Auditor General Larry Dennis said he continued to be concerned about the ability of Union Asset Holdings (UAH) to meet claims of up to $6.89 million should the $70 million Berkeley School development run into additional expenses.

In his lengthy response to criticism from UAH parent company, the Bermuda Industrial Union (BIU), Mr. Dennis said he made no excuses for questioning the validity and adequacy of the performance bond (insurance), which general contractor Pro-Active Management Systems was required to have in place to cover ten percent of the job.

He said: “Yes, I do question the ability of the BIU subsidiary, Union Asset Holdings Ltd, to meet the claims of up to $6.8 million under the bond, if called upon to do so.

“Why? Because proof of the ability of the BIU subsidiary to meet its claims should be in the files of the Ministry of Works and Engineering. It is not.

“In addition, the length of time it is taking to get there after repeated requests is unnerving, to say the least.”

The auditor said he was still waiting to see the original performance bond document, as opposed to a copy, and still wanted to see the assessment of the surety, which should have been carried out by the Attorney General's Chambers or Cabinet.

Mr. Dennis came in for sharp criticism from BIU president Derrick Burgess over his comments about the bond in his special report on the project released last week.

Mr. Burgess questioned why special audits had not been carried out on other projects under the previous Government and said the auditor would not have questioned the validity of a bond put up by any other city business.

At his Tuesday press conference, Mr. Burgess levelled angry racial innuendoes against the auditor, and said the BIU was being attacked because it was a working class organisation. Mr. Burgess also complained that Mr. Dennis had never tried to contact him about his concerns before releasing the report.

But the auditor said yesterday: “It is an axiom in auditing that is it not the responsibility of the auditor to prove the organisation correct; it is the responsibility of the organisation to prove that it is correct.

“Inconsistencies and delays heighten professional scepticism and, if they continue long enough, they begin to taint the audit environment.”

Mr. Dennis said contrary to the BIU claim that he said it was unlikely that the BIU was in a financial position to satisfy the bond claims, he said that was not true.

Mr. Dennis said what he actually stated in his report was that “it is unclear whether the BIU's assets are available to its subsidiary to satisfy bond claims. In my view it is unlikely.”

And he said he continued to think that.

But he said he had so far been unable to establish whether or not the BIU would cover the bond for its subsidiary company, if needed to.

“Union asset Holdings Ltd is a separate corporation enjoying limited liability,” he added.

“In this situation, the parent organisation's assets would not normally be available to satisfy the debts of the subsidiary.

“Further, why would the BIU go through the trouble of setting up a limited liability company if it were not going to take advantage of the limited liability benefit?”

But Mr. Dennis said he did not need to know the answer to that question to satisfy his “significant concerns” about the bond.

He said first he must receive the assessment documents outlining Union Asset Holding's capabilities from the Attorney General's Chambers and determine that there is a link between its potential liability and the BIU's assets.

Mr. Dennis said the BIU, in its statement, had implied that the union did guarantee the bond when it accused him of believing that it was impossible for a working class organisation to have enough assets to cover such a bond.

The Auditor General said he should not have to question whether or not an organisation has enough assets to guarantee a bond, and in this case, it should be a matter of public record, but it is not.

He said the BIU had not submitted its financial reports since 1999, so it was impossible for him or anyone else to look at its assets.

And regarding the statement about the BIU covering the bond, he said: “This is the first time I have come across any indication of this fact. I'm sure I shall come across the guarantee as soon as I am given the files pertaining to the assessment of Union Asset Holdings Ltd's ability to cover the $6.89 million bond, an exercise which the Ministry of Works and Engineering is required to do in accordance with rules, regulations or instructions, and the evidence of which I have the right to examine in accordance with the Audit Act 1990 and the Constitution.”