The auditor general has reminded members of the Development Bank of Jamaica (DBJ) board to properly declare their interest in companies that are awarded loans to avoid the perception of lack of transparency.
Pamela Monroe Ellis gave the nudge in a special audit report on loans awarded by DBJ between 2015/16 and 2020/21 to two companies in the ICT/BPO sector, in which board members had an interest but did not make written disclosures.
The report, tabled in the House of Representatives on Tuesday, also noted that the concerned members had recused themselves from deliberations associated with the loans.
The probe was conducted by the Auditor General’s Department based on anonymous allegations of malpractice in the award of the loans and conflict of interest.
Monroe Ellis said, while her team found no evidence to support the allegations of malpractice surrounding loans awarded to the ICT/BPO sector, it did identify variances between the requirements of the board for disclosure of conflicts of interest, and the actual practices by members of the DBJ board.
According to the report, the board members who had interests in entities which benefited from loans did not make the formal written disclosure, which is required by the DBJ’s code of ethics, but that the information was divulged verbally during meetings of the DBJ’s Investment Finance and Loans Committee (IFLC) and captured in the minutes of the meetings.
“Based on the information provided, all conflicts of interest declared in relation to the ICT/BPO sector were managed,” Monroe Ellis noted.
The auditor general said a total of 285 companies were identified in which the DBJ’s board of directors had interests between fiscal years 2015-16 and 2020-21. Two of these (identified only as companies A and B) were also beneficiaries of three loans from the DBJ of approximately US$12.32 million in total.
“The first of the three loans to both entities was approved in September 2015 for US$5 million to Company A, representing approximately 22.5 per cent of the total loans to the ICT/BPO sector approved in that fiscal year [total of US$22,164,146 — one of six loans],” the report outlined.
The loan for US$6 million to Company B was approved in January 2020, as well as another loan of US$1.32 million in March 2020, which represented 53.4 per cent of the total loans (US$13,692,822 — two of seven loans) to the ICT/BPO sector during that fiscal year.
Regarding the allegation of malpractice in the award of loans, Monroe Ellis said her assessment of the loan files for the two companies showed that they had met the criteria for receiving direct loans, and that the bank had adhered to the stipulations of the loan policy when approving these loans.
Twenty-three loans were awarded to the ICT/BPO sector amounting to $8,189 million between 2015-16 and 2020-21.
Concerning the allegation of conflict of interest, the auditor general noted that according to the DBJ’s code of ethics, board directors are not precluded from having interests in other companies, but those who have a stake in companies that are loan beneficiaries are required to declare their interest and recuse themselves from deliberations.
“We noted from our review of the minutes from meetings of the board of directors and the Investment Finance and Loans Committee that verbal declarations were made for Company A and Company B, two associated companies within the ICT/BPO sector, and the affiliated members recused themselves from these deliberations,” the report stated.
The DBJ provides funding and technical assistance to large projects. It also assists micro, small and medium-sized enterprises through an islandwide network of approved financial institutions.