Auditor General Larry Dennis is to meet with Police tomorrow to discuss his probe into the mystery $700,000 payment to the general contractor of the new Berkeley secondary school.

The Royal Gazette reported last month how Mr. Dennis had handed over his information on the payment for a criminal investigation to begin.

He said he decided to take the matter to Police after repeatedly asking staff at the Ministry of Works and Engineering for documents relating to the payment, and nothing materialising.

He said on Friday: "I'm meeting with the Police next week to determine what's going to happen with these documents I need and whether or not there is a case.

"I will be sitting down with them and going through the whole scenario so far, step by step, and discussing how they would be involved."

Mr. Dennis said he would be meeting with members of the Commercial Crime Unit, and would then know after that which direction the matter will go.

Mr. Dennis asked the Police to probe the legality of the $700,000, which was paid to contractor Pro-Active Management Systems Ltd. in the autumn of 2001.

The auditor general raised serious concerns about the payment when he carried out a detailed audit of the whole $70 million new secondary school project last year.

The money was supposed to be a reimbursement of cash already paid out by Pro-Active to Union Asset Holdings Ltd. (UAH), a new company which had been set up by the Bermuda Industrial Union (BIU) to provide a bond (guarantee) for the massive development.

The $6.8 million bond, which was ten percent of the overall project cost, would provide some financial security to Government, which owns the school site, should Pro-Active fail to deliver on its contract.

In theory, once the bond was in place and Pro-Active had paid the $700,000 as a premium to UAH, then the Ministry of Works and Engineering was to reimburse the contractor.

However, both technical officers within the Ministry and the auditor general questioned why the $700,000 had been reimbursed to Pro-Active when Government had received no evidence that the money had been paid out in the first place.

Immediately following his report, Mr. Dennis asked the Ministry for the receipt to show that Pro-Active had paid the cash, along with the original copy of the bond agreement.

And he also asked the Attorney General's Chambers for a copy of the assessment supposedly carried out on UAH before the bond was put in place.

The assessment was to ascertain that the bond company had the financial capability to meet a demand of up to $6.8 million.

After he released his report at the start of December, Mr. Dennis wrote to both departments asking for the information, but it was not forthcoming.

As a result, he wrote to the Ministry of Works and Engineering saying that as the documents had not turned up, he assumed they did not exist.

He therefore said he was handing the matter over to the Police.

Mr. Dennis, in his audit, questioned the ability of the bond company to meet an immediate demand for cash should the project be delayed or go way over budget.

And he also questioned whether or not a bond was actually in place if the $700,000 premium had not been paid by Pro-Active.

However, Mr. Dennis also raised concerns over the fact that the bond was agreed 11 days before UAH had been officially created.

President of the BIU Derrick Burgess accused the auditor general of singling the project out for special attention, and inferred that Mr. Dennis was racist.

Works Minister Alex Scott has repeatedly said there was no financial wrongdoing in the project, and said the union had called Mr. Dennis and informed him that the $700,000 was received.

The Minister said he had the bond, and knew he could call on it, if needed.

Mr. Scott said he did not believe the Police investigation would go anywhere.Police refused to comment yesterday.