Minister: WEDCO & BLDC Audited Financials

Minister of Public Works Lt/Col David Burch spoke in the House of Assembly about the West End Development Corporation [WEDCO] and the Bermuda Land Development Company [BLDC] financials.

The Minister said, “With regard to the financial highlights for 2016, the Corporations assets amounted to $137 million dollars while Liabilities totaled $100 million. Revenues continued to grow to almost $12.5 million when compared with expenses for that same period of $16.3 million – thereby resulting in a net loss of $3.8 million. There was a cash surplus for this period of $500,000.

“The financial report for 2017 reveals WEDCO assets of $111.3 million and Liabilities of $70.6 million. Total Revenues continued to grow to $15.5 million while expenses increased to $16.5 million with the resultant net loss of $1 million – and a cash surplus of $2.7 million.

The Minister then spoke about the BLDC, saying, “Since assuming my current role as Minister responsible for the Company, I enquired about the status of the Company’s financial reporting as only one of the above requirements have been met. I was advised that the last set of Audited Financial Statements and related Report on Operations incredulously were for the year ended March 31, 2009. I will speak more on the delay in a moment.

“Today I present the Audited Financial Statements and Reports on Operations for the years ended March 31, 2010, March 31, 2011 and March 31, 2012. I note for the information of the House that the Company received a clean audit opinion for each of those years.

“The auditor did, however, comment on weaknesses in internal controls related to the Company’s procurement processes, which were addressed in 2011 with the addition of more staff. It is noteworthy that the BLDC has not requested nor received Government funding for any of the years being presented today.

“I will now return to comment about the delayed tabling of reports for the Company. I am advised that there are several reasons for the delay but you can imagine that none rise to the level of satisfaction for me, given that we are now in 2018 with the most recent accounts relating to March 31, 2012.

“The underlying explanation for the delay is that the Auditor General was concerned about the procurement processes at the Company in 2010. The Auditor General completed a Special Report that year and determined that a more detailed examination of the accounts was required, which necessitated more time intensive processes to complete the audit.

“It is important to know how we will get this situation rectified. To that end, the Company completed a significant software upgrade this year to evolve beyond its legacy 2012 accounting systems. In addition, the shareholders, at the Company’s AGM in July approved a timetable and resources for all financial statements to be prepared and presented to the Auditor General by year end.

“An indication of the success of management’s efforts is that the 2013 accounts are presently with the Auditor General for review, with the remaining years anticipated to be submitted by year end. The Company also agreed to cover the additional costs to outsource the audits, at the direction of the Auditor General, if it is deemed practical to do so. The refusal of the Auditor General to allow outsourcing of this work is the source of ongoing frustration at all levels of the Company and contributes to the delay.

“The irony of this measured and sensible approach to the BLDC accounts that are presently 6 years out of date is not replicated in the qualified report tabled earlier in regard to the Consolidated Fund.

“Specifically with regard to the $10.3 million of capital development works which comprise primarily road works that can easily be verified – even without the documents – by simply driving on those very roads. I can confirm that those documents were in the office of the Auditor General – albeit delivered late – before the report was made – so one is left to ask the question of why the double standards.

“In addition to improving the financial management of the Company, the Board has been focused on significant improvements in governance. In that regard, they have consistently approved an annual operating and capital budget, business plan and strategy as required by the Act.

“Following the recent announcement that certain of the operational roles at BLDC and BHC would be combined, as originally recommended in the 2003 Report on Untangling Bermuda’s Quangos and further endorsed by the SAGE Commission – we anticipate further efficiencies.

The Minister’s full statement follows below:

Mr. Speaker, I rise today to comment on the West End Development Corporation [Wedco] and the Bermuda Land Development Company [BLDC] Reports for various periods.

Let me begin with the West End Development Corporations [Wedco] Annual Reports for operating years 2016 and 2017.

Mr. Speaker, for the years under review the WEDCo team has continued its efforts to establish the West End as Bermuda’s premier destination port, as well as the place in Bermuda to work, live and play. Additionally, WEDCo continues to work diligently to develop strategic partnerships within both the private and public sectors to ensure the sustainability of the Corporation as it moves forward with its development initiatives.

The year 2015/2016 was an extremely busy one for the Corporation with major investment and restoration projects undertaken following Hurricanes Fay and Gonzalo. The Corporation was further challenged with delivering the Cross Island venue which, when completed, would serve as the location for the 35th Americas Cup. These works were completed while Wedco maintained its support and services to their existing tenants and businesses.

Mr. Speaker, the major restoration obligations were not the sole focus that year as the Corporation also enhanced the residential housing and grew commercial opportunities.

Mr. Speaker, with regard to the financial highlights for 2016, the Corporations assets amounted to $137 million dollars while Liabilities totaled $100 million. Revenues continued to grow to almost $12.5 million when compared with expenses for that same period of $16.3 million – thereby resulting in a net loss of $3.8 million. There was a cash surplus for this period of $500,000.

Mr. Speaker, accomplishments include:

• 1. 6% increase in revenue
• 2. 2% retail growth despite the economic downturn.
• 3. Expansion of new retail shops
• 4. Renovations to the Prince Alfred Terrace residences.
• 5. Completion of Hurricane damage repair works.
• 6. Extensive program to involve small contractors to complete many of the Hurricane repairs and restoration projects.

Mr. Speaker, some of the activities which took place during this period:

• 1. The return of Destination Dockyard – a weekly event during the summer months.
• 2. The Annual End to End charity walk.
• 3. Bermuda Regiment Tattoo
• 4. Go Kart Grand prix.
• 5. And local live entertainment at Snorkel Park, Frog and Onion and Bonefish.

Mr. Speaker, I will now move on to the annual report for the following year 2016/2017 which continued in high gear with preparations for hosting the Americas Cup, extensive Capital investment for the restoration and upgrades to critical infrastructure and many Historic buildings.

The financial report for 2017 reveals WEDCO assets of $111.3 million and Liabilities of $70.6 million. Total Revenues continued to grow to $15.5 million while expenses increased to $16.5 million with the resultant net loss of $1 million – and a cash surplus of $2.7 million.

Mr. Speaker, the highlighted accomplishments include:

• 1. Meeting preparation responsibilities for hosting the 35th Americas Cup.

• 2. Investing and completing projects which totaled more than $10 million in the renovating of Historical structures.

• 3. Winning a National Trust award for restoration efforts.

• 4. Remaining focused on the continued development and growth of core businesses.

• 5. Increased Commercial revenue by 5% during difficult economic times.

Mr. Speaker, I would now like to move to the reports of the Bermuda Land Development Company Limited [BLDC].

The BLDC was established under the Base Lands Development Act 1996 with a mandate to manage or oversee the management of the land entrusted to it generally, for the purpose of integration of that land into the economic and social fabric of Bermuda, and in particular, to the creation of opportunities for increased employment now and in the future in furtherance of the well-being of present and future generations of Bermudians.

Mr. Speaker, in accordance with section 16 of the Act;

• [1] The Company shall prepare in respect of each financial year, financial statements in proper form, which shall be audited by the Auditor General.

• [2] The Company shall, as soon as may be practical after the end of each financial year, prepare a report on its operations during that year and on its policies and programs for future years.

• [3] Every report in respect of the financial year shall include the text of every direction given by the Minister to the Company under section 12 during that financial year.

• [4] The Company shall send to the Minister, within six months after the end of each financial year, a copy of the set of financial statements prepared, and of the report prepared in respect of that financial year.

• [5] The Minister shall cause a copy of every set of financial statements and of every report sent to him to be laid before each House of the Legislature.

Mr. Speaker, since assuming my current role as Minister responsible for the Company, I enquired about the status of the Company’s financial reporting as only one of the above requirements have been met. I was advised that the last set of Audited Financial Statements and related Report on Operations incredulously were for the year ended March 31, 2009. I will speak more on the delay in a moment.

Mr. Speaker, today I present the Audited Financial Statements and Reports on Operations for the years ended March 31, 2010, March 31, 2011 and March 31, 2012. I note for the information of the House that the Company received a clean audit opinion for each of those years. The auditor did, however, comment on weaknesses in internal controls related to the Company’s procurement processes, which were addressed in 2011 with the addition of more staff. It is noteworthy that the BLDC has not requested nor received Government funding for any of the years being presented today.

Mr. Speaker, I will now return to comment about the delayed tabling of reports for the Company. I am advised that there are several reasons for the delay but you can imagine that none rise to the level of satisfaction for me, given that we are now in 2018 with the most recent accounts relating to March 31, 2012. The underlying explanation for the delay is that the Auditor General was concerned about the procurement processes at the Company in 2010. The Auditor General completed a Special Report that year and determined that a more detailed examination of the accounts was required, which necessitated more time intensive processes to complete the audit. The delay was compounded by a recommendation to write down the carrying value of the Company’s assets by $6.7m [which had been audited since 2004] based on a review by the new finance team. The 2010 Audit was finalized on February 2, 2015. The 2011 Audit was impacted by changes in accounting rules related to public entities and the 2012 Audit was completed in January 2018.

Mr. Speaker – it is important to know how we will get this situation rectified. To that end, the Company completed a significant software upgrade this year to evolve beyond its legacy 2012 accounting systems. In addition, the shareholders, at the Company’s AGM in July approved a timetable and resources for all financial statements to be prepared and presented to the Auditor General by year end. An indication of the success of management’s efforts is that the 2013 accounts are presently with the Auditor General for review, with the remaining years anticipated to be submitted by year end. The Company also agreed to cover the additional costs to outsource the audits, at the direction of the Auditor General, if it is deemed practical to do so. The refusal of the Auditor General to allow outsourcing of this work is the source of ongoing frustration at all levels of the Company and contributes to the delay.

Mr. Speaker, the irony of this measured and sensible approach to the BLDC accounts that are presently 6 years out of date is not replicated in the qualified report tabled earlier in regard to the Consolidated Fund. Specifically with regard to the $10.3 million of capital development works which comprise primarily road works that can easily be verified – even without the documents – by simply driving on those very roads. I can confirm that those documents were in the office of the Auditor General – albeit delivered late – before the report was made – so one is left to ask the question of why the double standards.

Mr. Speaker, to add context to my remarks today, I note that the Company is doing commendable work in accordance with its mandate.

• A Request for Qualifications for a new Cargo Port and Energy Plant at Ships Wharf in St. David’s was issued in March this year.

• Significant improvements have been made to the potable water supply and treatment of wastewater at Southside.

• The annual National Heroes Parade has been hosted there since 2016.

• Bathrooms at Clearwater Beach have been completely renovated.

• New parking has been constructed at Turtle Bay.

• Daniels Head was reopened to concessionaires and the general public in 2017, whilst seeking a long-term developer for the site – [of note the shareholders decided earlier this year to withdraw Daniels Head from further development consideration at this time.]

• An Expression for Interest for Tudor Hill has been issued.

• And substantial renovations have been made to existing commercial and residential buildings.

Mr. Speaker, In addition to improving the financial management of the Company, the Board has been focused on significant improvements in governance. In that regard, they have consistently approved an annual operating and capital budget, business plan and strategy as required by the Act.

Following the recent announcement that certain of the operational roles at BLDC and BHC would be combined, as originally recommended in the 2003 Report on Untangling Bermuda’s Quangos and further endorsed by the SAGE Commission – we anticipate further efficiencies.

Mr. Speaker, I would like to thank the Board, Management and staffs at both Wedco and BLDC for all their hard work over the reporting periods.

Thank you, Mr. Speaker.

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