Following questions raised at recent AGMs, we wish to clarify the accounts produced by Milenium for both La Isla and a consolidation for the remainder of the resort were independently audited at the time except for the year 2016 and the first half of 2017 when they handed over to Admiburgos.
The audits found no evidence of any wrong doing and we have no reason to believe anything different occurred in 2016 or first half of 2017. The purpose of getting a further independent review is to validate these findings and also agree the balances between the level 2 areas and the level 1 and Urban Entity and agree the basis for the proposed bad debt provision to be included in the 2019 accounts based upon the historic information of ageing of the current debtor balances.
An initial bad debt provision has been calculated and we are further refining the calculation by checking significant movements in the debt over the last 8 years and how the large debt balances for individual apartments have built up over the years. The more thoroughly we perform our assessment and provide detailed calculations the more cost effective the process will be for the owners.
The validation of the intra resort balances is more complex and not an area focussed upon during the initial audits. We have to consider the coefficients used for allocation of cost, the amounts allocated to the level 2 communities and the bank movements to settle the outstanding amounts. The balances are derived from the start of the resort so some investigation and calculations will need to go back this far for meaningful conclusions to be drawn.
The collection and then investigation of the data continues and when we have drawn some conclusions we will get the results verified by an independent auditor. Whilst there is a statutory limit of 5 years on what we can claim from a third party if we find wrong doing in the accounts, from the investigation already completed and the previous external audits this is not the primary focus of the further external audit.
I would remind the community the audit was suggested by the current management board and supported by the ownership at the 2018 AGM. Whilst it is regrettable the preparation was not completed in 2018 this reflects the complexity of the task and there is little benefit in performing a superficial exercise which will just waste owners money for the sake of saying we have completed the task.
I can assure you, we will make every effort to complete the exercise and the independent audit during the current year so we can bring closure to this item.
Furthermore we have been working closely with Admiburgos and the level 1 board to improve our financial reporting with production of a summary financial scorecard, full year cash flow forecasts and further analysis of debtors. We are also looking to perform benchmarking of community fees at Condado against other similar resorts to potentially see how we can provide better value for money. As these are developed they will be shared with owners on a periodic basis.
Level 1 Board