Tweet
NHT: Good accountability, worrying finances
T. Ransparent - Analyst
The National Housing Trust (NHT) publishes one of the most informative and attractive annual reports - and on a timely basis - of all the public sector companies. Con-gratulations.
http://nht.gov.jm.
Its current 20-member board is chaired by attorney-at-law Howard Mitchell and has strong representation from the trade union movement and civil service, but is seriously lacking in senior business members.
Non-executive directors are modestly paid, receiving in total under $2m for the year.
The institution, which is headed by managing director Earl Samuels has a broad mandate to add to and improve the country's existing supply of housing and to enhance the usefulness of the funds of the Trust by promoting greater efficiency in the housing sector.
2007 FINANCES
NHT's total assets have grown from $46 billion in 2002 to $89 billion at March 2007.
The net surplus fell from $2 billion in 2002 to a loss of $1.9 billion in 2006, but the agency returned to profitability last year, reporting $528 million of profit at year end March 2007.
Operating expenses increased by 35 per cent in the 2006/07 year.
The average interest rate on loans was 8.0 per cent in 2002, reduced to 6.0 per cent in 2007.
NHT wrote off $65 million of the book value of equity investments and intangible assets in the review year - no details provided.
The agency has a strong and guaranteed cash flow. In 2007 it took in $10 billion of new contributions (2002: $5b) and only refunded $2 billion (2002: $446m). These contributions come from employers - 3.0 per cent of payroll and non-refundable; and employees - 2.0 per cent of salary, refundable after seven years.
Employee contributions earn 3.0 per cent per annum for seven years and, if not claimed as a refund, 8.0 per cent thereafter.
ACCOUNTS QUALIFIED
Deloitte & Touche's 2007 audit report of the Trust is qualified. The auditors indicate that NHT has not established personal accounts for some employed persons who made contributions to the agency.
The balances on these accounts appear to total a staggering $35 billion (Note 20), a substantial increase from $30 billion in 2006.
NHT indicates that the absence of personal accounts is due to employers not sending in proper annual returns.
NHT has also been sued for $214 million arising from an arbitration award over a housing project. NHT is challenging the award, which represents about 40 per cent of 2007 profits.
The trust has lent over $1 billion in mortgage loans on land for which titles are not yet available. The backlog of work at the Titles Office must be dealt with. But in the meantime, what real security does NHT have in relation to this $1 billion of loans?
UNUSUAL LOANS, INVESTMENTS
NHT over the past years has branched out and made a number of non-traditional loans/grants.
The trust has invested $302 million with three other shareholders in Central Wastewater. What is this and who are the other shareholders?
We know that the Trust owns 49 per cent of Harmonisation Limited, the company overseeing the Harmony Cove luxury tourism project in partnership with the Tavistock Group. NHT invested $917 million in this project and up to March 2007 had losses of $163 million.
Emancipation Park - a wonderful addition to Kingston's recreational facilities - cost NHT a little less than $1 million per week.
The Jamaica Defence Force borrowed $80 million for 15 years at 8.0 per cent, a loan apparently government guaranteed.
The agency also advanced $5 billion in 2005/06 to the Education Transformation Fund.
And $1.4 billion has been given as subsidy for the Inner-City Housing Project over two financial years.
NHT intended to spend $15 billion for this project in Kingston, St Catherine, St Mary and Westmore-land, creating 5,000 two and three-bedroom apartment housing solutions.
The cost of refurbishing works will be borne as direct Trust expenditure.
NHT should be congratulated for attempting to deal with inner-city housing problems, but criticised for not getting the mix right - building houses that persons can afford.
PM'S ANNOUNCEMENT
Prime Minister Bruce Golding in his budget debate speech announced an increase in NHT mortgage rates and serious concern over NHT's finances.
These issues cannot be analysed in this article due to dated data. However, there are clear signs that NHT has started using its vast resources in new creative/risky/ unanticipated ways.
RECOMMENDATIONS:
1 Explain in simple terms to NHT contributors the justification for the increased mortgage rates - be careful of creating a sub-prime crisis. The board of NHT has a responsibility to report directly and not just through the PM's budget speech. NHT is not meant to be used as a political instrument.
2 The existing funds in NHT will never be used fully to finance housing. It is time that the employers contributions (about $5b in 2007) either be discontinued or re-applied to general revenue for a specified new purpose. For a government to continue taxing employers, based on their payrolls, is unjust and guarantees fewer jobs. It's time to face reality.
3 Adopt stock exchange reporting requirements - publish quarterly accounts with supporting report. Report on the arrears status of the loan portfolio and the status and future of the Inner-City Housing Project.
4 Update website information: 'Loans made' stops in March 2006 and annual financial data stops in 2002, even though the information for the periods thereafter is published in the 2007 annual report on the website.
5 Note 30 to the audited accounts suggests that NHT entered into transactions with key management personnel/directors amounting to $15 million. Can the board provide details?
6 If Note 20 to the accounts is accurate then the NHT accounting system is in bad shape and getting worse in respect of accounting for contributions received.
7 Provide an update about adequacy of security for $1 billion lent without titles.
8 Support and work to implement a consolidated monthly contribution from employers combining all statutory deductions.
9 Develop, with the GOJ a national strategy for redeveloping the slum/squatter communities of Jamaica. Much of our social disintegration is due to poor families having inadequate shelter. Providing housing for the poor is a job that only NHT can tackle as the GoJ will not have the funding in the near future to do this. Maybe NHT can provide the funding and the GOJ guarantee the loans?
business@gleanerjm.com
T. Ransparent - Analyst
The National Housing Trust (NHT) publishes one of the most informative and attractive annual reports - and on a timely basis - of all the public sector companies. Con-gratulations.
http://nht.gov.jm.
Its current 20-member board is chaired by attorney-at-law Howard Mitchell and has strong representation from the trade union movement and civil service, but is seriously lacking in senior business members.
Non-executive directors are modestly paid, receiving in total under $2m for the year.
The institution, which is headed by managing director Earl Samuels has a broad mandate to add to and improve the country's existing supply of housing and to enhance the usefulness of the funds of the Trust by promoting greater efficiency in the housing sector.
2007 FINANCES
NHT's total assets have grown from $46 billion in 2002 to $89 billion at March 2007.
The net surplus fell from $2 billion in 2002 to a loss of $1.9 billion in 2006, but the agency returned to profitability last year, reporting $528 million of profit at year end March 2007.
Operating expenses increased by 35 per cent in the 2006/07 year.
The average interest rate on loans was 8.0 per cent in 2002, reduced to 6.0 per cent in 2007.
NHT wrote off $65 million of the book value of equity investments and intangible assets in the review year - no details provided.
The agency has a strong and guaranteed cash flow. In 2007 it took in $10 billion of new contributions (2002: $5b) and only refunded $2 billion (2002: $446m). These contributions come from employers - 3.0 per cent of payroll and non-refundable; and employees - 2.0 per cent of salary, refundable after seven years.
Employee contributions earn 3.0 per cent per annum for seven years and, if not claimed as a refund, 8.0 per cent thereafter.
ACCOUNTS QUALIFIED
Deloitte & Touche's 2007 audit report of the Trust is qualified. The auditors indicate that NHT has not established personal accounts for some employed persons who made contributions to the agency.
The balances on these accounts appear to total a staggering $35 billion (Note 20), a substantial increase from $30 billion in 2006.
NHT indicates that the absence of personal accounts is due to employers not sending in proper annual returns.
NHT has also been sued for $214 million arising from an arbitration award over a housing project. NHT is challenging the award, which represents about 40 per cent of 2007 profits.
The trust has lent over $1 billion in mortgage loans on land for which titles are not yet available. The backlog of work at the Titles Office must be dealt with. But in the meantime, what real security does NHT have in relation to this $1 billion of loans?
UNUSUAL LOANS, INVESTMENTS
NHT over the past years has branched out and made a number of non-traditional loans/grants.
The trust has invested $302 million with three other shareholders in Central Wastewater. What is this and who are the other shareholders?
We know that the Trust owns 49 per cent of Harmonisation Limited, the company overseeing the Harmony Cove luxury tourism project in partnership with the Tavistock Group. NHT invested $917 million in this project and up to March 2007 had losses of $163 million.
Emancipation Park - a wonderful addition to Kingston's recreational facilities - cost NHT a little less than $1 million per week.
The Jamaica Defence Force borrowed $80 million for 15 years at 8.0 per cent, a loan apparently government guaranteed.
The agency also advanced $5 billion in 2005/06 to the Education Transformation Fund.
And $1.4 billion has been given as subsidy for the Inner-City Housing Project over two financial years.
NHT intended to spend $15 billion for this project in Kingston, St Catherine, St Mary and Westmore-land, creating 5,000 two and three-bedroom apartment housing solutions.
The cost of refurbishing works will be borne as direct Trust expenditure.
NHT should be congratulated for attempting to deal with inner-city housing problems, but criticised for not getting the mix right - building houses that persons can afford.
PM'S ANNOUNCEMENT
Prime Minister Bruce Golding in his budget debate speech announced an increase in NHT mortgage rates and serious concern over NHT's finances.
These issues cannot be analysed in this article due to dated data. However, there are clear signs that NHT has started using its vast resources in new creative/risky/ unanticipated ways.
RECOMMENDATIONS:
1 Explain in simple terms to NHT contributors the justification for the increased mortgage rates - be careful of creating a sub-prime crisis. The board of NHT has a responsibility to report directly and not just through the PM's budget speech. NHT is not meant to be used as a political instrument.
2 The existing funds in NHT will never be used fully to finance housing. It is time that the employers contributions (about $5b in 2007) either be discontinued or re-applied to general revenue for a specified new purpose. For a government to continue taxing employers, based on their payrolls, is unjust and guarantees fewer jobs. It's time to face reality.
3 Adopt stock exchange reporting requirements - publish quarterly accounts with supporting report. Report on the arrears status of the loan portfolio and the status and future of the Inner-City Housing Project.
4 Update website information: 'Loans made' stops in March 2006 and annual financial data stops in 2002, even though the information for the periods thereafter is published in the 2007 annual report on the website.
5 Note 30 to the audited accounts suggests that NHT entered into transactions with key management personnel/directors amounting to $15 million. Can the board provide details?
6 If Note 20 to the accounts is accurate then the NHT accounting system is in bad shape and getting worse in respect of accounting for contributions received.
7 Provide an update about adequacy of security for $1 billion lent without titles.
8 Support and work to implement a consolidated monthly contribution from employers combining all statutory deductions.
9 Develop, with the GOJ a national strategy for redeveloping the slum/squatter communities of Jamaica. Much of our social disintegration is due to poor families having inadequate shelter. Providing housing for the poor is a job that only NHT can tackle as the GoJ will not have the funding in the near future to do this. Maybe NHT can provide the funding and the GOJ guarantee the loans?
business@gleanerjm.com
Comment