Thu | Aug 24, 2017

Government department spends $76m on rent without moving in

Published:Monday | March 13, 2017 | 3:00 AMArthur Hall
The old Oceana Hotel building being refurbished by its new owners.

The Accountant General's Department (AGD) has so far racked up a bill of almost $76 million to lease the ground floor of the old Oceana Hotel building in downtown Kingston, which it is yet to occupy.

To compound the seeming waste of taxpayers' money, the Ministry of Finance and the Public Service agreed to pay 77 per cent more than recommended by the commissioner of lands to rent the office space and a further 39 per cent more than recommended to rent parking spaces at the facility.

That is according to a just-completed special report by Auditor General Pamela Monroe Ellis into the lease of the ground floor of the property, which the Government sold for $385 million before agreeing to rent the space and spending some $400 million to renovate the area to be occupied by the AGD.

The commissioner of lands recommended a rental rate between $950 and $1,000 per square foot per annum. In addition, the commissioner recommended parking rates of $4,500 for uncovered and $6,500 for covered parking per month," said the auditor general in the report tabled in Parliament last Friday.

"However, the (finance ministry) agreed to a rental rate of $1,774 and parking rate of $9,030. This decision will cost the Government an additional $591 million over the lease term when compounded at 7.5 per cent as agreed in the lease," added the auditor general in her report.

The auditor general noted that the justification for the expenditure from the finance ministry was that the lease was negotiated within the context that Justice Square, which now houses the AGD, was required urgently, and previous attempts to locate suitable alternative premises proved unsuccessful.

"Further, the ministry indicated that international funding of $7.5 billion would be lost if the AGD did not relocate from the current premises by the end of 2016 to facilitate the Justice Square Project. To date - March 2017 - the AGD has not relocated, (and) the leased premises remain unoccupied," reported the auditor general.

 

... Inadequate planning pushes refurbishing project over budget, behind schedule

A just-completed special report by Auditor General Pamela Monroe Ellis has questioned the expenditure on the refurbishing of the area to be occupied by the Accountant General's Department (AGD), with the auditor general noting that it is over budget and behind schedule.

Last March, the finance ministry and the contractor signed an agreement for the construction build-out of the offices valued at just over $400 million.

The work was scheduled to begin on April 1, with expected completion on July 31, 2016.

However, the auditor general reports that inadequate planning resulted in variation costs of $52.05 million, or 13 per cent of the contract sum, and the payment of $9.2 million for time overrun as at January 27, 2017.

"It was disclosed that a complete set of construction drawings were not submitted to the bidders at the time of tender to allow for proper costing of the renovation works. This resulted in variation costs of $44.79 million, while the remaining $7.26 million was to level the uneven floor," said the auditor general.

"No approval was obtained for these variations. As at January 27, 2017, we noted that $285.43 million (or 63 per cent) of the total value of works has been completed. UDC indicated that the project is scheduled for completion by March 31, 2017," added the auditor general as she urged the Government to review its property-leasing policy to minimise its risk exposure from future lease arrangements.

"We estimate that the (Ministry of Finance) acceptance of the offer by the owner, coupled with other amendments, has resulted in a negative budgetary impact of $643.83 million," charged the auditor general.

arthur.hall@gleanerjm.com