The Comptroller and Auditor General has given its approval to the way Nama valued the loans it bought off banks at discount prices.
A special report said it was satisfied the assessment done to put a price on the assets was robust.
However, it criticised one of the fundamental methodologies which was used to underpin the original valuation of loans.
The report said when Nama was valuing assets that had tenants, it failed to allow for management costs when calculating potential profits.
In the case of six sample borrowers, who together had €1.9bnin debt, Nama expected their properties to generate €10.7m in rental profit last year.
However, only €7.9m was received. In the case of one borrower, there was an 82% shortfall. This was because Nama originally believed it would receive all rental income generated. In fact, it got the amount after expenses.
The C&AG said the methodology used by Nama had been approved by the European Commission but it did not provide for the indirect costs of managing the properties.
In its response, Nama said before the loans were transferred, the developers were not required to pass over any rental income or use it to pay down loans.
Nama’s chief executive, Brendan McDonagh, told the C&AG it now required rent to be lodged into a designated account but developers were allowed to keep an agreed amount to meet their overheads.
The C&AG’s report also revealed Nama had decided to scale back on its investigations into hidden assets of developers. The report described the outcome of some of these searches.
In one case, Nama spent €75,000 on deep searches of assets belonging to a developer. These discovered three properties in America, four high-value vehicles, a share of an office building in Dublin, the transfer of a European property to a spouse and an undisclosed shareholding.
In another case, €15,000 was spent to reveal a non-European residential property, two race horses and links to six corporations outside of the EU.
However, in some cases the searches were restricted because of privacy laws.
“Overall it was concluded that the cost of the searches might outweigh any potential benefits,” the C&AG said.
In response to the report, Nama chairman Frank Daly said the agency was aware of the issues raised and was working on them.
“[The report] highlights the challenges associated with managing the acquired loan portfolio so as to generate the cash flows that will enable Nama to meet its debt repayment targets.
“These challenges are well known to us but we remain very much on course to fulfil the primary commercial objective that has been set for us by the legislature.”
Shortly after the & report was released Nama published its results for the final quarter of 2011, showing an operating profit of €484m before it wrote down the value of impaired assets.
The report of the comptroller and auditor general showed that Nama had succeeded in reversing 31 cases where developers had transferred their assets to relatives.
This stopped efforts to put €160m worth of assets beyond the reach of the agency.
In another 17 cases transfers to relatives have been detected but Nama is still in discussions about reversing the move or putting a charge on the properties.
Five transfers by developers are the subject of legal action by Nama.
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