Deliberate efforts made to understate Hope Canal costs – audit

Deliberate efforts were made to understate the cost of the Hope Canal Project for which the National Drainage and Irrigation Authority (NDIA) spent more than $257M though it was substantively funded from the PetroCaribe Fund.

This is according to a Forensic Audit of the NDIA conducted by Nigel Hinds Financial Services. The audit which was made public on the Ministry of Finance’s Website yesterday noted that based on the information provided thus far, the  Cost of the Hope Canal Project amounts to $4,119,294,616, this is significantly more than the $3.4B previously reported.

The auditors however stated that the actual cost of the project was not computed as they were unable to obtain all the documentation to compute the actual cost of the Project “as it would appear that deliberate efforts were made to understate the actual cost.”

The Hope Canal Project was approved in 2009, however actual works did not begin until 2010.

The Project budgeted for $3.6B was completed in May 2015 at a purported cost of $3.4 Billion. However, the audit report findings indicate the costs of the project was over $4.1 Billion. Though substantively funded from the PetroCaribe Fund with all payments for the project passing through the Ministry of Finance, the report notes that none of the associated agencies: the MoF, Ministry of Agriculture nor NDIA were able to locate a contract agreement or loan terms for such a massive contract.

A review of documentation available at the Finance, Procurement and Engineering Offices at NDIA showed expenditures for the years 2013 and 2014 while no information was available for years 2010, 2011 and 2015.

For the years 2013 and 2014 the agency paid significant sums from its own funding for the completion of the project. These sums $166M in 2013 and $90M in 2014 did not include the $402M worth of fuel provided by the agency between June 2011 and May 2015.

Though the Chief Executive Officer Lionel Wordsworth is reported as indicating part of these increased cost as “maintenance work” done because of the prolonged time to complete the project and should not be treated as part of the project cost, the auditors state that they do not share this opinion “because project cost will include all cost incurred up to the point of completion.”

Speaking with Stabroek News last evening Wordsworth reiterated his position that sums expended by NDIA were for necessary maintenance work. He explained that upon the request of the Minister of Agriculture he had provided a detailed response to a draft report of the audit in which he cited as an example of these works the need to weed and clear outfall channels.

“As sections were completed maintenance work such as weeding and cleaning had to be done and these were done from NDIA funding. I have noticed that the auditor includes these cost in the cost of the project. I can’t agree with that assessment,’ he said.

Concerns were also raised about the unavailability of documents to verify dates of acquisition and amounts paid for equipment purchased directly for the Hope Canal Project.

According to the audit fourteen super long reach excavators were purchased between 2009 and 2012 for the Project at a cost of $441,628,000 yet the Finance Office is showing that $466,862,450 were paid for thirteen excavators and one bulldozer between 2009 and 2012.

The auditors concluded that additional work needs to be done to access all information to determine the true cost of the project and the sources of finance since NDIA, Ministry of Agriculture and Ministry of Finance were unable to access the Loan Agreement to determine the parties to the contract, the terms of the loan and the method of repayment.

“Any finance cost would increase the cost of the project as it has to be capitalized. Given the non-availability of critical information, it is reasonable to infer that the Project exceeded its original cost from the information gathered,’ the report said.

However Wordsworth has told Stabroek News that he is unsure of what loan document the auditors are referencing.

“We did not take a loan to build the Hope Canal  the funds came from the PetroCaribe Funds and all contracts are at the NDIA and were made available to the auditors so I don’t know what they are talking about,” he said.

A Cost Analysis of the Hope Canal Project as included in the Forensic Audit Report of the National Drainage and Irrigation Authority

20160611TAP- Hope Canal-2

 

 

 

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