The Bahamas Mortgage Corporation's (BMC) report for the financial year ending June 2012 reveals that the corporation did not have "sufficient" and "appropriate" evidence to support the balances and transactions that accompanied its financial statements. The corporation recorded that total mortgages were over $160 million as of June 2012.
BMC's auditor, Beneby & Company, completed the report on April 22, 2014. In its "basis for disclaimer of opinion" section, the auditor wrote that the "current state and quality" of BMC's accounting records did not allow the accounting firm to reach any opinion on the financial standing of the government entity.
"There were no satisfactory audit procedures that we could have performed to obtain reasonable assurance that the balances and transactions were free from material misstatement," the report states.
"As a result, we were unable to determine whether any adjustments would be required to the financial statements in respect of recorded or unrecorded balances and transactions."
The report notes that the corporation's success depends on its "ability to obtain adequate cash flow to meet its bond and interest payments, and financing of the Department of Housing's housing development obligations".
However, the report pointed out that circumstances acknowledged by management, "raise significant concerns" with the corporation's ability to continue as a going concern.
One of the reasons mentioned was its "high mortgage loan delinquency rate".
In January, a source explained to Guardian Business that the government-owned entity to date had a 42 percent delinquency rate and that 38 percent of its loan portfolio was non-performing.
Potential borrowers are more inclined to borrow from BMC, given its five percent equity down payment, which is relatively lower than other lending institutions.
The source contended that BMC does not have a problem attracting customers, but its "biggest problem" is the corporation's ability to raise funding.
Another concern, stated in the report, was the corporation's "inability to exercise its rights" under various collateral instruments, such as government guarantee and first legal mortgages.
Other concerns are: "excessive and increasing balances due from the Department of Housing" and "excessive borrowing to meet housing obligations". In 2012, the amount due from the Department of Housing was an estimated $15.5 million.
"Management's failure to correct these conditions could have an adverse effect on the corporation and may force the corporation to reduce or curtail operations," the report states.
BMC is also faced with an "underfunded bond sinking fund reserve", according the report.
The report also pointed out that BMC "seeks to mitigate" its high rate of loan delinquency through the implementation of "account monitoring procedures" and where possible, "through the receipt of salary deductions".

Click here to read more at The Nassau Guardian