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PHI sold properties without doing valuations, relied on bids – Audit
Who sells a property before knowing its worth? Property Holding Inc (PHI) does. This was highlighted in the recently released forensic audit report.
Former Director of PHI, Winston Brassington
For years, PHI was run by one of the most controversial public officials employed under the People’s Progressive Party/ Civic (PPP/C) government—Winston Brassington. He also had responsibility for about 13 other companies, including the National Industrial and Commercial Investment Limited (NICIL).
NICIL was not given a clean bill of health by forensic auditors, and neither has PHI.
Problems highlighted by auditors range from PHI noncompliance with tendering to PHI putting the proceeds of sales in several accounts.
Auditors also reported, “In order to save cost for PHI, a decision was taken by the board of PHI to execute current valuation of properties before public tenders were advertised. This has not happened in numerous cases.”
Auditors said that in many cases, instead of getting valuations, “PHI relied on the bid price as the source of current valuation.”
Auditor, Charles Sugrim, recommended that the current valuation of each property be obtained before any tender is advertised.
Responding to Sugrim’s finding, PHI’s management said that the recommendation is a “standard practice…despite the suggestion or implication that this is not the case. The audit report does not record if any sales occurred without a valuation prior to tender.”
Still, PHI said, “it was the general practice to conduct valuations prior to sale, save and except, a couple of instances when the valuations were conducted after the process but prior to the completion of a sale.”
The entity also said that based on the high cost of valuations, which were generally tied to the value, regular valuations were not cost effective.
“Further, the various boards recognized that valuations were not market valuations in the strict sense, as valuators did not have much information on appropriate comparables. The Privatisation Board felt that the compelling factor was what a willing buyer and willing seller would buy and sell at based on a competitive process.
“Given that this was carried out for the most part, the fairness of the price was best determined this way. The Privatisation Board also felt that previous valuations were often quite different among different valuators, and in some cases the discrepancies in quantum were quite large. Further, the methods used by the valuators were likely an adjusted replacement value rather than a strict market value. As such, Board members used the market bids, previous valuations, and their judgment in determining whether to recommend a sale.”
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Valuation is only ‘recommended’ not mandatory.