transactional processing through shared services or outsourcing.

Efficiency Enablers

Overall Source: PwC Analysis

Our overall assessment of the current status of the Treasury operations, based upon our short review, is that it trends towards the lower end of the scale of what represents poor and good practice. This is not unexpected given the history of past difficulties but it is of concern that greater progress has not been achieved in addressing the fundamental basics of good financial discipline expected of any public body. On the following pages we comment briefly and give examples of what we found to be poor practice, and also some more encouraging examples of where progress has been made. We wish to stress at this stage that management are well aware of many of these issues but they need support and investment if a real difference is to be made and good practice achieved. Government of the BVI Treasury Department PwC

PwC view –Significant improvement in all of the key areas for effective Treasury management is required particularly regarding relevance of the department as a source of support for financial and strategic decision making, the development of internal resources, and risk management particularly including collection of revenues.

Enablers – this is about having an effective finance organization, the development of the finance people, their skills, knowledge and experience, and the effective deployment of finance technology systems and data management. During the course of our work a number of key themes emerged all of which fall under the above titles. These issues taken together form a formidable body of work that needs to be addressed urgently in order to stabilize the current situation, and provide a firm platform for enhancement and development. Each of the issues we have identified are in themselves capable of resolution quickly but making the changes required will be impacted to a greater extent by the environment and culture within which the Treasury Department is operating. In short it seems to us that everyone within the public administration must develop a greater awareness of the importance of good financial governance and management.

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7 High-Level Assessment of Treasury Operations

Addressing the three elements of Insight, Compliance & Control, and Efficiency is critical: The Treasury department’s emphasis is focused more on basic processing of transactions.

The need for a high quality professional finance capability, to enable the BVI Ministries to do their job effectively, is greater than ever. The fiscal challenge, and the requirement for greater Value for Money, means that finance has a vital role to play in the delivery of public services.

PwC view – Treasury needs to be able to proactively assist with the management of scare resources by engaging with the BVIGOV as a partner and providing real quality insight to support the key decisions that impact on the delivery of services

Insight

The role of finance is represented in the diagram opposite. Achieving a high performing finance function within the BVI Government necessitates a clarity on the role and mandate of finance and the desired balance of activity between Efficiency, Compliance & Control, and Insight. This impacts on the areas of people, processes and systems. Feedback from our discussions indicate that finance does not place sufficient attention on the provision of Insight, rather it focuses most of its activity on basic processing and to a much lesser extent on cost control, risk and compliance. Financial reports are often late and as our investigations earlier in this report highlight, prone to significant error and mis-reporting.

Compliance & Control

Efficiency

In the difficult environment of managing constrained finances the Treasury needs to be able to respond by engaging with the BVIGOV as a partner and providing real quality insight to support the key decisions that impact on the delivery of services.

Efficiency in Finance means performing tasks in a timely and cost effective manner. This is typically achieved through simplified and standardised processes that leverage technology and make improvements to the efficient delivery of transactional processing through shared services or outsourcing.

To do this Treasury needs to be properly equipped with the skills, capabilities and tools to enable it to support change, increase efficiency, balance the budget and demonstrate value for money.

Compliance & Control is about the need to optimise financial risk management, compliance and control to establish a sustainable cost effective control environment which meets today’s requirements as well as being flexible for future changes.

Insight is increasingly important in effective finance function delivery. It is about Finance adding value to the organisation and supporting the strategic and operational decision-making process. Government of the BVI Treasury Department PwC

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7 High-Level Assessment of Treasury Operations

Themes identified in relation to Financial Insight

Following our discussions with the Accountant General we have a number of observations about the provision of financial insight and these are set out opposite. We believe that little attention is given to this important area. It is our view that unless these issues are addressed then the Treasury will continue to struggle to support effective financial management within the BVI and improve its performance from the lower end of the spectrum to accepted good practice.

Budgeting & Forecasting â&#x20AC;&#x201C; it is encouraging that efforts have been made this year to start the process of introducing a medium term budget with a three year rolling profile. We also understand that the collection of monthly performance statistics is to be introduced shortly. Comprehensive guidelines on the formulation of the annual budget and the in-year monitoring and reporting of actual expenditure against that budgeting are required. Controls do exist for a quarterly allotment of approved monies and any non-budgeted for expenditure must be approved by the Financial Secretary. However we believe that strengthened controls are required to monitor and report on variations from budgeted expenditure, both recurrent and capital expenditure, and take action where unapproved expenditure is incurred.

Forecasting and budgeting processes need to be improved. We suggest that a move to zero based budgeting would be of assistance, together with a more formal linkage of planned expenditure to policy outcomes and activities so that the success of public sector programmes can be planned and measured more effectively. Processes should also be introduced for more formal in-year monitoring of the budget plan. Management reporting â&#x20AC;&#x201C; this is extremely limited and requires immediate attention. We understand that the Accountant General has recently obtained approval for the establishment of a new Accounting & Reporting Unit within the Treasury and steps are in hand to recruit staff. The primary responsibilities of this new unit include fund reconciliation, monthly reporting and the preparation of annual accounts. This is a welcome step and should be pushed through quickly. Management Information appears to be very limited. The introduction of a new chart of accounts may help capture essential information but this requires development. There is a lack of commentary on the financial information produced (except for Auditor General comments in the final statements which are very late). Finally, a reasonably well balanced financial scorecard should be put in place allowing senior management to track financial outcomes and link these to the key drivers of performance operationally. Risk management should be introduced and linked to the balanced scorecard.

Government of the BVI Treasury Department PwC

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7 High-Level Assessment of Treasury Operations

Themes identified in relation to Financial Insight

Observations (cont’d)

Business Analysis – due to the concentration on managing day to day transactions there is limited attention given to business analysis, for example understanding the cost of delivery of services. The Treasury function should have the capability to develop such analysis and provide it to Ministries to assist them with formulating their strategic financial plans. Additional comments: •

There is a perceived lack of reliable and timely financial and management information (or staff don't always know where to get it) to support decision making.

•

The Treasury and Ministries have to balance the competing priorities of externally imposed decisions and internal management of the delivery of services.

•

Extensive time can sometimes be spent in following due process with little real outcome or benefit.

•

Performance measures, including financial KPIs, either do not exist or are not always aligned to the business.

•

There is little use of financial benchmarking to track performance.

•

There is little evidence of costing the provision of services or understanding the key cost drivers.

•

As already noted there is inconsistent monitoring and variance reporting of actual expenditure against forecast and budget.

•

Senior management are reported to not be sufficiently engaged in the budget setting and planning process.

Government of the BVI Treasury Department PwC

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7 High-Level Assessment of Treasury Operations

Themes identified in relation to Compliance & Control

We discussed with the Accountant General a number of general themes relating to how well the Treasury managed compliance with the financial regulations, the management of risk, and ensuring that an effective internal audit regime is in place.

The qualifications of the Internal Audit staff also need to be enhanced and a comprehensive audit methodology incorporating specialist attention on financial IT systems that are being developed and rolled out should be implemented.

It is our view that whilst these themes are recognised as being important little real progress has been made in ensuring that good practice exists.

Controls â&#x20AC;&#x201C; Some control activities are in place but are not adequately documented. There is no comprehensive manual of Financial Instructions or Standing Financial Orders which would document the responsibilities of staff, rules, and processes to be followed.

Unless these aspects are addressed quickly there is a danger that noncompliance will continue which has the potential to result in mismanagement and mis-reporting of public funds, error or fraud. Internal audit - this was raised in the OPM 2010 report as an area of concern and it remains so in this report. We understand that progress has been made in this area and the Internal Audit function is now a separate department that reports directly to Cabinet. However, we held discussions with the Acting Director of Internal Audit and reviewed the latest Audit Plan available as well as sample of recent audit reports. The auditing approach of this department can be improved as in our view Internal Audit should have a clearly defined role integrated with public sector wide risk management, governance and control initiatives.

Controls are therefore dependant upon people and ad-hoc instructions which are agreed in management meetings or issued from the Ministry of Finance from time to time. As indicated in the subsequent page, improved controls over the safeguarding of cash is required. We strongly recommend that a Financial Instructions manual be prepared to codify the internal control regime in accordance with the principles set out in the respective Financial Regulations and accepted good practice.

It should provide assurance to Cabinet, the Ministry of Finance and the citizenry on all aspects of compliance and monitoring of the internal control regime. It should play a fully active part in developing and enhancing internal control procedures, as well as carrying out value for money and other special studies on major projects prior to, during, and after completion.

Government of the BVI Treasury Department PwC

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7 High-Level Assessment of Treasury Operations

Safeguarding of cash – There is a lack of proper controls or enforcement of controls over the collection and reporting of cash collected by revenue generating departments of the BVIGOV.

PwC view – The decentralized nature of cash collections by several revenue generating government agencies requires stronger internal controls over the safeguarding of cash, including daily reconciliations of cash received vs cash deposited in banks and reported to the Treasury department.

During our review of bank reconciliations and inquiries of internal controls over the safeguarding of cash, we noted that the cash balances are accurately reported and bank statement reconciliations are performed monthly in a timely manner.

The decentralized cash collection, breaches in proper reporting of collections and deposits, prior misappropriations, and the fact that there are no Treasury personnel located within the various collection agencies to reconcile cash collections and deposits daily – or at least review these collections / reconciliations – suggest significant control weakness over the safeguarding of cash.

However, there are certain long outstanding reconciling items in the bank reconciliations such as unpresented cheques dating back to 2002 for $494,000 that require clearance. These differences have likely contributed to the inaccuracies with various account balances and should be reviewed in detail and cleared.

Additionally, at December 2011 there was an Unallocated Deposit balance of $1.3 million in the Consolidated Fund bank accounts. This balance arose due to a repeated issue where a revenue collecting department, such as the Water and Sewage Authority, collected and deposits funds without informing the Treasury department. This poses a significant control risk over the safeguarding of cash. We understand this risk has materialized in prior years. We were also informed by the Accountant General that there was a recent matter in 2012 regarding misappropriation of cash at a public entity in Virgin Gorda that is currently under investigation.

Government of the BVI Treasury Department PwC

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7 High-Level Assessment of Treasury Operations

Themes identified in relation to Efficiency

Whilst the basic processing of transactions is an area of strength for the Treasury Department there is a lack of basic financial disciplines which may result in the efficiency and quality of the department being compromised. Material errors that have been identified should be resolved immediately so that the financial statements are not mis-reported.

General accounting â&#x20AC;&#x201C; The Treasury has worked hard in recent months to develop a new standard chart of accounts for the recording and reporting of transactions. This is currently being implemented and will bring distinct improvements such as the ability to report economic analysis categories required by the IMF, and the recording of loan balances. This is a welcome development. A monthly accounting calendar has been developed but it is fair to say that this has not been adhered to in a disciplined way. We understand that the Financial Secretary has issued instructions for prompt closure of the books of account. Adhering to a strict accounting timetable is one of the most basic financial disciplines and any deviation from it should be treated very seriously. Failure to lodge cash in the bank on a timely basis, failure to forward payment vouchers to the Treasury on a timely basis, failure to process monthly transactions on a timely basis, all will have serious implications for financial management and reporting. Some basic financial accounting disciplines, such as the clearance of long outstanding items on bank reconciliations are not performed in a timely manner. Earlier this report has commented on issues which, in our view, are indicative of a poor culture of financial discipline. Such deviations from good practice would not be tolerated in any well run organization, public or private, and should be addressed immediately. We were informed that none of the personnel in the Ministry of Finance, including the Treasury department, are qualified accountants. Therefore, the current capabilities of the Financial Reporting team may be insufficient to effect the urgent and substantial remedial actions required to improve the financial reporting process â&#x20AC;&#x201C; especially reducing the current time take to produce final accounts from in excess of 12 months to 4 months, without additional support. We appreciate that a previous recommendation was made to move, in the medium term, to accruals accounting. Our view is that such a move at this stage would be inappropriate as the underlying financial processes, accounting knowledge and experience, and related controls are simply not strong enough to support the more complex system of accruals accounting. An interim step might be to introduce some form of commitment accounting, and use this as a tool to educate users, and smooth the way for an eventual transition to accruals.

Government of the BVI Treasury Department PwC

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7 High-Level Assessment of Treasury Operations

Themes identified in relation to Efficiency

Observations (cont’d)

General accounting continued – Experience in other jurisdictions with the move to accruals has been somewhat mixed with a failure to fully understand the benefits accruals accounting delivers and as a result a continued short term focus on the management of cash. Financial systems – A great deal of work has been completed to upgrade the financial management systems to a more modern version. We understand that two system programmers remain with the Treasury to continue to develop the system and correct errors and problems as they arise. We are informed that at the end of January 2013 work will commence on developing a suite of financial reports. Further initiatives include revisions and modifications to the financial feeder systems and interfaces.

Concern has been expressed at the lack of basic systems documentation for some of the older financial systems, such as the TMS bank reconciliation system. This complicates systems maintenance and makes any development more difficult. We welcome the Treasury decision to move away from these older systems when practicable and utilize the functionality available as standard inside the JD Edwards ERP system. Additional comments: •The many unresolved accounting errors, some of which we understand date back many years, should be resolved without delay and adjustments made to correct the books of account.

•Every effort should be made to close off the financial year end and complete the audit of the year end accounts within a reasonable timescale, certainly no more than 3 months after the year end date. •All revenue due to the BVI Government as receivables should be collected by the date when it falls due. All cash received should be accounted for promptly and banked immediately upon receipt. •All payment vouchers must be provided to the Treasury within 48 hours of the product being received.

Government of the BVI Treasury Department PwC

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7 High-Level Assessment of Treasury Operations

Themes identified in relation to Enablers

The Accountant General has recognised the need for a suitably trained, skilled and experienced staff. The staff are generally enthusiastic but their training and development needs must be urgently addressed if the performance of the Treasury is to be improved substantially.

Treasury Vision – It would be very helpful for the Treasury Department to have a documented business plan which sets out how it sees its vision for the management of finance both within the Department itself and also across the government organizations. The Accountant General with the support of the Deputy Financial Secretary should continue to actively promote the role of the Treasury Department and the importance of what it is trying to achieve. Organizational structure – The Accountant General has developed an organizational structure which she believes is best suited to the needs of the business. This is still a work in progress and needs to be developed further in conjunction with the views of the deputy Financial Secretary. Of particular note is the proposed Internal Control/Compliance Unit and the provision of business analysts and IT technical support staff within the administration unit. Job descriptions are still being written and have yet to be finalized and agreed. Once completed these should be used to inform the overall assessment of skills and training needs as well as used to direct staff in their roles and responsibilities, and support the introduction of a more rigorous approach to performance management. Additional technical resources may be required to help prepare these job descriptions and business plan given the day-to-day needs of the department. Talent management – one difficulty the Accountant General has is in the recruitment of appropriately trained, skilled and experienced staff. We understand there is no formal process for talent management within the Treasury Department. We strongly recommend that a Training Needs Analysis is carried out as a matter of urgency to assess the developmental needs of staff to enable them to perform their jobs effectively and efficiently. Given that the unit is small there is also a need to ensure that job roles are flexible and inter-changeable to provide sufficient cover in the event of absence, sickness etc. We also suggest that a competency framework is developed so that the required competency sets are matched to the staff available. Career expectations/Succession planning – It is often the case that it is difficult to recruit people into finance as they wish to pursue a more varied career path or perceive that the opportunities for advancement within finance are limited. The Ministry of Finance could assist the Treasury Department by actively promoting finance as a good place to work.

Government of the BVI Treasury Department PwC

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7.1 Recommendations and Suggested Next Steps

Recommendations and Suggested Next Steps

Government of the BVI Treasury Department PwC

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7.1 Recommendations and Suggested Next Steps

Recommendations for Immediate Action

1. Timeliness of Financial Reporting: The entire end to end process for the preparation of the BVIGOVâ&#x20AC;&#x2122;s financial statements require urgent review and improvement, including more proactive collaboration between the Accountant General and Auditor General. A formal accounting timetable should be strictly enforced by the FS for both month-end and year-end accounting closure procedures, and a plan for completion of he annual audits agreed with the Auditor General. The FS should issue a formal instruction to the Accountant General and Auditor General regarding the required timetable. This remedial action is critically required for the BVIGOV to achieve its goal of improved Public Sector Financial Management. 2. Audited financial statements: In order to effect the submission of final, audited financial statements within a more reasonable timeframe, consideration should be given to amendment of the relevant legislation (such as the Audit Act) to mandate the submission of audited accounts to the FS and Minister of Finance within a specified period of time . However, such an amendment should only go into effect after the aforementioned suggested reconciliations, accounting clean-up, process improvement, communication protocols, enforced timetables, and training of financial reporting personnel in the Treasury have been implemented. Best practice (in the UK public sector and otherwise) requires the publishing of final audited accounts within three to four months after year-end. 3. Accuracy of Financial Reporting - Fund Balances: A remedial accounting exercise should be conducted to investigate, reconcile, and correct all historical Fund balances in order to present rolled-forward balances that can be agreed to or reconciled to actual cash balances that are available for expenditure, and that reflect the actual net fiscal status of the BVIGOV. 4. Accuracy of Financial Reporting - Other Account Balances: A remedial accounting exercise should also be conducted to investigate, adjust, reclassify or eliminate each asset balance that cannot be substantiated or does not represent a proper asset from which economic benefit can be realized in the future, as well as each reported liability balance that is not representative of an obligation to be paid by the BVIGOV. 5. Presentation of Net Fiscal Position: The Statement of Assets and Liabilities should be restated to include public debt, commitments not yet paid at year-end (including pending litigation where payment is probable and can be estimated), contingent liabilities, and fixed assets owned by the BVIGOV (when identification and valuation of these assets is completed). These amounts should be included on the face of the Statement as well as in the footnotes of the accounts where further detail of the composition of these balances should be provided. 6. Completion of the Final 2010 and 2011 Audited Accounts and Annual Reports: The 2010 and 2011 Audited Accounts and Annual Reports should be completed as a matter of urgency and items #2 through #5 should be considered when completing these accounts to ensure the opening balances of the 2012 accounts properly reflect these items. A clear finalization plan and protocols between the Accountant General and Auditor General should be agreed and implemented based on instructions from the FS and Minister of Finance. Government of the BVI Treasury Department PwC

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7.1 Recommendations and Suggested Next Steps

Recommendations for Immediate Action (continued)

7. Review of contingent liabilities: A detailed review of each loan guarantee should be conducted from an accounting perspective to determine whether these amounts should be included on the face of the Statements as a BVIGOV liability under international accounting standards. Additionally, the viability of each state entity for which debt was guaranteed by the BVIGOV should be analyzed in detail on at least a quarterly basis including a review of the entities’ monthly net cash flows (historical and forecasted). This analysis should be included in the FS’ quarterly accounting package to continuously assess these entities’ ability to service their debt through maturity, and the likelihood of any calls for payment from the BVIGOV. 8. Controls over Development Expenditure: Improved internal controls and fiscal discipline over Development Expenditure is required as development expenditure has historically exceeded budgeted amounts, supplemental appropriations and re-votes have been significant, and deficit financing of this expenditure has occurred where expenditure has exceeded the operating surpluses available.

9. Strengthening of Controls over Revenue/Cash Collection: Certain revenue collection agencies do not report cash collected and deposited to the Bank to the Treasury Department in a timely manner. As a result, deposits are made to the Bank and Treasury is unaware of the source of the deposits until a reconciliation of the bank statements is conducted and inquiries are made. This is a severe control weakness and daily reconciliations of cash collected vs. cash deposited should be conducted at each revenue collection agency. All cash collected should also be deposited and accounted for within 24 hours. The FS should issue stern instructions surrounding the processes to be followed over cash collection and the consequences of non-compliance. Support and approval should be provided to introduce an internal compliance unit within the Accountant General’s department to help improve these controls, which would be separate from the Internal Audit department that reports to Cabinet. 10. Awarding of Major Contracts on a Sole Source Basis by Cabinet: Although the current legislation provides an exception that allows Cabinet to award Major Contracts directly without tender, this practice became the norm and not the exception during 2011 – with no basis or rationale documented for waiving the tender process. A clear basis for the award of Major Contracts on a sole source basis should be agreed upon by Cabinet (and the wider House of Assembly as necessary) and all such decisions for award should be based on this clear and agreed rationale for sole selection. Over the longer term, the BVIGOV should consider amending the Public Finance Management Act regulations to include this basis for award of Major Contracts on a sole select basis. documents as evidence that a proper and transparent process was followed. 11. Strengthening of Major Contract Award and Payment Controls: The control weaknesses and poor practices identified during our examination should be immediately ceased or rectified with strong disciplinary action taken where necessary including (i) signing of contracts before Cabinet approval; (ii) awarding of contracts for expenditure that was not budgeted for; (iii) splitting of contracts without a clear documented basis as well as adequate oversight in place for the monitoring of service delivery by several contractors; (iv) issuance of payments to vendors without proper approval or without a contract; and (v) the non-retention of key tender documents. Additionally, all contract payments in JDE should include a field with the contract number as a reference number to enable verification of amounts paid vs. the contract amount, Government of the BVI Treasury Department PwC

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7.1 Recommendations and Suggested Next Steps

Recommendations for Immediate Action (continued)

12. Further investigation of certain contract awards : The scope of our Major Contracts examination was limited to contracts issued during 2011 and the procedures previously outlined. However, based on our initial findings we believe further investigation of the facts and circumstances surrounding the prior and current New Peebles Hospitals contracts should be conducted given the fact that $63 million has been spent on this project to-date, and $95 million in loans was raised by the BVIGOV to fund construction that is not yet completed five years after work commenced. Further investigation into the award of a contract to Electronic Solutions for the Supply and Installation of Closed Circuit Television directly by Cabinet should also be conducted. The Public Tenders Committee recommended the award of the contract to another bidder - Infinite Solutions, whose contract bid was at a lower cost than Electronic Solutions’ bid. Infinite Solutions’ overall evaluation score by the Committee was also the highest of the three bids received. It appears that Cabinet did not accept the Committee’s recommendation as the contract was awarded to Electronic Solutions. We also noted that the eventual $308, 682 amount included in the signed contract with Electronic Solutions was also $99,699 lower than this vendor’s bid amount of $408,381. An investigation into the nature and eventual recipients of approx. $950,494 and $988,630 in unallocated costs for the Construction of North South Alternate Road Infrastructure Network and the Anegada Road Infrastructure Development projects should also be conducted. 13. Accounting Support / Project Management Office: We understand an exercise to send personnel on accounting training and pursuit of accounting qualifications has been initiated by the Ministry of Finance. However, it is important to note that training and completion of accounting qualifications by Treasury personnel will not be sufficient to complete all of the remedial actions identified herein in a timely and high quality manner. The Ministry of Finance should consider engaging a small team of outsourced accounting support (in the form of a Project Management Office) to work alongside the Accountant General and Treasury personnel to assist with completion of the necessary improvement and “clean up” actions, and to transfer accounting knowledge. After this clean up is complete, including the introduction of commitment accounting and embedding of improved basic accounting and financial discipline in the department; then we suggest the transition to accrual based accounting in accordance with international standards should be fully implemented.

Government of the BVI Treasury Department PwC

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7.1 Recommendations and Suggested Next Steps

Recommendations for Short-Term Action (suggested completion within 3 to 6 months)

14. Compilation and Valuation of Fixed Assets: Additional resources (personnel time and funds to engage valuators), focus, co-ordination between the Ministry of Finance and other Ministries, leadership support, and priority should be assigned to complete the current initiative to identify, list, value, and account for the Fixed Assets (Land, Buildings etc) owned by the BVIGOV. 15. Procurement Unit Resources & document retention: An assessment of the resource needs and capabilities of the Procurement Unit to effectively manage the tendering of contracts in an expeditious but transparent manner should be conducted. This exercise is particularly needed as the number of Major Contract awards more than doubled from 16 in 2008 to 34 in 2010, and 27 in 2011. Additional resources and training of personnel should be afforded to this department and the increasing trend of bypassing this department and the public tendering process should be reversed. Additionally, the retention of all tendering documents throughout each step of the tendering process requires improvement including the use and retention of the Public Tenders Committee Evaluation form. A checklist of each required document throughout each stage of the tendering process should be utilized and signed off, and included on the front of the files retained for each publicly tendered contract. 16. Budgeting & Forecasting: Improved controls are required to monitor and report on variations from budgeted expenditure, both recurrent and capital, and to take action where unapproved expenditure is incurred. A move to zero based budgeting would also be of assistance, together with a more formal linkage of planned expenditure to policy outcomes and activities so that the success of public sector programmes can be planned and measured more effectively. Processes should also be introduced for more formal in-year monitoring of the budget plan. 17. Management reporting: Management information and analysis is very limited. Approval, as well as internal and external support, should be provided to the Accountant General for the implementation of the proposed Accounting & Reporting Unit. There is also a lack of commentary on the financial information produced (except for Auditor General comments in the audited final statements which are very late) and narrative should be included in the aforementioned quarterly accounting package suggested in the immediate actions. Finally, a reasonably well balanced financial scorecard should be put in place allowing senior management to track financial outcomes and link these to the key drivers of performance operationally. Risk management should also be introduced and linked to the balanced scorecard. 18. Transition to accrual based accounting: We appreciate that a previous recommendation was made to move, in the medium term, to accruals accounting and this is a key element of the goal of improved public sector financial management. Our view is that such a move at this stage would be inappropriate as the underlying financial processes, accounting knowledge and experience, and related controls are simply not strong enough to support the more complex system of accruals accounting in accordance with an international standard. An interim step might be to introduce some form of commitment accounting (such as the Restated Net Fiscal position presented herein), and use this as a tool to educate users together with external/outsourced accounting support, training, and knowledge sharing , to smooth the way for an eventual transition to accruals. A documented methodology or manual should also be put in place and training conducted before implementation of full or modified accrual based accounting to ensure consistency and propriety of all accounting entries. Government of the BVI Treasury Department PwC

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7.1 Recommendations and Suggested Next Steps

Recommendations for Medium-Term Action (suggested completion within 6 to 9 months)

19. Treasury Business Plan: The Treasury Department should prepare a documented business plan which sets out how it sees its vision for the management of finance both within the Department itself and also across the government organizations. The Plan should also include an implementation plan for achieving the vision with defined timelines. This Plan can be informed by the findings included in this report and the OPM report, including actions currently in progress. 20. Department Organizational Structure: Ministry of Finance support, focus, and resource assistance should be provided to the Accountant General for completion and approval of a revised organizational structure for the department including the proposed Internal Control/Compliance Unit, the provision of business analysts, and IT technical support staff within the department. Job descriptions should be completed and these should be used to inform the overall assessment of skills and training needs as well as used to direct staff in their roles and responsibilities, and support the introduction of a more rigorous approach to performance management. 21. Talent management: We strongly recommend that a Training Needs Analysis is completed (as we understand the Ministry has initiated an exercise to send personnel on training) as a matter of urgency to assess the developmental needs of Treasury staff to enable them to perform their jobs effectively and efficiently. Given that the unit is small there is also a need to ensure that job roles are flexible and inter-changeable to provide sufficient cover in the event of absence, sickness etc. We also suggest that a competency framework is developed so that the required competency sets are matched to the staff available. However, as this exercise is a longer-term solution to the Treasury departmentâ&#x20AC;&#x2122;s capability needs this assessment and pursuit of training should be conducted simultaneously with the introduction of an accounting support team / Project Management Office.

Government of the BVI Treasury Department PwC

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At a glance â&#x20AC;&#x201C; our views

Executive report

Supporting information

Appendices Glossary

Supporting information

Proforma Statement of Affairs

Compliance with Protocols for Effective Financial Management

Government of the BVI Treasury Department PwC

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At a glance – our views

8 Proforma Statement of Affairs

Executive report

Supporting information

Appendices Glossary

Fixed Assets are excluded from the Government’s Statement of Assets and Liabilities. Management should complete the compilation of a listing of the Government’s major fixed assets and obtain valuations for these assets. PwC Adjustments

BVI Gov Proforma Statement of Affairs Restatements to Reported Assets & Liabilities: 2008 to 2011 Dec-08 Proforma

US$

Dec-09 Proforma

Dec-10 Proforma

Dec-11 Proforma

Assets - as reported Total Assets per Financial Statements

85,124,378

49,164,877

44,282,816

57,462,309

Total Net Assets / Fund Reserves - As Reported

(19,191,023)

(21,493,867)

(23,220,828)

55,816,025

29,973,854

22,788,949

34,241,481

Add: Fixed Assets not reported

Add: Insurance Receivables reclassified Less: Insurance Payable reclassified Less: Inclusion of Public Debt Less: Inclusion of Year-End Commitments (Unrecorded Liabilities)

22,911,737

12,911,737

3,581,505

3,810,803

3,962,851

(3,581,505)

(3,810,803)

(3,962,851)

(5,386,117)

(72,008,782)

(134,251,314)

(126,713,341)

(113,473,556)

(1,958,564)

(902,492)

(2,562,425)

(7,411,139)

(1,786,274)

4,760,416

(92,268,215)

(93,575,080)

(75,517,751)

Less: Provision for Litigation Net Proforma Fiscal Position [(Deficit)/Surplus]

In FY2010, an exercise was initiated by the Ministry of Finance to identify all fixed assets of the Government. We held discussions with the Policy Analyst who was responsible for this exercise and it was NQ ! stated that staff from the Procurement Unit assisted with the preparation of the inventory of all assets for each government 12,911,737 @ department.

(29,308,353)

Proforma adjustments

Add: IPOC Investigation balance

5,386,117

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011

and PwC Analysis Note: Net fiscal position presented excludes Land, Buildings and other fixed assets owed by the Government Contingent Liabilites Loan Guarantees

Historically, the BVIGOV accounts have not included Fixed Asset balances in the Statement of Assets and Liabilities. This exclusion of Fixed Assets results in the Government’s assets being under-reported. The current value for Government’s fixed assets are unknown.

Liabilities - as reported Total Liabilities per Financial Statements

! Fixed Assets not reported

(28,191,949)

Government of the BVI Treasury Department PwC

(23,491,717)

(23,140,726)

(21,306,990)

As at the date of this report, a partial listing of fixed assets for various Government ministries, departments and agencies has been compiled, however no values have been ascribed to any of these assets. Significant additional resources would be required to complete this exercise.

@ IPOC Investigations This relates to a settlement received by the BVI Government subsequent to the conclusion of a court matter between the BVI Government and Bermuda Government against a third party company. The monies received for this settlement are held in cash and was inaccurately recorded in Other (Miscellaneous) Deposits which is a “liability” account. This resulted in an overstated of the Government’s liabilities and as such this adjustment represents the increase in Net Assets as a result of the removal of these amounts from liabilities.

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At a glance â&#x20AC;&#x201C; our views

8 Proforma Statement of Affairs

Executive report

Supporting information

Appendices Glossary

Insurance Receivable balances have been inaccurately recorded as a liability. These amounts should be reclassified to Government assets and should be monitored to ensure collection. PwC Adjustments

BVI Gov Proforma Statement of Affairs Restatements to Reported Assets & Liabilities: 2008 to 2011 Dec-08 Proforma

US$

Dec-09 Proforma

Dec-10 Proforma

Dec-11 Proforma

Assets - as reported Total Assets per Financial Statements

85,124,378

49,164,877

44,282,816

57,462,309

(29,308,353)

(19,191,023)

(21,493,867)

(23,220,828)

55,816,025

29,973,854

22,788,949

34,241,481

Liabilities - as reported Total Liabilities per Financial Statements Total Net Assets / Fund Reserves - As Reported Proforma adjustments Add: Fixed Assets not reported Add: IPOC Investigation balance Add: Insurance Receivables reclassified Less: Insurance Payable reclassified Less: Inclusion of Public Debt Less: Inclusion of Year-End Commitments (Unrecorded Liabilities)

22,911,737

12,911,737

3,581,505

3,810,803

3,962,851

Net Proforma Fiscal Position [(Deficit)/Surplus]

Other (Miscellaneous) Deposits include Insurance Receivable balances as a payable. Management represented that this account reflects insurance payments on behalf of employees by the BVIGOV that are recovered through salary deductions. However, this account was in a receivable balance at each year end examined, indicating that the Government did not recover these payments from all employees at year end. Management represented that the receivable position primarily relates to payments made on behalf of BVIHSA employees.

These receivables should be regularized immediately to avoid the continuous growth in this balance which could lead to amounts 5,386,117 # becoming uncollectible. The adjustments to these balance represents (5,386,117) # the reclassification of negative payable balances to a receivable. NQ

12,911,737

(3,581,505)

(3,810,803)

(3,962,851)

(72,008,782)

(134,251,314)

(126,713,341)

(113,473,556)

(1,958,564)

(902,492)

(2,562,425)

(7,411,139)

(1,786,274)

4,760,416

(92,268,215)

(93,575,080)

(75,517,751)

Less: Provision for Litigation

# Reclassification of Insurance Payables

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011

and PwC Analysis Note: Net fiscal position presented excludes Land, Buildings and other fixed assets owed by the Government Contingent Liabilites Loan Guarantees

(28,191,949)

Government of the BVI Treasury Department PwC

(23,491,717)

(23,140,726)

(21,306,990)

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At a glance – our views

8 Proforma Statement of Affairs

Executive report

Supporting information

Appendices Glossary

Public Debt, which is the single largest liability of the Government, has historically been excluded from the Government’s Statement of Assets and Liabilities PwC Adjustments

BVI Gov Proforma Statement of Affairs Restatements to Reported Assets & Liabilities: 2008 to 2011 Dec-08 Proforma

US$

Dec-09 Proforma

Dec-10 Proforma

Dec-11 Proforma

Assets - as reported Total Assets per Financial Statements

85,124,378

49,164,877

44,282,816

57,462,309

(29,308,353)

(19,191,023)

(21,493,867)

(23,220,828)

55,816,025

29,973,854

22,788,949

34,241,481

$ Inclusion of Public Debt The Government’s Public Debt has traditionally not been reported on the face of the annual Statements, however this balance is reflected as a note to the financials, i.e. it does not form part of the Statement of Assets and Liabilities.

22,911,737

12,911,737

3,581,505

3,810,803

3,962,851

5,386,117

(3,581,505)

(3,810,803)

(3,962,851)

(72,008,782)

(134,251,314)

(126,713,341)

(1,958,564)

(902,492)

(2,562,425)

4,760,416

(92,268,215)

(93,575,080)

Less: Provision for Litigation Net Proforma Fiscal Position [(Deficit)/Surplus]

The increase in Public Debt from $72 million at December 2008 to $134 million at December 2011 was primarily due to loans taken out in (113,473,556)$ FY2009 amounting to $60 million and $4.7 million for the New Peebles Hospital Project and Supply of Greenhouses respectively, offset (7,411,139) by loan repayments made between FY2010 and FY2011. (5,386,117)

(1,786,274)

(75,517,751)

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011

and PwC Analysis Note: Net fiscal position presented excludes Land, Buildings and other fixed assets owed by the Government Contingent Liabilites Loan Guarantees

(28,191,949)

Government of the BVI Treasury Department PwC

(23,491,717)

(23,140,726)

Public Debt represents significant cash inflows obtained by the Government from various lending agencies to fund specific projects. This Public Debt is a material contractual obligation of the Government and as such should be factored in determining the BVIGOV’s net fiscal position. Consequently, we have included the annual reported Public Debt in the Proforma Restated Statement of Assets and Liabilities.

It is important to note that the value of any fixed assets infrastructure that was acquired or constructed using this debt financing is currently unknown. The inclusion of such assets in the Proforma Statements will reduce the net fiscal deficits.

(21,306,990)

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Forensic Investigation into certain practices, policies, and internal controls at the College.

At a glance – our views

8 Proforma Statement of Affairs

Executive report

Supporting information

Appendices Glossary

There are a number of year-end commitments/liabilities which are excluded from the Government’s Statement of Assets and Liabilities PwC Adjustments

BVI Gov Proforma Statement of Affairs Restatements to Reported Assets & Liabilities: 2008 to 2011 Dec-08 Proforma

US$

Dec-09 Proforma

Dec-10 Proforma

Dec-11 Proforma

Assets - as reported Total Assets per Financial Statements

85,124,378

49,164,877

44,282,816

57,462,309

(29,308,353)

(19,191,023)

(21,493,867)

(23,220,828)

55,816,025

29,973,854

22,788,949

34,241,481

22,911,737

12,911,737

3,581,505

3,810,803

3,962,851

5,386,117

(3,581,505)

(3,810,803)

(3,962,851)

(72,008,782)

(134,251,314)

(126,713,341)

(1,958,564)

(902,492)

(2,562,425)

4,760,416

(92,268,215)

(93,575,080)

Less: Provision for Litigation Net Proforma Fiscal Position [(Deficit)/Surplus]

% Inclusion of Year-End Commitments (Unrecorded Liabilities) At the end of each financial year, all unpaid Purchase Orders (Pos) are closed off within the JD Edwards System and payments against these POs are not possible in the system. This process effectively removes the liabilities from the current financial period. All unpaid Purchase Orders are re-created in the subsequent financial period, with approval granted from the Ministry of Finance, and paid in that year. As a result the expense is recognized in the new financial period. However, although these POs are “closed” the commitment to the vendors and related financial obligations existed at year-end. Therefore, we have included this obligation in the Restated Statement of Affairs.

Note: This adjustment/inclusion may not capture all commitments not yet paid. We noted that December payroll was paid during the month of December, however, other (7,411,139) % expenses may need to be included in this balance if full (1,786,274) accrual accounting is implemented and a detailed expense (75,517,751) audit is conducted. (5,386,117)

(113,473,556)

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011

and PwC Analysis Note: Net fiscal position presented excludes Land, Buildings and other fixed assets owed by the Government Contingent Liabilites Loan Guarantees

(28,191,949)

Government of the BVI Treasury Department PwC

(23,491,717)

(23,140,726)

(21,306,990)

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22 March 2013 58

At a glance – our views

8 Proforma Statement of Affairs

Executive report

Supporting information

Appendices Glossary

Provisions for litigation and loan guarantees are excluded from the Government’s Statement of Assets and Liabilities. PwC Adjustments

BVI Gov Proforma Statement of Affairs Restatements to Reported Assets & Liabilities: 2008 to 2011 US$

Dec-08 Proforma

Dec-09 Proforma

Dec-10 Proforma

Dec-11 Proforma

Assets - as reported Total Assets per Financial Statements

85,124,378

49,164,877

44,282,816

57,462,309

Liabilities - as reported Total Liabilities per Financial Statements Total Net Assets / Fund Reserves - As Reported

(29,308,353)

(19,191,023)

(21,493,867)

(23,220,828)

55,816,025

29,973,854

22,788,949

34,241,481

Proforma adjustments Add: Fixed Assets not reported Add: IPOC Investigation balance Add: Insurance Receivables reclassified

22,911,737

12,911,737

3,581,505

3,810,803

3,962,851

5,386,117

^ Provision for litigation This adjustment relates to litigation proceedings brought against the Government. Based on a listing provided by the Attorney General’s Office, potential liabilities at the end of FY2011 totalled $1,786,274. These potential liabilities were determined based on whether judgements were already made against the BVIGOV in court matters and outstanding amounts were due at December 2011; or court matters where the Attorney General’s office expected judgement to be in favour of the claimant and an expected payout amount was provided.

& Contingent Liabilities The Government’s contingent liabilities include:

Loan guarantees which were provided to BVI Electricity Corporation, Development Bank of the VI and the Scholarship Trust Fund Board. The Government assists these statutory bodies with securing loans by Less: Inclusion of Year-End Commitments (Unrecorded Liabilities) (1,958,564) (902,492) (2,562,425) (7,411,139) standing as guarantor for the outstanding loan balances. Therefore, in Less: Provision for Litigation NQ NQ NQ (1,786,274) ^ the event these bodies are unable to meet their debt commitments, the Net Proforma Fiscal Position [(Deficit)/Surplus] 4,760,416 (92,268,215) (93,575,080) (75,517,751) Government will have to honour these liabilities. As such the Government needs to be continuously mindful of the outstanding loan Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and PwC Analysis balances for these bodies, their respective risk weightings per the Protocols for Effective Financial Management, and the entities ability to Note: Net fiscal position presented excludes Land, Buildings and other fixed assets owed by the Government service the debt. (3,581,505)

(3,810,803)

(3,962,851)

(5,386,117)

Less: Inclusion of Public Debt

(72,008,782)

(134,251,314)

(126,713,341)

(113,473,556)

Contingent Liabilites Loan Guarantees

(28,191,949)

(23,491,717)

(23,140,726)

(21,306,990)

Less: Insurance Payable reclassified

& As at the end of FY2011, loan guarantees totalled $21,306,990. These liabilities will need detailed accounting review to determine whether an accrual is required on the central government’s books. However, we have presented the balances for information purposes and consideration when assessing the BVIGOV’s net fiscal position.

Government of the BVI Treasury Department PwC

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9 Compliance with Protocols for Effective Financial Management

At a glance â&#x20AC;&#x201C; our views

Executive report

Supporting information

Appendices Glossary

Compliance with Protocols for Effective Financial Management

Government of the BVI Treasury Department PwC

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9 Compliance with Protocols for Effective Financial Management

At a glance – our views

Executive report

Supporting information

Appendices Glossary

The BVI Government has to continuously monitor its compliance to the Protocols for Effective Financial Management signed with the BVI’s Government The ratios as per the Protocols for Effective Financial Management are:

Government of the Virgin Islands Statement of Public Debt Loan Description

Lender

Dec-08

Dec-09

Dec-10

Dec-11

Fort Hill Water Project

European Development Fund

164,627

125,041

110,960

101,602

East End Water Project

European Development Fund

457,651

382,199

353,069

306,639

Hurricane Rehabilitation (Sea Defense)

Caribbean Development Bank

1,485,828

1,301,881

1,117,849

1,062,083

Port Development CDB**

Caribbean Development Bank

249,248 2,131,200

Port Development EIB**

European Investment Bank

Virgin Gorda/Tortola Water Supply

European Economic Community

Road Improvement Maintenance Project (RIMP)

992,191

1,516,976

1,705,373

1,623,080

1,572,527

Social Security Board

800,000

600,000

400,000

200,000

DBVI Capital Increase

European Investment Bank

600,000

474,855

337,273

237,100

Airport Feasibility Study

European Investment Bank

143,582

Social Security Board Scotia Bank European Investment Bank

2,607,500 1,218,760 2,380,866

2,309,500 941,974 1,105,678

2,011,500 671,142 776,723

1,713,500 389,731 264,510

12,412,237

18,962,980

16,889,949

14,380,379

Beef Island Airport Terminal

Runway

Caribbean Development Bank

Road Improvement and Infrastructure Development

Social Security Board

New Peebles Hospital

Social Security Board Social Security Board Banco Popular

Supply of Greenhouses Total

9,848,116

6,682,912

6,075,375

5,315,828

35,000,000 -

35,000,000 15,000,000 45,000,000

32,812,500 13,875,000 45,000,000

29,895,833 12,375,000 44,250,000

4,658,921

1,408,824

72,008,782

134,251,314

126,713,341

113,473,556

•

Net Debt: 80% (of annual revenue) maximum;

•

Debt Service: 10% (of annual revenue) maximum; and

•

Liquid Assets: 25% (of annual revenue) minimum

Net Debt: is defined as the total outstanding value of Government debt and risk-weighted government-guaranteed debt, minus liquid assets (We understand that only the Reserve Fund is considered to be liquid assets based on the definition of liquid assets below) Debt Service: is defined as the debt-interest and scheduled principal repayments of Government debt. This measure does not include the debt service of government-guaranteed statutory authority debts. Liquid Assets: are defined as the lowest total balance of unallocated liquid funds at the disposal of the Government of the Virgin Islands during the fiscal year. These funds should not be held against budgeted expenditure or liabilities of any form. We assessed GVI’s annual loan portfolio against the above criteria to determine whether the GVI is in compliance with the Statement of Agreed Borrowing Procedures as shown below. This assessment is illustrated on the following pages.

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

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9 Compliance with Protocols for Effective Financial Management

At a glance – our views

Executive report

Supporting information

Appendices Glossary

The Government has remained below the net debt threshold of 80% and debt service ratio of 10% but liquid assets are significantly lower than the 25% minimum requirement •

Net Debt: 80% (of annual revenue) maximum

•

Net Debt

Debt Service FY2008

Public Debt and Risk Weighted Gov't Guarantees Liquid Assets (Reserve Fund) Net Debt Annual Revenue Net Debt Ratio %

Debt Service: 10% (of annual revenue) maximum

FY2009

79,047,287 140,221,214 1,337,514 1,373,589 77,709,773 138,847,625 278,580,199 268,644,829 28% 52%

FY2010

132,490,993 119,055,290 1,399,791 7,446,751 131,091,202 111,608,539 272,960,807 287,479,526 48% 39%

Source: Ministry of Finance and PwC Analysis

The table above shows that the annual Net Debt, and its percentage to annual revenues. As shown above the Net Debt increased significantly in FY2009 due to two additional loans amounting to $60 million raised to fund the construction of the new hospital. The low Liquid Assets balance of the BVIGOV, may result in significant exposure to the BVIGOV as its liquid assets could hardly cover its loan portfolio. This exposure decreased over FY2010 and FY2011 as repayments were made to loans and the GVI’s liquid assets improved. We were not provided with details of the current portion of the loan balances. However, the Net Debt of GVI as a percentage of annual revenues , over the Review Period showed that the Government has remained below its maximum threshold of 80% of annual revenue, with FY2009 recording the highest ratio of 52% as a result of the sizeable loans taken out in that year.

Government of the BVI Treasury Department PwC

FY2008

FY2011

Annual Revenue Annual Debt Service Debt Service as a % of Revenues

FY2009

FY2010

FY2011

278,580,199 268,644,829 272,960,807 287,479,526 3,499,990 3,892,400 7,699,592 13,239,785 1% 1% 3% 5%

Source: Ministry of Finance and PwC Analysis

As shown in the table above, GVI has kept within their 10% maximum debt service ratio over the Review Period. •

Liquid Assets: 25% minimum

Liquid Assets FY2008

FY2009

FY2010

FY2011

Annual Expenditure 248,352,177 253,665,085 256,396,051 251,006,071 Liquid Assets (Reserve Fund) 1,337,514 1,373,589 1,399,791 7,446,751 Liquid Assets as a % of Annual Expenditure 1% 1% 1% 3% Source: Ministry of Finance and PwC Analysis

As shown in the table above, the GVI has not maintained their 25% minimum requirement of liquid assets as a percentage of recurrent expenditure for the Review Period. As a result the BVIGOV is not in compliance with the Protocols for Effective Financial Management executed with the UK Government in 2012. We were not provided with details of the terms and conditions of the BVIGOV’s loans to determine whether any loan covenants were breached or whether any reporting requirements exist. A detailed review of the Government’s debt portfolio and detailed terms was not part of our scope.

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9 Compliance with Protocols for Effective Financial Management

At a glance – our views

Executive report

Supporting information

Appendices Glossary

Public debt as at 31 December 2011 is approximately twice the value of reported assets (excluding fixed assets values) and a clear debt reduction plan is required to minimize this fiscal exposure Management of Public Debt is of critical importance and the Government is limited in the amount of funds it can generate through loans. The table below illustrates the annual reported public debt of the Government as a percentage of its reported total assets: Debt Ratio FY2008 FY2009 FY2010 FY2011 Public Debt 72,008,782 134,251,314 126,713,341 113,473,556 Total Assets (excluding Fixed Assets) 85,124,378 49,164,877 44,282,816 57,462,309 Debt Ratio 0.8 2.7 2.9 2.0 Source: Ministry of Finance and PwC Analysis

The debt ratio indicates the proportion of debt the Government has relative to its assets (excluding fixed assets). As shown in the table above, in FY2008 the debt ratio was in a positive position as the Government’s total assets (excluding fixed assets) covered its debt liabilities. However the debt ratio deteriorated significantly from FY2008 to FY2009 where the Government’s total assets cannot cover its debt-load as the Government has taken on more debt (primarily to fund construction of the new hospital) than it is currently able to sufficiently cover. The debt ratio has not shown any significant improvement as at the end of FY2011. Government needs to manage its debt portfolio going forward and seek to minimize its exposure. This exposure is particularly heightened as the Government is also a guarantor for a number of loans issued to other state agencies.

Government of the BVI Treasury Department PwC

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At a glance â&#x20AC;&#x201C; our views

Appendices

Government of the BVI Treasury Department PwC

Executive report

Supporting information

Appendices Glossary

Appendices

Reported Assets & Liabilities

Reported Income and Expenditure

Recurrent Revenue Analysis

Recurrent Expenditure Analysis

FY2011 Abstract Statement

Year-end Commitments / Unrecorded Liabilities

Litigation Listing

Major Contracts awarded in FY2011

Listing of Contract Payments

Outstanding Audit Requests

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

Cash and Investments are monitored and managed by the Government on a real time basis online and via monthly review and reconciliation of bank statements BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

The adjacent table illustrates the reported financial position of the Government of the British Virgin Islands (GBVI) for the past four (4) years ended 31 December 2008 to 31 December 2011. Based on discussions with management and our review of the annual audited and unaudited accounts (including the Auditor General’s and ! Accountant General’s Report comments), we have summarized our understanding of the individual financial statement components as follows: Assets

! Cash and Cash Equivalents Cash and cash equivalents include operating accounts, money market accounts and certificates of deposits held at both local and overseas Banks namely Banco Popular, First Bank, National Bank of the Virgin Islands, First Caribbean Bank, Scotia Bank and Crown Agents in London. Operating and money market accounts are used for Government’s operational and capital expenditure while certificates of deposit are investments, approved by the Finance Minister, to attract higher interest income. Based on a cash and investment analysis provided by management, we noted that each facility is monitored and managed based on the Bank with which the facility is held and Fund to which it is allocated. However, there is no reconciliation of cash and Fund balances for several Funds, including the Development Fund in particular, therefore several Reported Fund balances were incorrect.

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

Investment facilities are monitored by the Treasury Department for accuracy via monthly reconciliations and via year end confirmations circulated to all financial institutions Assets

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

85,124,378

49,164,877

44,282,816

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

73,032,163 65,364,007 62,202,762 (37,265,266) (56,311,797) (60,346,875) 4,382,776 4,384,325 4,067,355 5,557,414 5,593,489 5,619,691 200,000 200,000 200,000 1,669,213 2,477,357 2,757,149 640,171 666,918 689,312 100,000 100,000 100,000 100,000 100,000 100,000 6,799,555 6,799,555 6,799,555 600,000 600,000 600,000

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

Dec-11 Unaudited

! Cash and Cash Equivalents

Each cash and investment facility is allocated to one of the following four (4) Funds: 15,669,693 • Consolidated Fund; 35,882,286 • Development Fund; 51,551,979 ! • Reserve Fund; and the 1,652,788 • Contingency Fund. 3,833,185 There are specific bank statements for each of these funds however 424,357 5,910,330 there are no bank statements for the other seven Funds presented in 57,462,309 the annual accounts. These above funds are discussed within the “Fund Balances” section. Comfort is gained by the Treasury department on the accuracy of the (47,152) Cash balances through monthly bank statement reconciliations and 23,267,980 23,220,828 reviews performed by the Treasury Department, including bank confirmations which are circulated to all financial institutions during 66,828,117 the annual year end audit. Investment accounts are monitored (56,050,117) 3,669,312 throughout the year and also confirmed during the annual year end 7,446,751 audit. The Treasury Department also has online access to accounts 238,470 3,794,308 held in Banco Popular, First Bank, First Caribbean Bank and Scotia 715,086 Bank to monitor activity and bank balances real time. 100,000 100,000 Review of Bank Reconciliations 6,799,555 600,000 Our scope included a review of Bank Statements and Bank Reconciliations for the period 31 December 2010 to 31 December 2011 34,241,481 for irregular activity and comparison to cash balances reported by the 57,462,309 BVI Treasury. For completeness, as an extension of our scope, we also reviewed Bank Reconciliations at December 2008 and December 2009.

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

Management prepares monthly Bank Reconciliations on a timely basis thereby minimizing the occurrence of errors and irregularities with reported cash balances Assets

Analysis of Cash at Banks and Investments Dec-08

Dec-09

Dec-10

Dec-11

Cash

! Cash and Cash Equivalents Review of Bank Reconciliations Findings

Total Operating/Checking/Current a/c

12,764,261

7,485,558

2,518,715

15,159,640

Crown Agent - Current Account London Office - Tennant Escrow HSBC - London Office HSBC - Trust Account Subtotal - Cash

339,107 63,916 341,918 79,044 13,588,245

406,730 71,900 760,107 3,743 8,728,037

375,612 67,978 438,386 3,538 3,404,229

370,916 47,374 88,200 3,563 15,669,693

There are 13 accounts held at 4 banks for the Operating/Checking/Current accounts.

Investments Total Certificates of Deposit Crown Agent - Fixed Deposit Subtotal - Investments

54,473,321 1,305,000 55,778,321

33,707,038 1,467,000 35,174,038

33,754,197 1,386,000 35,140,197

34,426,853 1,395,000 35,882,286

Total

69,366,566

43,902,076

38,544,426

51,551,980

b) Proper segregation of duties were applied as separate individuals were responsible for preparing and reviewing bank reconciliations. It was also noted that all Bank Reconciliations were signed as prepared and reviewed.

Source: Management Reports, PwC Analysis

a) Monthly Bank Reconciliations were prepared for all operating accounts for the periods requested

c) Bank Reconciliations were prepared by adjusting both the General The above table presents a summary of our analysis of all cash and Ledger Balance and Bank Account Balance to arrive at an adjusted investment balances that aggregates to the Cash and Cash Equivalents reconciled balance. in the Reported Statement of Assets and Liabilities. d) Based on a comparison of the dates the respective: Our examination focused on the operating account bank reconciliations, as such our reconciliation review was performed on all i. Bank Statement is received; cash accounts that make up the Total ii. Bank Reconciliation is prepared; and Operating/Checking/Current account (“operating accounts”) iii. Bank Reconciliation is reviewed. highlighted in the table above. We also reviewed bank statements and confirmations for all investment accounts for accuracy. It was noted that Bank Statements are generally received within a We obtained Bank Reconciliations for all operating cash accounts, for month after the month-end, and Bank Reconciliations are prepared the periods noted within our scope, and reviewed them for the and reviewed within a month after receiving the Bank Statement. following: e) Each reconciling item within the Bank Reconciliations were • Timely preparation and review; supported by listings detailing the transactions that make up their respective balances. • Proper maintenance of listings to support reconciling items; • Timely clearance of outstanding reconciling items; and • Timelyofupdate General Ledger accounts. Confidential Information for the sole benefit and use of PwC’s Client. 22 March 2013 Government the BVIof Treasury Department PwC

Final

At a glance – our views

1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

Long outstanding items identified within the Bank Reconciliations should be investigated and appropriately cleared Analysis of Cash at Banks and Investments Dec-08

Dec-09

Dec-10

Dec-11

Cash Total Operating/Checking/Current a/c

12,764,261

7,485,558

2,518,715

15,159,640

Crown Agent - Current Account London Office - Tennant Escrow HSBC - London Office HSBC - Trust Account Subtotal - Cash

339,107 63,916 341,918 79,044 13,588,245

406,730 71,900 760,107 3,743 8,728,037

375,612 67,978 438,386 3,538 3,404,229

370,916 47,374 88,200 3,563 15,669,693

Investments Total Certificates of Deposit Crown Agent - Fixed Deposit Subtotal - Investments

54,473,321 1,305,000 55,778,321

33,707,038 1,467,000 35,174,038

33,754,197 1,386,000 35,140,197

34,426,853 1,395,000 35,882,286

Total

69,366,566

43,902,076

38,544,426

51,551,980

Source: Management Reports, PwC Analysis

Assets ! Cash and Cash Equivalents Review of Bank Reconciliations Findings (Continued) f) We analyzed each reconciling item within each Bank Reconciliation and noted that the reconciling items generally seen as adjustments to the General Ledger and Bank Statement were as follows: General Ledger Adjustments

Bank Statement Adjustments

Deposits in Bank not recorded

Deposits in General Ledger not cleared in Bank

Payments in Bank not recorded

Un-presented cheques

g) The detailed listings for each reconciling item were analyzed and it was generally noted that transactions that make up these reconciling items were up-to-date, indicating that reconciling transactions are cleared within a timely basis. There were however some accounts where reconciling transactions were long outstanding and should be immediately investigated and appropriately cleared. These accounts were: Bank Reconciliation

Description

Amount

Banco Operating a/c – G/L#1-11200

This General Ledger account includes prior years’ unpresented cheques dating back to 2002

33,172.21

Banco Checking (Capital) a/c – G/L#2-11317

This General Ledger account includes prior years’ unpresented cheques dating back to 1997

494,634.19

First Bank Payroll a/c – G/L#1-11275

This General Ledger account includes prior years’ unpresented cheques dating back to 1999

21,982.52

Source: Bank Reconciliations and PwC Analysis

The untimely clearance of long outstanding items can result in the mis-statement of General Ledger accounts and not present a true representation of monies available to the Government. Also the longer transactions/items remain un-cleared, the more difficult it is to clear as its original purpose becomes uncertain over time. This non-clearance of outstanding items in the General Ledger has likely contributed to the incorrect Fund balances.

Source: Bank Reconciliations and PwC Analysis

Government of the BVI Treasury Department PwC

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Executive report

Supporting information

Appendices Glossary

Treasury Management and the Auditor General represented that aged balances exist in the Other Advances account which should be investigated and appropriately cleared Assets

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

@ Public Officers Advances

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

These advances relate to loans issued to public servants for medical purposes, vehicle purchases or special circumstances. Employees are required to sign a loan agreement with the Government for each loan issued. We obtained and reviewed a sample of loan agreements and compared these agreements back to the general ledger to confirm the accuracy of loan balances included in the financial statements. We noted that the employee advances loan agreements selected were properly authorised and reported in the general ledger. All loan agreements are signed by either the Financial Secretary or Deputy Financial Secretary (on behalf of the Government); the Borrower; Guarantor of the Borrower; and witnesses for both the Government and Borrower. These advances are repaid through automatic salary deductions and are monitored and managed by the Debt Management Accountant. Repayment amounts noted in the loan agreements were vouched to the general ledger for the selected employees, and repayments via salary deductions were observed for all the loan files reviewed. Also included under Public Officers Advances are short term advances in the form of imprests to facilitate public officers and elected representatives travelling abroad on official business.

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

A detailed review of the Other Advances account is required to clean up and adjust old balances that may not represent collectible assets Assets

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

# Other Advances These advances relate to miscellaneous advances which are issued by the Financial Secretary(FS), which are accompanied with instructions on how they are to be cleared (usually through a supplementary appropriation or upon receipt of loan funds). Other advances also arose from various operational anomalies such as

# returned cheques that were received from members of the general public. These cheques will be re-issued from this account.

Management and the Auditor General represented that there are a number of aged balances included in this account which should be investigated and appropriate action should be taken to have them cleared. A detailed review of these accounts was not included in our scope. We recommend such a review to clean up and adjust old balances that may not represent a proper realizable asset of the BVIGOV.

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

Postmaster Deposits are not reconciled by the Post Office regularly which can result in errors and irregularities going undetected for long periods Assets

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

$ Current Accounts

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

Fund Balances - As Reported Consolidated Fund Development Fund Emergency/Disaster Fund Reserve Fund Contingency Fund Transportation Improvement Network Fund Car Loan Revolving Fund Debt Service Fund Loan Revolving Fund Pension Fund Repairs and Renewal

Liabilities

% Postmaster Deposits

Liabilities Deposits - As Reported Postmaster Deposits Other Deposits Total Liabilities - As Reported

Current accounts represent the net amount due from and owing to other Governments and Administrations. Included in this balance are pension allocations held for retired civil servants with service in the Virgin Islands as well as other territories; and balances for the Foreign and Commonwealth Office (FCO), the Overseas Development Administration (ODA) and the British Development Division.

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

This account represents money orders purchased on behalf of other

% Caribbean countries, United States and United Kingdom post offices. Payments to these post offices are made annually. The Post Office currently uses SWIFT to capture all transactions and on a weekly basis, a report is sent to the Treasury Department to update the Postmaster Deposits in JDE. The Auditor General represented that the balance within this account is not being regularly reconciled by the Post Office. We also held discussions with the Postmaster General who confirmed that no reconciliation is performed between the SWIFT system and JDE. This can result in errors and irregularities in this account going undetected for a long period. A detailed review of these accounts was not included in our scope. We recommend a system of reconciliation be implemented with the Post Office to ensure that balances within this account are accurately reported. The long outstanding balances within this account should also be investigated and cleared.

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

Other Deposits include a number of unclaimed deposits which require legislative direction or FS instructions to investigate and clear these amounts Liabilities

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

Section 34 (1) of the Public Management Finance Act 2004 defines a “Deposit” as any monies, not being raised or received for the purpose of the Government, which has been deposited with the Accountant General or with any other public officer authorised by the Accountant General. The Act further provides that “Deposits” shall not form a part of the Consolidated Fund and shall not be applied for a purpose of Government. Interest derived from investment of funds in the Deposit Account can, however, be paid into the Consolidated Fund and applied for Government purposes.

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

^ Other (Miscellaneous) Deposits

We obtained and analyzed a detailed G/L listing of this account balance and noted that deposits into this account include but are not limited to monies collected by the Customs Department to secure Import Duties; Immigration Department for immigrant workers bonds; Magistrate’s Court for child maintenance; and Public Works Department for tender submissions etc. These all constitute legitimate deposit liabilities as the monies are not collected for use by the Government but are usually returned to the payer or passed on to a third party. However, our analysis indicated, and the Auditor General confirmed in the footnotes to the audited statements, that there are several items in the Deposit Fund that do not qualify as “Deposits” as defined in the Act. According to the Accountant General and Auditor General, deposits also include a number of accounts with unspent balances which were transferred from the Consolidated Fund to deposit accounts so that the funds continue to be available for spending in subsequent years.

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

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Executive report

Supporting information

Appendices Glossary

Other Deposits include a number of large balances which should be investigated and appropriately cleared Liabilities

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

The existing legislation (Public Finance Management Act) makes no provision for dealing with inactive/abandoned deposits, therefore, an amendment is required either to the Public Finance Management Act or subsidiary legislation (or instruction from the FS) to state how unclaimed deposits are to be treated.

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

^ Other (Miscellaneous) Deposits

Based on our analysis and Treasury Management representations, it was also noted that in FY2011 this account included the following balances which should be investigated (if required) and appropriately cleared.

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

Account

Balance

Unallocated Deposits

(1,258,850)

IPOC Investigations

(12,911,737)

Insurance Payable

5,386,117

Accounts Payable (Capital Fund)

(1,351,427)

Other (Miscellaneous) Deposits

(13,132,083)

Total

(23,267,980)

a) Unallocated deposits at Bank amounting to $1.3 million. This balance relates to deposits made directly to the Bank with no supporting documentation. Management represented that this occurs when revenue collecting offices/departments deposit monies into the bank but do not report these deposits nor its purpose to the BVI Treasury Department.

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

Other Deposits also include a $12.9 million received from an IPOC dispute settlement which should not be accounted for as a liability Liabilities

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

^ Other (Miscellaneous) Deposits a) The amounts within this account should be immediately investigated and appropriately cleared. If there is continued difficulty in sourcing the supporting documentation for transactions, these transactions should be written to the Income Statement. A control process should also be implemented to cease or strengthen controls around this practice as cash could be misappropriated at the revenue collecting agencies. b) A balance of $12.9 million under the account “IPOC Investigations” which relates to a settlement received by the BVI Government subsequent to the conclusion of a court matter between the BVI Government and Bermuda Government against a third party company. This balance is currently held in two Certificates of Deposit in the Consolidated Fund. In the 2012 Budget it was noted that $9.7 million of this balance should be transferred to the Development Fund, however as at the date of this report that transfer has not been made. c) Deposits also include Insurance Payable amounting to $(5.4) million. Management represented that this account is used to make insurance payments on behalf of employees through salary deductions. However, this account was in a receivable position at the end of FY2011, indicating that more money was paid towards insurance than the Government had recovered from the employees at year-end. Management represented that this is a result of Hospital staff that have not been making payments towards insurance and the Government is currently making payments on their behalf.

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

The Accounts Payable (Capital Fund) should be reconciled to departmental capital income and expenditure accounts on a regular basis and reviewed by an authority within the Treasury Department Liabilities

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

c) These receivables should be regularized immediately to avoid the continuous growth in this balance which could lead to amounts becoming uncollectible.

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

^ Other (Miscellaneous) Deposits

d) Accounts Payable (Capital Fund) amounted to $1.4 million. Management represented that this account represents monies owing to Government departments to fund their respective capital expenditure. Each department is expected to maintain a spreadsheet itemizing their capital income and expenditure to monitor and manage the use of funds they receive. Management represented that these spreadsheets were historically reviewed by the Treasury Department but this review no longer occurs. These departmental capital income and expenditure statements should be reconciled to this account on a regularly basis and reviewed by an authority within the Treasury Department to ensure the prudent and transparent use of Government Funds and to detect any errors or irregularities within this account.

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

The reported Consolidated Fund balance is incorrect largely because it includes budgeted amounts that are not reconciled and “trued up” for actual inflows, outflows and supplementary appropriation expenditure Fund Balances

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

The Consolidated Fund was established under the Virgin Island Constitution Order 1976 (section 59). The Fund is comprised of all revenue and other monies received, raised or borrowed on behalf of the Government. Authority for withdrawal from this Fund must be in accordance with the Appropriation Ordinance and Supplementary Estimates.

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

The Consolidated Fund essentially supports the operating activity of the Government as monies received into the Fund are primarily used for expenditure on recurrent activity.

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

& Consolidated Fund

This Fund also supports other financing obligations, approved by the House of Assembly, through contributions or transfers to the other funds such as the Development Fund (used for capital expenditure). The Consolidated Fund comprises a number of cash and investment (bank) accounts tied to the operations and activity of this Fund. However, the reported balance in this Fund does not represent the actual cash balances available for expenditure, at any point in time, due to the recording of budgeted balances in this Fund that are not adjusted to present actual balances.

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

The reported Development Fund balance of ($56.1) million is incorrect and requires urgent investigation and reconciliation to the actual cash balance of $12.7 million at December 2011 Fund Balances

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

* Development Fund Capital projects undertaken by the Government are funded through the Development Fund. The Development Fund is legislated by the Public Finance Management Act 2004. The purpose of this Fund is to provide the necessary development for the economic and social advancement of the BVI. The Fund consists of: a. Money appropriated by way of supply vote; and

b. Money received by way of grants or loan i.

for a specific development scheme, project or programme; or

ii.

generally for the purpose of development.

Revenue recorded in the Development Fund primarily include transfers from the Consolidated Fund, loans from commercial banks and lending agencies, grants and other miscellaneous sources.

* There are specific cash and investment accounts tied to this Fund however, due to budgeted amounts included in this account, the balance in this Fund does not reflect the actual cash balances and there is no reconciliation from the reported G/L or book balance presented of $(56.1 million) to the actual cash available of $12.7 million.

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

There are specific bank facilities tied to the Emergency Disaster Fund and the Reserve Fund. Historically the Reserve Fund did not reflect actual cash available, however, this was rectified at the end of December 2011 Fund Balances

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

The Disaster Management Act 2004, which came into force on 15 May 2004, stipulates that the Fund is to be used towards recovery efforts and the adoption and promotion of preventative measures before, during and after a disaster emergency.

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

This Fund has specific cash and investment accounts tied to its operations, however, the $3.7 million balance actually represents budgeted amounts but no actual cash transfers to this fund occurred.

) Reserve Fund

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

( Emergency Disaster Fund

( )

The initial framework for the Reserve Fund was introduced in the 2002 annual budget estimates and subsequently legislated in sections 15 and 16 of the Public Finance Management Act 2004. The intent of this Fund was to create a separate and distinct account into which resources could be appropriated outside of the Consolidated Fund, for use in the event the Government experiences financial difficulties. This Fund is expected to assist the Government in achieving continued long term stability. There are specific cash and investment accounts tied to this Fund however due to the aforementioned reporting of budgeted amounts in these Funds and the lack of reconciliation and a “true up” to actual cash balances, the reported balance in this Fund has been incorrect historically. However, at December 2011, management ensured that the Reserve Fund balance reflected the balance in the bank account of $7.4 million.

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

As there are no bank facilities tied to either the Contingency Fund or Transportation Improvement Network Fund, expenditure related to the intended purpose of these Funds are effected by the Consolidated Fund. Fund Balances

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

_ Contingency Fund Section 5 of the Public Finance Management Act 2004 provides for a Contingency Fund to be financed by money appropriated from the Consolidated Fund. This Fund is intended to meet any urgent and unforeseen need for expenditure for which no other provision exists.

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

There are currently no cash and/or investment accounts tied to this Fund. The reported balance in this Fund solely relates to amounts budgeted or appropriated for transfer to this Fund but there are no cash balances for this Fund.

+ Transportation Improvement Network Fund

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

This Fund was established under the Transportation Network (Land, Sea and Air) Improvement Fund Act 1992 and came into force on 1 October 1992. It is intended to be used for the purpose of rebuilding and development of the major transportation network infrastructure in BVI. The Fund’s revenue should be generated from a fossil fuel surcharge collected by the Customs Department.

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

_ +

There are currently no cash and/or investment accounts or cash balances tied to this Fund. The balance in this Fund solely relates to prior budgeted or appropriated amounts.

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

The objectives of the Car Loan Revolving Fund, Debt Service Fund and Loan Revolving Fund are effected by the Consolidated Fund and there are no actual cash balances in these Funds. Fund Balances

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

- Car Loan Revolving Fund

Dec-11 Unaudited

This Fund should reflect interest accrued on the advances issued to public servants for purchasing personal vehicles. Loan advances and repayment activity is reflected under “Public Officers Advances” and only interest is to be paid into the Car Loan Revolving Fund. However, there were no cash and/or investment accounts or balances related to this Fund for the period reviewed. The cash balance at each of the years presented was actually zero.

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

= Debt Service Fund This Fund was introduced to secure a separate provision for repayment of Public Debt. This Fund received an initial contribution or transfer of $100,000 from the Consolidated Fund in 2002 and has since remained inactive. Repayments of loans in the Public Debt continue to be made directly from the Consolidated Fund. There were no cash and/or investment accounts tied to this Fund for the period reviewed.

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

{ Loan Revolving Fund = {

This Fund was set up to replace the system of providing loan assistance (advances) to public service employees from the Consolidated Fund. An initial amount of $100,000 was allocated in 2002 (but not transferred to any specific bank account) to establish this Fund. The balance has not changed and there has been no activity since that time. Loans to public servants are reflected under “Public Officers Advances”. There were no cash and/or investment accounts or balances related to this Fund for the period reviewed.

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1 Reported Assets & Liabilities

Executive report

Supporting information

Appendices Glossary

The objectives of the Pension Fund and Repairs and Renewal Fund are effected by the Consolidated Fund and there are no actual cash balances in these Funds. Fund Balances

BVI Government Statement of Assets & Liabilities - As Reported US$

Dec-08 Audited

Dec-09 Audited

Dec-10 Audited

Dec-11 Unaudited

} Pension Fund The Pension Fund was established in 2002 to provide a separate account from which Government pensions would eventually be paid. The intent of this Fund was to make pension provisions for the Public Service. These amounts were to be reviewed by actuarial experts, and a revised pension system was to be implemented to manage this Fund. This proposed new system has not been developed and pension payments have continued to be made from the Consolidated Fund.

Assets Cash and Cash Equivalents - As Reported Cash at Banks Certificates of Deposits and Savings Advances and Current Accounts - Reported Public Officers Advances Other Advances Current Accounts

Total Assets - As Reported

13,588,245 55,778,321 69,366,566

8,728,037 35,174,038 43,902,075

3,404,229 35,140,197 38,544,426

15,669,693 35,882,286 51,551,979

1,583,420 13,890,818 283,574 15,757,812

1,431,055 3,654,462 177,285 5,262,802

1,583,275 3,768,161 386,954 5,738,390

1,652,788 3,833,185 424,357 5,910,330

85,124,378

49,164,877

44,282,816

57,462,309

220,712 29,087,641 29,308,353

(6,963) 19,197,986 19,191,023

(29,288) 21,523,155 21,493,867

(47,152) 23,267,980 23,220,828

There were no actual cash and/or investment accounts tied to this Fund for the periods reviewed. The reported balance in this Fund solely relates to a prior year appropriation but no funds were actually transferred (in cash) to this Fund.

Total Fund Balances - As Reported

55,816,025

29,973,853

22,788,948

34,241,481

Total Liabilities and Fund Balances - As Reported

85,124,378

49,164,877

44,282,816

57,462,309

| Repairs and Renewal Fund The establishment of this Fund was to meet expenditure for the repair or renewal of public stores or other Government property. There has been no activity in this Fund for the last four (4) years. There are currently no cash and/or investment accounts or cash balances tied to this Fund. } |

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

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2 Reported Income and Expenditure

At a glance â&#x20AC;&#x201C; our views

Executive report

Supporting information

Appendices Glossary

Reported Income and Expenditure

Government of the BVI Treasury Department PwC

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2 Reported Income and Expenditure

Executive report

Supporting information

Appendices Glossary

BVIGOV has generated positive operating surpluses in each of the last four years primarily attributed to significant revenues collected through the Financial Services Commission and recurrent expenditure remaining flat BVI Government Annual Financial Statements Statement of Income & Expenditure For the four (4) years ended 31 December 2008 to 31 December 2011

US$ Recurrent Activity Recurrent Revenue Less: Recurrent Expenditure Operating Surplus - As Reported Contributions to Other Funds Development Fund Emergency/Disaster Fund Pension Fund Reserve Fund Contingency Fund Repairs and Renewal Fund Total Fund Contributions - As Reported Consolidated Fund Surplus/(Deficit)

Dec-08 Actual (Audited)

Dec-09 Actual (Audited)

Dec-10 Actual (Audited)

Dec-11 Actual (Unaudited)

278,580,199 268,644,829 272,960,807 (248,352,177) (253,665,085) (256,396,051) 30,228,022 14,979,744 16,564,756

287,479,526 (251,006,071) 36,473,455

(35,342,879) (1,000,000) (2,200,000) (1,000,000) (200,000) (39,742,879)

(22,647,900) (22,647,900)

(19,726,000) (19,726,000)

(30,068,000) (1,780,100) (31,848,100)

(9,514,857)

(7,668,156)

(3,161,244)

4,625,355

@ Recurrent Revenues Recurrent revenues have shown increases from FY2009 to FY2011 which was primarily attributed to increases in the Government’s core revenue earner, Financial Service Commission fees. The fees collected based on registration of companies, issuance of banking licences etc, have increased from $166.8 million in FY2009 to $182.2 million in FY2011.

# Recurrent Expenditure Recurrent expenditure have shown increases from FY2008 to FY2010 with a reduction noted in FY2011. These expenditure movements were primarily as result of movements in the Water and Sewerage expenditure which showed steady increases of $3.1 million and $3.7 million in FY2009 and FY2010 respectively. In FY2011, a reduction in Water and Sewerage expenditure of $6.7 million was observed. The movements in the Water and Sewerage account is mainly due to movement in the cost of purchase of desalinated water.

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

! Operating Surplus The GVI has maintained positive operating surpluses over the four year Review Period with FY2011 recording the highest surplus of approx. $36.5 million while FY2009 recorded the lowest surplus of approx. $15.0 million. FY2009 revenues were also lowest at $268.6 million over the last four years after the global economic crisis in 2008.

Government of the BVI Treasury Department PwC

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3 Recurrent Revenue Analysis

Executive report

Supporting information

Appendices Glossary

The average annual recurrent revenue of the Government was $277 million over the last four years, and was primarily generated from Financial Services fees, Taxes, Import Duties and other Fees such as Stamp Duty Revenue streams from the various sources are relatively flat year on year with the exception of:

BVI Government Recurrent Revenue Analysis For the four (4) years ended 31 December 2008 to 31 December 2011 Sources of Revenue Financial Services Taxes Import Duties Fees Licences Sales Other Govt Revenue Fines and Forfeitures Investment Income Rental Royalties Total Recurrent Revenue

FY08 % Audited of Total 164,896,132 43,713,430 32,959,268 18,047,871 9,690,615 6,265,459 1,028,097 732,211 699,381 475,614 72,121 278,580,199

59.2% 15.7% 11.8% 6.5% 3.5% 2.2% 0.4% 0.3% 0.3% 0.2% 0.0%

FY09 % Audited of Total 166,845,763 43,046,070 29,318,542 11,825,652 9,347,460 5,698,911 769,634 419,520 575,574 720,389 77,317 268,644,829

62.1% 16.0% 10.9% 4.4% 3.5% 2.1% 0.3% 0.2% 0.2% 0.3% 0.0%

FY10 % Audited of Total 167,991,753 44,452,842 29,318,434 11,216,818 9,377,022 5,876,436 3,400,945 382,668 321,102 596,281 26,507 272,960,807

61.5% 16.3% 10.7% 4.1% 3.4% 2.2% 1.2% 0.1% 0.1% 0.2% 0.0%

FY11 % Unaudited of Total 182,183,694 45,579,776 29,094,301 12,983,539 9,290,175 6,261,692 306,659 256,325 381,465 1,141,893 7 287,479,526

63.4% 15.9% 10.1% 4.5% 3.2% 2.2% 0.1% 0.1% 0.1% 0.4% 0.0%

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

The table above represents an analysis of the composition of the Government’s Recurrent Revenue over the Review Period.

Financial Services Income

•

This income is earned through the Financial Services Commission (FSC) which is a statutory body responsible for registering companies and issuing banking licences etc. The FSC collects fees, charges and penalties payable under the Financial Services Commission Act 2001. The monies collected by the FSC are paid into a joint trust account and transferred to the Government’s Consolidated Fund on a quarterly basis.

•

Financial Services income increased by $14.3 million in FY2011 as a result of 64,729 companies registering in FY2011 as opposed to the prior year where 59,624 companies were registered.

The primary revenue contributors to the Government’s annual revenues comes from Financial Services, Taxes, Import Duties and Fees. Financial services has historically accounted for 59.2% to 63.4% of total revenues. The sustainability of FSC fees are critical to the GVI as these fees are the main revenue generator.

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At a glance â&#x20AC;&#x201C; our views

Executive report

Supporting information

Appendices Glossary

Recurrent revenue streams remained relatively flat over the Review Period with the exception of notable movements in Financial Services Income, Import Duties and Fees @

Import Duties Import duties declined by $3.6 million from FY2008 to FY2009 primarily as a result of a decrease in import duties charged on non-alcoholic beverages, which decreased from $31.2 million in FY 2008 to $27.3 million in FY 2009. Import duties remained relatively flat from FY2009 to FY2011.

Fees Fees declined from FY2008 to FY2009 by $6.2 million primarily due to reductions in stamp duty fees collected in FY2008 from $10.0 million to $4.1 million collected in FY2009. Management represented that stamp duty fees is the second largest source of revenue collected with the Inland Revenue Department. Stamp Duties are charged and imposed under the Stamps Act on affidavits, agreements, bills of sale, mortgage, bonds, debentures, transfer of land, lease and power of attorney. The reduction in stamp duty for FY2008 to FY2009 was solely due to a reduction in the volume of instruments presented that attracted stamp duties. These fees have remained relatively flat for FY2009 to FY2011.

Government of the BVI Treasury Department PwC

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4 Recurrent Expenditure Analysis

Executive report

Supporting information

Appendices Glossary

The total annual recurrent expenditure remained relatively stable over the Review Period. BVI Government Recurrent Expenditure Analysis For the four (4) years ended 31 December 2008 to 31 December 2011 Expenditure by Head Grant to Statutory Board (Premier's Office) Health (Hospital Services) Health (Community Services) Grant to Statutory Board (Ministry of Health and Social Development) Water & Sewerage Police Ministry of Education & Culture Pension & Gratuities Education (BVI High School) Education (Primary and Pre-Primary) Public Works Public Debt Premier's Office Customs Ministry of Communication & Works Other Government Expenses Total Recurrent Expenditure Growth in expenses (%)

FY08 Audited

FY09 Audited

FY10 Audited

FY11 Unaudited

! @ @ 19,235,954 @ 14,669,177 #

22,208,775 19,189,492 6,590,477

20,967,745 16,346,940 6,051,948

23,806,711 -

26,126,070 -

1,902,384

19,819,604

14,705,880 14,550,056 9,418,090 9,058,004 8,922,860 8,900,702 8,808,180 7,601,625 5,549,140 4,822,091 4,744,793 103,282,012

17,755,736 15,597,058 9,416,326 12,038,507 8,742,822 8,912,994 8,564,871 7,854,713 5,418,231 4,840,350 5,020,334 104,234,127

21,398,554 14,977,503 9,641,049 13,028,530 8,875,805 9,039,118 8,366,440 12,510,703 5,791,107 5,027,856 4,398,226 99,714,847

15,223,258 9,788,341 12,351,394 8,880,407 8,896,392 8,235,578 14,112,355 5,306,473 4,775,463 3,107,716 100,297,494

248,352,177 NA

253,665,085 2%

256,396,051 1%

251,006,071 (2%)

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

The table above illustrates the annual Recurrent Expenditure of the Government for Review Period FY2008 to FY2011. The analysis details the 15 largest expenses of the Government by type, with all other expenses consolidated under “Other Government Expenses”.

Government of the BVI Treasury Department PwC

The annual recurrent expenditure of the Government for the Review Period ranged from $248.4 million to $251 million. As shown in the table, the annual recurrent expenditure was relatively stable over the Review Period. We performed a high-level analysis of the top 15 expenses and analyzed expenses with variances greater than $1 million year on year as follows:

Grant to Statutory Board (Premier’s Office). The allocated grants to the Premier’s Office are transferred to various statutory bodies, the Government’s college and the Tourist Board. Changes in this grant are directly related to the recurrent expenditure needs of these entities.

Health (Hospital Services), Health (Community Services) and Grant to Statutory Board (Ministry of Health and Social Development. These three expenditure components are inter-related as expenses which fell under Health (Hospital Services) and Health (Community Services) in FY2008 and FY2009 were consolidated and re-categorized from FY2010 under Grant to Statutory Board (Ministry of Health and Social Development). The expenses within these categories relate to recurrent expenditure incurred within the BVI Health Services Authority, i.e. Salaries, utilities, equipment etc.

Water and Sewerage. Expenses within this component relates to recurrent expenses involved in the operations of the Water and Sewerage Authority. The primary variable expense within this category relates to the purchase of desalinated water which makes up approximately 61% of the total water and sewerage expenses.

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4 Recurrent Expenditure Analysis

Executive report

Supporting information

Appendices Glossary

The overall reduction in annual expenses to $251 million in 2011 was primarily due to a reduction in Water and Sewerage costs which was offset somewhat by an increase Public Debt Servicing #

BVI Government Recurrent Expenditure Analysis For the four (4) years ended 31 December 2008 to 31 December 2011 Expenditure by Head Grant to Statutory Board (Premier's Office) Health (Hospital Services) Health (Community Services) Grant to Statutory Board (Ministry of Health and Social Development) Water & Sewerage Police Ministry of Education & Culture Pension & Gratuities Education (BVI High School) Education (Primary and Pre-Primary) Public Works Public Debt Premier's Office Customs Ministry of Communication & Works Other Government Expenses Total Recurrent Expenditure Growth in expenses (%)

FY08 Audited

FY09 Audited

FY10 Audited

FY11 Unaudited

22,208,775 19,189,492 6,590,477

20,967,745 16,346,940 6,051,948

23,806,711 -

26,126,070 -

1,902,384

19,819,604

19,235,954

14,705,880 14,550,056 9,418,090 9,058,004 8,922,860 8,900,702 8,808,180 7,601,625 5,549,140 4,822,091 4,744,793 103,282,012

17,755,736 15,597,058 9,416,326 12,038,507 8,742,822 8,912,994 8,564,871 7,854,713 5,418,231 4,840,350 5,020,334 104,234,127

21,398,554 14,977,503 9,641,049 13,028,530 8,875,805 9,039,118 8,366,440 12,510,703 5,791,107 5,027,856 4,398,226 99,714,847

14,669,177 15,223,258 9,788,341 12,351,394 8,880,407 8,896,392 8,235,578 14,112,355 5,306,473 4,775,463 3,107,716 100,297,494

248,352,177 NA

253,665,085 2%

256,396,051 1%

251,006,071 (2%)

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

# $ %

Water and Sewerage. Based on a review of the annual expenses for the Water and Sewerage Authority, it was noted that the purchase of desalinated water was the primary cause of fluctuations in the Water and Sewerage as indicated in the table below. FY

Total Water and Sewerage Expenses

Purchase of Desalinated Water

FY2008

$14,705,880

$9,000,000

FY2009

$17,755,738

$12,932,742

FY2010

$21,398,554

$16,076,595

FY2011

$14,669,177

$9,459,797

Source: Treasury Financial Statements

The overall reduction in total expenses in FY2011 to $251 million

^ was largely due to the reduction in Water and Sewerage.

Police. This expense component relates to the recurrent expenses for the police service. This expense showed an increase from FY2008 to FY2009 of $1 million which was primarily due to an increase in staff employed within the police service.

Pension and Gratuities. This expense relates to pension and gratuity payments made to public servants. This expense showed an increase of approximately $3 million from FY2008 to FY2009 which was primarily due to a significant increase in payments to civil servants from $7.8 million to $10.6 million.

Public Debt. This expense relates to repayments made to loans taken out by the Government. This expense showed significant increases in FY2010 and FY 2011 due to increases in the Public Debt loan balance related to financing of the construction of the new Peebles Hospital. Government of the BVI Treasury Department PwC

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4 Recurrent Expenditure Analysis

Executive report

Supporting information

Appendices Glossary

The significant increase in loan repayments from FY2010 is a direct result of three new loans amounting to $64.7 million that were secured in FY2009, primarily to fund construction of the New Peebles Hospital ^

FY08 Audited

FY09 Audited

FY10 Audited

FY11 Unaudited

22,208,775 19,189,492 6,590,477

20,967,745 16,346,940 6,051,948

23,806,711 -

26,126,070 -

1,902,384

19,819,604

19,235,954

14,705,880 14,550,056 9,418,090 9,058,004 8,922,860 8,900,702 8,808,180 7,601,625 5,549,140 4,822,091 4,744,793 103,282,012

17,755,736 15,597,058 9,416,326 12,038,507 8,742,822 8,912,994 8,564,871 7,854,713 5,418,231 4,840,350 5,020,334 104,234,127

21,398,554 14,977,503 9,641,049 13,028,530 8,875,805 9,039,118 8,366,440 12,510,703 5,791,107 5,027,856 4,398,226 99,714,847

14,669,177 15,223,258 9,788,341 12,351,394 8,880,407 8,896,392 8,235,578 14,112,355 5,306,473 4,775,463 3,107,716 100,297,494

248,352,177 NA

253,665,085 2%

256,396,051 1%

251,006,071 (2%)

Source: Audited accounts for years ended 31 December 2008 to 2010, Unadited accounts for year ended 31 December 2011 and Pw C Analysis

Government of the BVI Treasury Department PwC

Public Debt. The table below illustrates the co-related movement between the Public Debt servicing expense and the Public Debt loan balance. Increased repayments were noted from FY2009 as the Government took out significant additional loans in this financial period. FY

Public Debt Loan Balance

Public Debt Expense

FY2008

$72,008,782

$7,601,625

FY2009

$134,251,314

$7,854,713

FY2010

$126,713,341

$12,510,703

FY2011

$113,473,556

$14,112,355

Source: Treasury Financial Statements

Repayments to the Government’s loan portfolio are made from the Consolidated Fund. Overall, costs are largely fixed and revenues heavily dependent on FSC fee collections which may not be sustainable given the economic volatility in Europe and United States. Government is seeking to increase and to diversify the BVI’s income stream, by pushing certain statutory boards like BVIHSA to be more self-sufficient, and introduce cost cutting austerity measures.

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5 FY2011 Abstract Statement

Executive report

Supporting information

Appendices Glossary

FY2011 Abstract Statement GOVERNMENT OF THE VIRGIN ISLANDS Abstract Statement 2011

RECEIPTS

RECURRENT BUDGET Im port Duties Taxes Licences Fines and Forefeitures Fees Sales Rental Royalties Inves tm ent Incom e Other Governm ent Revenue Total Recurrent Revenue CAPITAL BUDGET Local Revenue Loan Grants Inves tm ent Incom e Revenue Other

: : : : :

Budget

: : : : :

Actual

: : : : : : : : : : : :

: : : : : : : : : :

35,300,000

29,094,196

46,345,000

45,579,881

765,119

12,466,000

9,290,175

3,175,825

600,000

256,325

343,675

16,112,000

12,983,539

3,128,461

6,591,000

6,261,692

329,308

417,000

(724,893)

1,141,893

75,000

74,993

381,465

108,535

169,488,000

182,490,353

287,884,000

: :

287,479,526

: :

30,068,000

(8,991,800)

14,178,887

(14,178,887)

28,091

: -

44,274,978

287,479,526

Trans portation Im prov Netwrk Fund Car Loan Revolving Fund Debt Service Fund Loan Revolving Fund Pens ion Fund Res erve Fund Repairs & Renewal Fund DEPOSITS: Pos tm as ter Other INVESTMENTS: Certificates of Depos its & Savings ADVANCES: Current Accounts Public Officers Other

: Total Receipts

Cash Balance as at 1.1.11 Grand Total

: : :

: 308,960,200

(28,091) -

21,076,200 287,884,000

Em ergency/Dis as ter Fund

404,474

Contingency Fund

(13,002,353)

21,076,200

: : : : : : : : : : : : : : : : : : : : : : : : :

6,205,804

490,000

Total Recurrent Revenue

OTHER FUNDS:

Total Development Revenue

Grand Total Revenue

: : : : :

Variance

: :

1,421,095

42,942

1,037,159

25,774

1,827,060

601,429

424,065,614

11,010,468

46,302

1,299,509

2,278,910

775,410,766

: :

3,404,229

: :

778,814,994

: :

: : : : : : : : : :

(23,198,778) : 404,474

: 331,754,504

: : : : : : : : : : :

(22,794,304)

: : : : : : : : : : : : : : : : : : : : : : : : :

PAYMENTS

RECURRENT BUDGET Deputy Governor Prem ier's Office Minis try of Finance Minis try of Natural Res ources & Labour Minis try of Education & Culture Minis try of Health & Welfare Minis try of Com m unication & Works Pens ions and Gratuities Public Debt Mis cellaneous Funds Contribution Total Recurrent Expenditure CAPITAL BUDGET Deputy Governor Prem ier's Office Minis try of Finance Minis try of Natural Res ources & Labour Minis try of Education & Culture Minis try of Health & Welfare Minis try of Com m unication & Works Mis cellaneous Total Development Expenditure Total Recurrent Expenditure

Grand Total Expenditure OTHER FUNDS: Contingency Fund Em ergency/Dis as ter Fund Trans portation Im prov Netwrk Fund Car Loan Revolving Fund Debt Service Fund Loan Revolving Fund Pens ion Fund Res erve Fund Repairs & Renewal Fund DEPOSITS: Pos tm as ter Other INVESTMENTS: Certificates of Depos its & Savings ADVANCES: Current Accounts Public Officers Other

: :

: : :

: : : : :

Cash Balance as at 31.12.11 Grand Total

: : :

B U D G E T Development Aid & Grants $

: : :

Loan $

: : :

Total $

: : : : :

A Local Revenue $

C T U A L : Development : Aid & Grants : $

: : :

Loan $

: : :

: : : : :

Total $

Variance $

44,405,200

38,954,727

39,230,500

38,924,682

305,818

21,360,000

19,407,403

1,952,597

11,476,200

10,686,441

789,759

43,428,000

42,393,139

1,034,861

32,962,800

33,906,514

36,596,600

36,526,158

11,166,000

12,351,394

(1,185,394)

16,332,300

14,112,355

2,219,945

3,850,200

3,743,258

28,076,200 288,884,000

: :

28,076,200 288,884,000

: :

31,848,100 282,854,171

: :

31,848,100 282,854,171

: :

: : : : : : : : : : : :

: : : : : : : : : :

70,442

106,942 (3,771,900) 6,029,829

7,343

4,082,877

1,892,932

2,189,945

7,555,104

383,832

7,938,936

4,851,931

3,087,005

3,991,661

6,250,000

10,241,661

2,288,195

7,953,466

4,560,446

2,603,515

7,163,961

2,051,112

7,530

2,058,642

7,055,134

6,245,244

1,066

6,246,310

808,823

12,357,405

84,131,575

96,488,981

3,566,102

2,063,143

5,629,245

90,859,736

29,223,392

19,453,950

48,677,343

11,755,729

2,396,452

14,152,181

34,525,162

4,769,501 73,588,177

: :

112,439,040

: :

4,769,501 186,418,392

: :

2,858,720 35,509,964

: :

4,459,595

: :

2,858,720 39,978,155

: :

1,910,781 146,440,237

288,884,000

282,854,171

: : :

391,175

: 362,472,177

(943,714)

: : : : : : : : : : : : : : : : : : : : : : : : :

5,450,473

4,075,534

: Total Payments

Local Revenue $

: 391,175

: 112,439,040

475,302,392

318,364,135

8,596

: :

6,029,829

: 322,832,326

1,382,626

440,985

619,293

422,320,854

83,705

1,369,022

2,343,933

: :

763,145,301

: :

15,669,693

: :

778,814,994

: :

5,105,318

152,470,066

: :

: : 11,752,557

: : :

Source: Treasury Financial Statements

Government of the BVI Treasury Department PwC

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6 Year-end Commitments / Unrecorded Liabilities

Executive report

Supporting information

Appendices Glossary

Year-end Commitments / Unrecorded Liabilities at December 31, 2011

Unpaid Commitments at Year-End December 2011 ("closed" Purchase Orders) Constitutional Established Departments House of Assembly Cabinet Office Office of DPP Complaint Commission Audit

Ministry of Natural Resources and Departments 29,057.17 8,581.55 2.065.75 6,812.90 489 44,940.52

Ministry of Natural Resources and Labour Agriculture BVI Fishing Complex Conservation and Fisheries Department Labour Land Registry Survey

63,010.77 58,604.85 3,137.20 4,481.00 5,040.95 4,238.44 138,513.21

Governor's Group Governor Deputy Governor Department of Human Resources Training Department of Disaster Management Supreme Court Civil Registry and Passport Office Magistracy Commercial Court Attorney General's Chambers Police Law Reform Commission

415 12,151 10,934.20 3,088.66 37,933.37 41,099.77 1,960.61 3,513.80 6,237.98 261.46 106,445 505.25 224,545.81

Ministry of Education And Culture and Departments Ministry of Education and Culture Youth Affairs and Sports Education (Administration) Education (Pre-Primary and Primary) Department of Culture Education (Other Secondary Schools) Education (Elmore Stoutt High School) Library Services Prison

286,484.75 193,991.76 5,192 3,788.61 89,655.28 579,112.65

Ministry of Health and Social Development Premier's Office and Departments Premier's Office BVI Shipping Registry Development Planning

BVI International Finance Centre Immigration Information and Public Relations Town and Country Planning BVI International Affairs Secretariat Trade and Consumer Affairs

65,279.01 4,926.62 -

64,727.09 12,225.04 46,818.74 0.00

795,471.30

123,770.87

106,412.60 1,479 371 38,340.83 1,012,281.00

Ministry of Finance and Departments Ministry of Finance Customs Inland Revenue Internal Audit Post Office Treasury Department of Information Technology

Ministry of Health and Social Development Adina Donovan Home Department of Waste Management Social Development Department

151,855.17 292,749.67 3,669.43 1,863.00 28,283.14 13,430.97 1,480.34 493,331.72

Ministry of Communications and Works and Departments Ministry of Communications and Works Facilities Management Unit Civil Aviation Fire Services Water and Sewerage Department of Motor Vehicle Public Works Telephone Services Management Unit

Grand Total

1,024,082.78 5,388.49 53,073.79 3,579,771.23 0.00 90,401.42 41,925.36 4,794,643.07

7,411,138.85

Source: Treasury Management Information (Regulation 83 Schedule)

Government of the BVI Treasury Department PwC

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7 Litigation Listing

Executive report

Supporting information

Appendices Glossary

Litigation Listing – pending legal liability as at December 2011

Litigation accrual Date Claim was Filed

Case

Judgment Granted

Outstanding as at 31-Dec-11 Additional Comments

1 BVIHCV2007/0277 BVIHCV2008/192 BVI Appeal 19 of 2009 BVI Appeal; 20 of 2009 Ocean Conversion

Jan-07

Judgment granted in favor of claimant during 2011

1,000,000

2 BVIHCV2008/270 Erminie Mathavious

2008

Information not supplied

240,000

Payment was made to claimant in May 2012

3 BVIHCV2011/0129 Kevin Prince v Attorney General

May-11

Payment to be made to claimant as stated under the Police Act

6,000

Sep-11

11,707

It is likely for the judgment to be in favor of the claimant.

5 BVIHCV2011/24

Jun-11

10,000

The Government has admitted liability

6 Civil Appeal No.41 of 2012 Loretta Frett (Executor of the Estate of Jeuel Simeon Frett, deceased) v Attorney General

2007

150,000

General damages may possibly range from $150,000 - $200,000 if claimant is successful.

7 BVIHCV2007/008 Vincent Pickering, Cedric Pickering & Attorney General

2007/08

Yes

147,227

8 BVIHCV 2007/306 Civil Appeal 27/2008 Civil Appeal 65/2011 Daphne Alves

2007

Yes

179,706

9 BVIHCV 2008/0383 Berenice Freeman Total Litigation Liability as at 31-Dec-2011

2008

Yes

41,634 1,786,274

10 BVIHCV2011/0015 Esther Penn-Frett v Virgin Islands Shipping Registry, Yvette Huggins, Attorney General

Jan-11

Information not supplied

455,993

11 BVIHCV2008/270 Erminie Mathavious

2008

Information not supplied

Claimant's assessment of expenses paid out with settlement of $240,000

4 BVIHCV2011/0223 Mario Matthew, Commissioner of Police, Attorney General

Total Litigation

2,242,266

Source: Litigation listing provided by the Attorney General's Chambers

Government of the BVI Treasury Department PwC

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8 Major Contracts awarded in FY2011

Executive report

Supporting information

Appendices Glossary

Listing of Major Contracts awarded during FY2011

No. Contract No.

1 MEC/1/11

Contractor

Contract Description

Contract Amount

STO Enterprises

Architectural services for the modernization of the Elmore Stoutt High School Campus

705,000.00 144,249.80

2 MEC/2/11

QWOMAR Construction

Construct 2nd floor of the bathroom facility for the VI Festival and Fairs 150,951.00

3 MEC/2/11

N.E.E.D.S by Samuel Jones

Purchase and supply furniture for Francis Lettsome Primary School 4,174,444.22

4 MOF/1/11

James Todman Construction

Building Envelope and external works @ New Peebles Hospital 30,808,870.88

5 MOF/2/11

James Todman Construction

Internal Fit-Out works at the New Peebles Hospital 261,362.69

6 MC&W/1/11

7 MC&W/2/11

8 MC&W/3/11

9 MC&W/4/11 10 MC&W/5/11

Enchantment Holding Ltd

Virgin Gorda Concrete Products

Ebony & Ivory Concrete Supply Ltd

Leonards Concrete Products D & C Construction BVI Paving Ltd

133,688.00

12-Jan-11

374,497.00

12-Jan-11

374,497.00

12-Jan-11

205,461.00

12-Jan-11

Road paving from Fanny Hill leading to Long Bay VG

Supply ready mixed concrete Supervise road construction from Fanny Hill to Long Bay VG Asphalt overlay rehabilitation works

JoClaud Enterprises Ltd

Supply, instillation, maintenance and operations of traffic signals at the intersection of James Walter Francis Drive and Wickhams Cay II/Pasea Drive with interconnect to Station Avenue 308,682.00

13 DGO/1/11

Electronic Solutions

Installation of a closed circuit TV camera system across Tortola 273,257.00

14 DGO/2/11

Solid Power Boats Inc

Yamaha 300 for Police Department 118,906.00

15 DGO/3/11

A. H. Parker & Sons

Parker 900 Baltic Rigid Inflatable for Police Department

Government of the BVI Treasury Department PwC

15-Dec-10

Budget/S Owners / Directors APS (Y/N) Y

Dion Stoutt

Lorrily Anthony and Marvin Blyden

Samuel Kenmore Jones

James Todman

Anselmo Stevens

Ronnie Allen

Dwite and Paola Flax

Ricardo Leonard

Daniel Cline

Mark Simmonds and Ashley Ritter

John C Samuel

Trevor Blaize

Eddy Cerra

Andre Scott

14-Jan-11 Ralph T. O'Neil - Premier of GVI Ronnie Allen - Virgin Gorda Concrete Products Ltd

Road paving from Fanny Hill leading to Long Bay VG

325,920.00

12 MC&W/7/11

Date Signatories Contract Signed 8-Dec-10 3-Mar-11 Ralph T. O'Neil - Premier of GVI Dion Stoutt - STO Enterprise 24-Aug-11 7-Sep-11 Ralph T. O'Neil - Premier of GVI Marvin Blyden - Quomar Construction 24-Aug-11 9-Sep-11 Ralph T. O'Neil - Premier of GVI Samuel Jones - New Era Educational and Developmental Supplies 24-Mar-11 5-Dec-11 Ralph T. O'Neil - Premier of GVI James Todman - James Todman Construction Ltd 1-Sep-11 4-Nov-11 Ralph T. O'Neil - Premier of GVI James Todman - James Todman Construction Ltd 12-Jan-11 14-Jan-11 Ralph T. O'Neil - Premier of GVI Anselmo Stevens - Enchantment Holdings Ltd

Civil Works at Virgin Gorda Airport Project

1,970,980.00 11 MC&W/6/11

Cabinet Waiver

14-Jan-11 Ralph T. O'Neil - Premier of GVI Dwite Flax - Ebony & Ivory Concrete Supply Ltd 20-Jan-11 Ralph T. O'Neil - Premier of GVI Ricardo Leonard - Leonard Concrete Products Ltd 14-Jan-11 Ralph T. O'Neil - Premier of GVI Daniel Cline - D&C Construction 4-Feb-11 Ralph T. O'Neil - Premier of GVI Mark Simmonds - BVI Paving Ltd 1-Sep-11 Ralph T. O'Neil - Premier of GVI John C. Samuel - JoClaud Enterprises Ltd Julian Fraser - Witness (Minister for Communications & Works) 3-Feb-11 Ralph T. O'Neil - Premier of GVI Edmund Trevor Blaize - Director, Electronic Solutions 10-Mar-11 Ralph T. O'Neil - Premier of GVI Eddy Cerra - Solid Powerboats Inc 9-May-11 Ralph T. O'Neil - Premier of GVI Andre Scott - Director, A.H. Parker & Sons (Gt. Britain) Ltd

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8 Major Contracts awarded in FY2011

Executive report

Supporting information

Appendices Glossary

Major Contracts awarded in FY2011 (Continued)

No. Contract No.

Contractor

Contract Description

Contract Amount

Deric Leonard Construction

Construction of North Sound Community Centre (Lower Level)

630,022.58 16 MHSD/1/11

147,847.00 17 SW/1/11 18 PO/1/11

RAL Trucking Service STO Enterprising Ltd

Collection of solid waste on VG Acquiring and construction of stadium at AO Shirley Grounds

1,082,995.00 1,071,914.00

19 PO/2/11

Tortola Concrete Products

Supply remix concrete and other materials for road works on Anegada 252,689.06

20 PO/3/11

D & C Construction

Supervise contruction of road infrastructure on Anegada 500,346.00

21 PO/4/11

Anegada Concrete Products

Supply 2,166 cubic yrds of readymixed fibre concrete @ $231.00 per cy for Anegada road infrastructure 776,030.00

22 PO/5/11 23 PO/6/11

24 MNRL1/11 25 Not provided

26 MC/001/11

Sandwise Ltd Block Marine Construction

WDMO Real Legacy Insurance

Tortola Carpet Sales & Services

Re-development of the Red Bay Fisherman's Dock EE Harbour Development design / construction of Dock

Construction of bathroom facilities at the Top of the Baths Insurance coverage for Central Admin Building (renewal)

425,000.00 254,375.90

396,416.00 185,808.00

Cleaning Service for Central Admin Building 300,000.00

27 Not provided

KPMG

Job Proposal Analysis

Total

Government of the BVI Treasury Department PwC

Cabinet Waiver

Date Signatories Contract Signed 23-Feb-11 25-May-11 Ralph T. O'Neil - Premier of GVI Dancia Penn - Deputy Premier Deric Leonard - Owner 12-Jan-11 18-May-11 Ralph T. O'Neil - Premier of GVI Lester Maduro - RAL Trucking Services 23-Feb-11 3-Mar-11 Ralph T. O'Neil - Premier of GVI Dion Stoutt - STO Enterprise 28-Sep-11 19-Sep-11 Ralph T. O'Neil - Premier of GVI Ashley Ritter - Tortola Concrete Products Ltd 28-Sep-11 19-Sep-11 Ralph T. O'Neil - Premier of GVI Daniel Cline - D&C Construction 28-Sep-11 19-Sep-11 Ralph T. O'Neil - Premier of GVI Kevin Vanterpool - Anegada Concrete Products Ltd 7-Sep-11

Budget/S Owners / Directors APS (Y/N)

Lester Maduro Dion Stoutt

M. Ashley Ritter

Daniel Cline

Vernon and Kevin Vanterpool Amount approved by Cabinet was exceeded

Y Y

7-Sep-11 21-Jul-11 Ralph T. O'Neil - Premier of GVI Wayne O'Neal - WDMO Group Limited 12-Aug-11 Ralph T. O'Neil - Premier of GVI Ruford Potter - Director, Tortola Carpet Sales and Services Ltd 1-Sep-11 Ralph T. O'Neil - Premier of GVI Russell Crumpler - KPMG (BVI) Limited

Deric Leonard

Wayne O' Neal

Ruford Potter

Russell Crumpler

46,354,210.13

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9 Listing of Contract Payments

Executive report

Supporting information

Appendices Glossary

Listing of payments testing

No. Contract No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42

DGO/001M /2011 DGO/002M /2011 DGO/003M /2011 M C#001/11 M C#001/11 M C#001/11 M C1/2011 M CW#1/2011 M CW#2/2011 M CW#3/2011 M CW/M C#3/2010 M CW/M C#3/2010 M CW/M C#4/2011 M EC/01C/2011 M EC/01C/2011 M EC/02C/2011 M EC/02C/2011 M EC/03C/2011 M EC/03C/2011 M OF/M C#1/2011 M OF/M C#1/2011 M OF/M C#2/2011 M OF/M C#2/2011 M OF/M C#2/2011 M OH/001M /2011 M OH/001M /2011 M OH/001M /2011 M OH/001M /2011 M OH/001M /2011 PM O/001/2011 PM O/001/2011 PM O/001/2011 PM O/001/2011 SW1/11 SW1/11 SW1/11 SW1/11 SW1/11

Cheque No. 35891 39820 40001 560232 555756 553615 40469 40011 40035 40010 40006 40006 40191 41641 39914 41041 41136 41308 42555 42820 43274 42862 43006 43414 40187 41967 42376 42591 43256 39673 40074 40117 40380 559789 556239 554923 553222 550516 563131 557696 551044 550250

Amount $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

184,239.20 136,628.50 76,156.00 16,110.98 7,837.00 7,742.00 46,828.46 235,226.42 97,394.39 280,872.75 74,980.08 205,461.00 249,303.93 211,500.00 176,250.00 70,000.00 74,249.80 143,951.00 7,000.00 313,807.00 118,617.75 2,025,035.66 1,027,596.78 782,906.85 63,002.26 137,403.26 55,225.47 58,884.68 70,302.31 541,497.50 324,898.50 108,299.50 108,299.50 7,979.16 7,979.16 7,979.16 7,979.16 7,979.16 132,142.00 50,050.65 35,523.55 16,985.90

Payment Voucher Approval Form

7-Feb-11 7-Feb-11 22-M ar-11 22-M ar-11 12-M ay -11 12-M ay -11 8-Jun-11 11-Ap r-11 2-M ar-11 28-Jul-11 28-Jul-11 22-Dec-10 12-M ay -11 22-Dec-10 12-M ay -11 22-Dec-10 12-M ay -11 13-M ar-11 25-Feb-11 22-Dec-10 12-M ay -11 22-Dec-10 17-Jun-11 22-Dec-11 22-Dec-11 25-03-11 25-03-11 7-Oct-11 7-Oct-11 7-Oct-11 7-Oct-11 25-Oct-11 25-Oct-11 27-Jul-12 27-Jul-12 23-Aug-12 23-Aug-12 17-Oct-12 17-Oct-12 3-Aug-12 12-Jun-12 23-Aug-12 12-Jun-12 17-Jun-11 8-Jun-11 30-M ar-12 30-M ar-12 11-Jun-12 21-Jun-12 27-Jul-12 27-Jul-12 9-Oct-12 9-Oct-12 10-M ar-11 10-M ar-11 23-M ay -11 23-M ay -11 2-Jun-11 2-Jun-11 2-Jun-11 5-Jul-11 20-M ay -11 27-Ap r-11 4-Ap r-11 23-Feb-11 10-Aug-11 6-Jun-11 3-M ar-11 1-M ar-11

2-Feb-11 22-M ar-11 12-M ay -11 6-Jul-11 12-Ap r-11 22-M ar-11 28-Jul-11 5-M ay -11 19-M ay -11 5-M ay -11 23-Feb-11 26-Ap r-11 15-Jun-11 22-Dec-11 25-M ar-11 7-Oct-11 7-Oct-11 25-Dec-11 27-Jul-12 23-Aug-12 17-Oct-12 22-Aug-12 19-Sep -12 21-Jun-11 30-M ar-12 29-Jun-12 31-Jul-12 9-Oct-12 10-M ar-11 2-Jun-11 11-Jul-11 5-Jul-11 20-M ay -11 4-Ap r-11 23-Feb-11 12-Aug-11 6-Jun-11 4-M ar-11 18-Feb-11

Payment Certificate

Passed for Payment 11-Feb-11 19-Ap r-11 19-M ay -11 12-Jul-11 11-M ay -11 18-Ap r-11 28-Jul-11 19-M ay -11 19-M ay -11 19-M ay -11 19-M ay -11 19-M ay -11 22-Jun-11 31-Dec-11

21-Aug-12 9-Oct-12 30-Jul-12 20-Aug-12 19-Oct-12 30-M ar-12 21-Jun-12 30-Jul-12 9-Oct-12

12-Oct-11 19-Oct-11 8-Dec-11 27-Jul-12 24-Aug-12 19-Oct-12 31-Aug-12 21-Sep -12 26-Oct-12 22-Jun-11 30-M ar-12 29-Jun-12 1-Aug-12 11-Oct-12 18-M ar-11 25-M ay -11 7-Jun-11 20-Jul-11 8-Jul-11 24-M ay -11 28-Ap r-11 14-Ap r-11 2-M ar-11 16-Aug-11 9-Jun-11 16-M ar-11 1-M ar-11

Cheque Date 11-Feb-11 19-Ap r-11 19-M ay -11 13-Jul-11 17-M ay -11 20-Ap r-11 28-Jul-11 19-M ay -11 19-M ay -11 19-M ay -11 19-M ay -11 19-M ay -11 23-Jun-11 31-Dec-11 6-M ay -11 12-Oct-11 19-Oct-11 8-Dec-11 27-Jul-12 24-Aug-12 19-Oct-12 31-Aug-12 21-Sep -12 9-Nov-12 23-Jun-11 5-Ap r-12 29-Jun-12 1-Aug-12 19-Oct-12 18-M ar-11 27-M ay -11 7-Jun-11 21-Jul-11 8-Jul-11 25-M ay -11 14-Ap r-11 14-Ap r-11 3-M ar-11 17-Aug-11 15-Jun-11 17-M ar-11 3-M ar-11

Legend Dates not in sequence No document / evidence on file

Government of the BVI Treasury Department PwC

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10 Outstanding Audit Requests

Executive report

Supporting information

Appendices Glossary

Outstanding Information Requests

1. Documentation from Cabinet indicating the decision making process for the Major Contracts awarded in 2011 where the tender process was waived by Cabinet that have not yet been provided. (Cabinet papers, minutes, evaluations of bidders, instructions to Ministry or other correspondence) 2. Names of owners of vendors and copies of the major contracts for the three Major Contracts in 2011 and all major contract vendors for 2009 and 2010 as requested via email on 20th November 2012

Contract #

Contractor

Description of Project

PO/5/11

Sandwise Ltd

PO/6/11

Block Marine Construction

Not noted

Real Legacy Insurance

Re-development of the Red Bay Fisherman's Dock EE Harbour Development design / construction of Dock Insurance coverage for Central Administration Building (Renewal)

Cost $ 776,030 $425,000 $396,416

3. Listing of Major Contract awards for 2008 from the Auditor General.

Government of the BVI Treasury Department PwC

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Executive report

Supporting information

Appendices Glossary

Glossary

Term

Definition/Meaning

BVI/VI

British Virgin Islands

BVIGOV/GVI/Government

Government of the British Virgin Islands

BVIHSA

British Virgin Islands Health Services Authority

Financial Secretary

FSC

Financial Services Commission

Financial Year

BVIG

British Virgin Islands Government

IPSAS

International Public Sector Accounting Standards

JDE

JD Edwards System

Major Contracts

Contracts valued greater than $100,000

P.O.

Purchase Orders

PwC view

Our view in the context of the scope of our work and the circumstances at the time of our field work

PwC

PricewaterhouseCoopers Advisory Services Limited

Government of the BVI Treasury Department PwC

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Executive report

Supporting information

Appendices Glossary

Glossary

Term

Definition/Meaning

Review Period

Our review period was focused on and limited to analysis of the historical results for the four (4) years ended 31 December 2011, analysis of bank statement cash balances and reconciliations as at December 2010 and 2011 and examination of Major Contracts entered into between January 1 and December 31 2011.

Government of the BVI Treasury Department PwC

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