British Virgin Islands

Wednesday, Jan 19, 2022

Internal Audit: Govt’s SME COVID grant initiative failed expectations

Internal Audit: Govt’s SME COVID grant initiative failed expectations

The sitting government’s 2020 ‘stimulus grant’ programme to assist small, medium and micro enterprises (SMEs) that were negatively impacted by the health pandemic, was improperly regulated and failed to fulfil most of its expectations.

This is according to the details of a report revealed during Wednesday’s hearing of the Commission of Inquiry (COI) where the government’s Internal Auditor, Dorea Corea shared her findings.

According to the internal audit report, the execution of the SME assistance grant programme exposed significant structural and operational deficiencies within the BVI government.

The report said the programme focused on ‘accommodating businesses’ rather than executing a process that would optimise the allocation of grants fairly and transparently to SMEs that proved they were negatively impacted by COVID-19.

It was also found that the programme was stripped of all basic controls and criteria for determining eligibility, approval and accountability.

Initially, the audit found, there was a plan for each business to fill out a form to state how they were going to utilise the stimulus funds they received. But this was never implemented.

No financial information submitted to access grants

The SME assistance grant programme began with an extensive application, eligibility and approval criteria designed to assess each business’ operational position and compliance with various statutory requirements.

However, the audit found that due to time constraints and the unavailability of requisite data, the majority of these criteria were eliminated from the final execution of the programme in order to facilitate greater participation of businesses.

According to the audit, the programme’s review process was rudimentary, flawed, and not evidence-based in its assessment of applications.

Persons were selected for grants based on two factors; an approved trade license and the reported profit-and-loss factor as reported by the business owner.

And in most cases, the audit found that no financial information was collected or reviewed to confirm whether the applicants’ claims were true. A majority of the applicants, it said, did not actually maintain any financial information that could be submitted.

Poor criteria used to assess applications

Ultimately, the only eligibility criteria utilised was the business’ trade license and the business employing fewer than 20 employees.

The reclassified criteria, the report found, created inequity in the process because of the sizes of the various businesses.

As a result of the approach adopted, funding was awarded to businesses such as DJs, entertainers, and vehicle rental companies that would yield little economic benefit in the current environment.

Essentially, it was not being used as an economic stimulus, but rather as social support for businesses.

The report also found that the individual needs of each business were not considered. And as such, all businesses within the programme were treated as having equal financial needs.

An example given in the report showed that a micro business with one employee, which suffered a loss of $1,000 received the same amount as a medium business with six employees, and a loss of $10,000.

Furthermore, even though a cap of $15,000 was implemented, a lack of transparency in disclosing how businesses were able to receive funds meant businesses in some instances received more than this amount.

Based on the manner in which the applications were reviewed and assessed, effective controls were not put in place to ensure this cap was not breached.

The internal audit also reported that information and assistance were not forthcoming from the Premier’s Office, which administered the programme. The Office of the Auditor General also reported having this problem.


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