Bermuda College has come in for criticism from Auditor General Larry Dennis for poor accounting and investing of the donations it received in the past.

In his annual report for 2000/20001 released last Friday, Mr. Dennis said the college had not tabled any annual reports since 1985, and said better policies and procedures were needed to record and support the acquisition of goods.

But Mr. Dennis said his biggest concern was that restricted funds, which were largely cash donations to the college, were used inappropriately.

And he recommended the college improve its accounting on a number of fronts, as well as ensure that it complied with legislation.

In his report, he said: "The college co-mingles some restricted funds with its operating funds.

"The college receives donations and similar amounts that can be used only for the purposes prescribed by the donors. These amounts are designated as restricted funds, and accounting conventions require that they be properly safeguarded and segregated from the recipient's operating funds."

However, Mr. Dennis said this had not happened between April 2000 and March of last year. He added: "At March 2001, almost $600,000 of restricted funds were in the college's operating back account.

"A greater concern is that the operating bank account was overdrawn. This means that the college has spent those restricted funds and therefore was violating the restrictions imposed on the use of the funds by the donors."

And the Auditor General also voiced concern that on March 31 last year the college had invested almost half of the $500,000 of invested restricted funds in high-tech stocks.

Mr. Dennis said this could be considered an overly concentrated investment in one area or type of securities.

"The college should ensure that its investment policy for restricted funds is consistent with the restrictions imposed by the donors and the need to safeguard the value of those funds."

And he recommended that college improve its accounting and control for the acquisition of goods and services, for computer resource security, and for investing.

However, management at the college had responded to Mr. Dennis' concerns by claiming that once a chief financial and operations officer was appointed in the near future, emphasis would be given to systematically addressing the concerns in a reasonable time frame.

As yet, the officer has not been appointed but it is hoped that he or she will be brought on board soon.

Last night, Chairman of the college Jan Spiering, who took over in January of last year, said much of the auditor's report referred to accounting procedures under the previous administration and said he was only too aware of the downfalls.

But he said steps had already been taken to tighten up the policies and procedures and over the next couple of years the auditor should see a difference.

He said: "We agree absolutely with what he said, there is no question about it. This is something we need to do.

"We were aware of the restricted funds, and that again was a legacy of the past. That legacy has been corrected as part of the monies that we got through Government grant at the last budget.

"We have now set up a restricted funds account and we have basically corrected this area. We continue to be in the process of correcting other policies and controls."

But Mr. Spiering said it was an ongoing process and would not be 100 percent overnight.

But he said he hoped to see an improvement in the auditor's report next year, and even more so after that.

He added: "We are working on all of that and we have advised the auditor accordingly.

"Obviously, the auditor is able to report exactly as he sees fit. We agree with most of his remarks, but we will reserve the right to have our own views as to how we correct some of the areas."

Also mentioned in the auditor's report was the fact that the Bermuda College did not store copies of software and data files off-site to mitigate the loss of information in the event of a major fire or other business disaster.

And Mr. Dennis said more control needed to be placed over the acquisition of goods, including procedures to ensure the goods were paid for and received, proper invoices to support payments, and a policy to govern the tendering of large contracts.

But the college also came in for criticism over the troubled Stonington Beach Hotel. The college was responsible for the hotel until April this year when it was announced that the Education Ministry would no longer be responsible for it and would instead transfer it to the Ministry of Tourism.

A committee has been set up, including representatives from the college, to find a long-term investor to come in and manage the hotel, however, no decision has yet been taken on who that will be.

Mr. Dennis said in his report that the hotel, as of March last year, was still experiencing cash-flow problems and that management had continued to deal with its long-term money difficulties by delaying payments to suppliers and deferring capital expenditures.

But the auditor also said more effective debt collection efforts would have improved the cash flow of the hotel.

Mr. Dennis said financial control over the acquisition of capital assets was weak and said of particular concern to him was that some large capital acquisitions had not been tendered, with some acquisitions coming from suppliers who had personal or business relationships with hotel board members and staff.

He recommended: "Stonington Beach Hotel should develop a longer-term strategy for dealing with its persistent cash-flow difficulties, and improve accounting for and control over accounts receivable, debt collection, capital assets, bank reconciliations, and approvals and supporting documentation for certain expenditures."

However, with the hotel now in the hands of the tourism Ministry, and a new management company being brought in to oversee the running of it, the college should soon no longer have to account for its losses or problems.