By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The National Insurance Board (NIB) has had to contend with two government agencies defaulting on multi-million dollar debts owed to it with one still delinquent at year-end 2022.

The social security system’s 2022 annual report, tabled in Parliament yesterday, revealed that the Ministry of Housing had “defaulted” on a near ten-year old loan where a balance of $5.88m remained outstanding at that year’s end. And no repayments had been made for two years on what was originally a $10m facility advanced under the last Christie administration to fund construction of low-cost government homes.

“During 2013, the Fund (NIB) through a memorandum of understanding with the Ministry of the Environment and Housing agreed to lend up to $10m for the Bahamas National Housing Construction Project,” the annual report stated, noting that the final $300,000 drawdown occurred in 2017.

“The loan will be repaid from mortgages issued through lending institutions other than the Bahamas Mortgage Corporation. No principal repayments were made in 2022 and the loan is in default.” Nor were any payments made in 2021.

The NIB annual report’s fine print also revealed that Bahamian taxpayers, via the Government, had to step into the breach and plug the hole when the Education Loan Authority defaulted on repaying $15m in bond principal that came due on August 15, 2020.

The Government, to ensure NIB and the Bahamian people, who are its beneficiaries, are repaid issued a promissory note to the social security system’s benefit where it would be repaid its $15m via five installments of $3m “no later than September 16, 2023”. Some $7.529m was left to be paid at year-end 2022 and, because these are the latest financials to be released, it is uncertain whether that deadline has been met.

The footnotes to the 2022 annual report provide an insight into the Government’s well-known use of NIB as a ‘cash cow’ to finance particular projects, while also allowing sums due to the social security system from other public agencies - for items such as building rent and lease costs - to build up to receivables higher than $100m.

The then-Minnis administration, on December 1, 2018, was forced to issue NIB another promissory note for $61.762m “to cover all outstanding lease balances as at June 30, 2018”. This, though, was fully repaid by year-end 2022 in line with the four-year target, with a $34.086m debt wiped out during that year - the Davis administration’s first full year in office.

This helped slash the sums owed to NIB by the Government from $117.775m at year-end 2021 to $27.087m some 12 months later, representing a 73 percent year-over-year decline. However, the latter sum included $19.141m owed for the Chronic Diseases Prescription Drug Fund, which itself had been slashed from $38.118m at year-end 2021.

And, elsewhere, the NIB annual report confirmed it had lent a collective $15m to the Water & Sewerage Corporation to finance construction of the Gladstone Road wastewater treatment plant - a project alleged to have been plagued by massive cost overruns, and which had not been completed almost a decade after the initial $10m was disbursed.

The project’s fate, even today, remains uncertain with Robert Deal, the Water & Sewerage Corporation’s general manager, not responding to this newspaper’s request for an update despite the two ‘blue ticks’ confirming he had seen its message.

The last time the Gladstone Road wastewater treatment plant surfaced in public was in early 2022 when Alfred Sears, then-minister of works and public utilities, said the total cost to complete it was presently “unknown” and that US-based Hatch Ltd, an engineering consulting company, had been hired to determine this.

However, NIB’s annual report confirms that Water & Sewerage customers and, by extension, Bahamian taxpayers given the amount of subsidies they pump in, are paying 4.75 percent interest to service a loan that is financing a project whose completion remains in doubt. Some $8.072m in principal remained outstanding at year-end 2022, with $1.136m repaid during that year.

An EY (Ernst & Young) probe under the former Minnis administration found that despite a 91 per cent overrun on the original $9.6m budget, which had cost the Corporation some $18.3m by March 2018, further capital expenditure was required to complete the still-unfinished Gladstone Road facility.

It added that besides the capital loss on the wastewater plant’s construction, every day it remains unfinished costs the Water & Sewerage Corporation significant revenue and operating losses. This is because the Corporation is having to pay a non-completion ‘penalty’ to Baha Mar by supplying it with heavily discounted water to irrigate the Cable Beach development.

“The Gladstone Road Waste Water Treatment Plant is capable of receiving waste water from Baha Mar, but is non-operational in the sense that the waste water is not being treated and returned for irrigation,” the EY report said. “Instead, the waste water is simply disposed of in the well.

“Because the Gladstone Road Waste Water Treatment Plant is non-operational, Water & Sewerage Corporation is currently providing Baha Mar with potable water at a substantial discount for irrigation purposes, further increasing the losses to the Corporation.

“As a result of the substantial budget overruns and inoperable facility, Water & Sewerage Corporation management believes that the facility will result in substantial losses to the Corporation, both with respect to the recovery of capital as well as operationally going forward.”

EY said Water & Sewerage Corporation management took “little to no responsibility” for the Gladstone Road project, blaming the shortcomings and mismanagement on third-party engineers and consultants hired to oversee it on their behalf.