The cash-strapped general contractor of the new $70 million secondary school has received advances and loans from Government to see it through the project so far.

Auditor General Larry Dennis said, as of the end of August this year, Pro-Active had received monthly or twice-monthly payments amounting to 29 percent of the total contract value.

He complimented the Ministry on its system for processing payments and said it was well-designed, and he said controls appeared to be working well.

However, the Auditor General said he had discovered that in some cases those controls had been overridden by senior management.

He said: "An important Ministry control over monthly payments is exercised through its quantity surveyor.

"His duties include reviewing the work done each month and assessing its value.

"He then reviews each component on the detailed sheets and certifies as to whether the work claimed has been done and the amount billed is in accordance with the contract."

Mr. Dennis said payments were generally made based on the quantities certified by the quantity surveyor, which were reviewed and signed by the project manager and approved by the Minister's Permanent Secretary.

"Documentation examined during the audit shows that all payments to Pro-Active under the contract were properly processed and approved," said Mr. Dennis.

"My examination of monthly payments to Pro-Active revealed payments that were not strictly in accordance with contractual requirements or that exceeded amounts certified by the quantity surveyor."

For example, Mr. Dennis said in September of last year, Pro-Active was given a payment that included an amount not approved by the quantity surveyor.

The general contractor had claimed usage of machinery ranging from 60 to 90 percent, but the quantity surveyor reduced that usage figure to 25 to 30 percent.

Mr. Dennis said as less than four percent of the project was complete at that time, the quantity surveyor's assessment may even have been generous.

"Notwithstanding this, the Acting Permanent Secretary approved payment of the amounts claimed by Pro-Active.

"The `uncertified' amount paid was $450,000 and was effectively a cash advance to Pro-Active," said Mr. Dennis.

And the Auditor said in October last year, Government made payments totalling more than $500,000 direct to suppliers of the general contractor, which were concessions allowed to Pro-Active.

He said they were not planned for in the original contract, however, were catered for by an addendum to the contract, prepared by the Attorney General's Chambers.

The total of those payments is being treated as a loan and the Ministry is collecting interest at nine percent on the outstanding balance.

The contract calls for Pro-Active to be paid monthly for certified work, however, since April this year the company has been paid twice-monthly.

This, again, has been described as a concession by the Ministry.

But, in July and August of this year, there were also additional cash advances of $500,000 to help Pro-Active with its cash-flow problems.

They were approved by the Permanent Secretary and were deducted from amounts paid to Pro-Active at the month end.

Mr. Dennis said there had been some approved increases to the budget, but they were all immaterial to a contract of this size.

However he said Pro-Active had claimed for additional costs totalling $1.4 million, which had been rejected by the Ministry.

Mr. Dennis concluded that Government has assumed increased risk with the project and had therefore incurred additional financing costs.

He said: "I acknowledge that the Ministry is within its authority to grant the concessions, and the concessions were approved at an appropriately senior level.

"I am concerned, however, that the advice of the Ministry's quantity surveyor has been disregarded so often.

"As well, advance payments are generally discouraged by Government policy since they increase the risk assumed under contracts and increase Government borrowing costs."