The purpose of the loans and advances has been primarily to finance capital expansion and renovation costs and, to a lesser extent, to finance operating losses of the hotel.
Yearly interest is charged on the loans and a corresponding allowance is set up.
To assess the underlying value of the loans would inherently require a valuation of Algonquin Properties Limited's assets and results of operations. The scope of this is beyond the terms of our review engagement.
Our comments are therefore based on the assumption the Province of New Brunswick is satisfied it is appropriate for the full amount of the loans to be offset by the allowance.
The decision to request the write-off must be done in light of various administrative factors, including whether it is still appropriate to continue to charge interest on the loans.
The department has advised it has exhausted all collection efforts and believes the receivables, in the amount of $2.8 Million are, in fact, uncollectible.
Section II(l)
Loan receivable - Algonquin Properties Limited
Terms of Reference
"We were requested to review the loans and advances to Algonquin Properties Limited by the Province of New Brunswick".Background
The Province has been loaning and advancing funds to Algonquin Properties Ltd. (APL) since approximately 1973. The total outstanding amount of these loans and advances as of March 31, 1999 is in the order of $29.5 million. $9.7 million of this total bears interest at 9.06% with the remainder being interest free with no specific terms of repayment. APL is wholly owned by the Province and its general purpose is to administer the operations of the Algonquin Hotel in St. Andrews New Brunswick.Scope of Review Procedures and Analysis and Conclusions
Through discussions with the Office of the Comptroller we are advised the loans and advances have been fully provided for in an allowance for doubtful accounts.Recommendation
We recommend the Province of New Brunswick write-off all of the loans.Department of Labour - Receivables as a result of loan guarantees
Terms of reference
We had no specific terms of reference with respect to this matter. The matter was brought to our and the Steering Committee's attention by the Department of Labour for our review.Background
The Department of Labour has advised they currently have outstanding receivables as a result of honouring guarantees from certain Entrepreneurial and Student Venture programs. Funds were advanced to various individuals under the programs with the Province acting as guarantor in the event of default. When the Province was required to honour a guarantee and advance funds, a receivable was set up from the individual and the Province then attempted to recover it's funds.Scope of Review Procedures and Analysis and Conclusions
These receivables have been fully provided for in the Department's allowance for doubtful accounts.Recommendation
We recommend the receivables be written off.
