Questions about the misuse of funds by the Region Two administration and a subsequent audit have revealed several other contraventions, including breaches in the award of contracts, payments for incomplete works, and misallocation of funds for at least six projects last year.
The findings of the special audit and accompanying recommendations were presented to the National Assembly’s Public Accounts Committee (PAC) yesterday, when the region’s administration was called to the fore once again to have its accounts examined.
Calling the act a “contravention of standard policy,” Financial Secretary Hector Butts stated that the Region Two administration was in breach of the law, announcing that the matter will be dealt with at the level of the Ministry of Finance. This call was later supported by PAC Chairman Irfaan Ali, who stated that the region’s accounts will be revisited after a revision by Butts has been completed.
Butts explained that while using current allocations to fund capital projects is permissible under the law, approval must first be sought by the minister.
Member of Parliament Juan Edghill questioned whether it was a point of the region misleading the ministry as to the purpose the funds were being requested for.
Last month, Regional Executive Officer (REO) Rupert Hopkinson was questioned extensively on the use of current expenditure to fund capital projects, as was observed in the 2016 Auditor General’s (AG) report. When asked by Ali if similar observations would be made when the 2017 accounts are examined, the REO at first stated no, but later told the committee that he was unsure.
The regional engineer, however, would inform the PAC that the practice had in fact gone on in 2017. As a result, the PAC asked the Auditor General to investigate, resulting in the special audit, the findings of which were presented yesterday.
When Hopkinson appeared before the PAC yesterday and Ali asked him if he was aware that using current funds for capital projects was in contravention of the financial laws, he stated yes. But when asked why he did so, Hopkinson attempted to explain that the head of programmes had agreed with the decisions in each instance as the projects were seen as a necessity.
He further stated that they were not aware of the breaches at the time as they were caught up in the excitement of having saved money. According to the REO, the region “saved” $147 million in 2016 and it is already known that there will be savings of approximately $80 million this year.
Asked by Edghill what he believes constitutes savings, Hopkinson explained that those are the cases where the lowest responsive returned bid in the procurement process is lower than the engineer’s estimate.
According to the audit report presented yesterday, the auditors examined the contract documents, payment vouchers and tender board minutes for six of Region Two’s 2017 projects, which were identified by the engineer.
These projects were: The construction of a fence at Unity Park, Ex-mouth, Essequibo Coast (phase 1); the construction of a fence at Unity Park, Ex-mouth, Essequibo Coast (phase 12); the construction of a bus shed at Dartmouth, Essequibo Coast; general repairs to the landing at Liberty Primary School, Lower Pomeroon River; general repairs to the sitting area at Cotton Field, Essequibo Coast; and general repairs to the Anna Regina Health Centre located on the Essequibo Coast.
The total cost of those projects was $37,784,115.
The audit team found evidence of capital projects being funded under current budget allocations, specifically under maintenance of bridges, buildings and other infrastructure.
Another breach observed was that while all the projects were awarded using the three-quote procurement method, only one of the projects, the construction of the bus shed at Dartmouth, qualified.
Reference was made to Section 21 (1) of the Procurement Act of 2003, which states that the threshold for using the quotations method is $1.5 million. The aforementioned project was the only one below $1 million.
The other breach recorded was the failure of the region to return its unspent money to the consolidated fund, in violation of the Fiscal Management and Accountability Act (FMAA).
It was stated that during the visit, during the physical verification exercise, five cheques amounting to $16,997,021 were discovered. Four of these cheques were unpaid monies owed to contractors for two of the projects (a cheque for $3,112,912 and another for $353,740 toward the general repairs at the sitting area at Cotton Field, and $10,985,515 and $1,248,354 toward general repairs to the Anna Regina Health Centre), while the fifth was said to be a $1,296,500 retention fee for the project dedicated to repairs at the Liberty Primary School landing.
It was also discovered that the cheques for the Cotton Field and Anna Regina projects were prepared although the works were unfinished. The contracts for both were reportedly signed in November, 2017, and scheduled to be completed by December, 2017. However, during the site visit in February, the works were still in progress.
The administration is still in possession of those cheques and it was noted that there were no provisions in the contract for liquidated damages should the contractors not deliver on time. Furthermore, the performance bonds for both projects expired on December 28th, 2017, and to top it off, there were no multi-year approvals for these projects although they were treated as such.
In the case of the repairs to the landing at the Liberty Primary School, the contract for which was also signed in November, and which was also expected to be completed in December, when verification took place in February, a total of $11,409,200 was paid for completed works and $1,296,500, a retention sum, was held by the region.
The findings also showed that there were projects for which funds were allocated under the wrong line items. In the case of the construction of a landing, reinforced walkway and perimeter fence for the Liberty Primary School, the funds were allocated under “Health Services” when it should have fallen under “Education Delivery.”
In the other case, the construction of a reinforced concrete and chain link fence at the Unity Play Park was budgeted under “Education Delivery”, but it was advised that such a project would have been better filed under “Public Works” or “Administration”.
Additionally, the report stated that based on physical measurements done at the site, the region overpaid for the works at the play park by $330,800. Notably, the engineer’s estimate for the project was $4,300,000 although the contract awarded by the Tender Board was for $3,988,500.
In light of the findings, it was recommended that, among other things, the officers for the region be held accountable and be dealt the appropriate sanctions; that the overpayment on the play park be recovered; that the region stop preparing valuations for full payments before project works are completed; and that they ensure that all works are properly measured and quantified before the payments are made to the contractors.