Nation to write off $2.2 million
for BCDS cost

By Kathy Helms
Diné Bureau

WINDOW ROCK — Write it off now, pray it’s recouped later.
That’s basically the strategy the Navajo Nation is going to take on the $2.2 million loan to Biochemical Decontamination Systems, or BCDS Manufacturing Inc. in Shiprock.

On Aug. 10, 2006, the Navajo Dam Review and Selection Committee approved the collateralization of a $2.2 million loan from the Navajo Dam Escrow Fund to finance an expansion of BCDS. The 20th Navajo Nation Council’s Budget and Finance Committee approved the plan five days later.

Navajo Nation President Joe Shirley Jr. signed a pledge agreement with JP Morgan Chase Bank on Sept. 29, 2006, authorizing collateralization of the loan, and BCDS and JP Morgan signed the loan agreement the same day.

The loan will mature Sept. 29, but with the whereabouts of BCDS’ former CEO Hak Ghun unknown, and the company hanging by a thread, the Navajo Nation, as 51 percent owner, is at a crossroads. Non-payment would result in default of the loan backed by the Escrow Fund.

In discussions Tuesday on the Nation’s 2007 audit, Controller Mark Grant told the Budget and Finance Committee that the $2.2 million is going to be recognized as a loss in the current year financial statement.

“But if everything works out, it will be reversed next year, so it will be all right.”

John Kennedy of KPMG LLC, auditors for the Nation, told the committee, “That’s based on representations from your legal counsel, from Mr. (Marcelino) Gomez in particular, relative to where the attorneys expect that to go.”

“We’ll take the hit now, and if things change for the good, then we can adjust it back,” B&F Chairman LoRenzo Bates said after the meeting.

The $2.2 million loss is in addition to the loss of $5.6 million in collectible grant money and up to $12 million in revenue from indirect costs paid to the Nation for administering the grants — also announced Tuesday.

Unfortunately, this will have an impact on the Fiscal Year 2009 budget. Last year’s appropriation originally started out at $137 million and went to $149 million. This year, the initial revenue projection was approximately $160 million and then later revised to $172.9 million.

When the budget is approved by the Navajo Nation Council, it’s based on projected revenue, Bates said. “As those revenues come in, it is applied to the expenses that the Nation has incurred as a result of the budget.

“This year we’ll be recommending a revenue projection above and beyond the $149 million. The intent of increasing the budget as a result of increasing the revenue projection was to provide more services to the people.

“That’s not going to happen now because that increase that otherwise would have gone to those needs is now going to go toward absorbing those costs that would have otherwise been paid for,” he said.

Though the money still will be included in the final budget, it no longer will be used for the purpose intended by the committee — the Nation’s unmet needs.

“Just think how many more police officers you could bring in, how many more animal control officers you could bring in — increase the wages for the Department of Justice so you could keep people. That’s why we lose good, qualified Navajo attorneys, because we have low wages,” he said.