Procurement breaches span successive administrations

Introduction

It is rather unfortunate that a public spat erupted over a statement allegedly made by the Auditor General. The on-line publication Guyana Standard of 21 May 2019 under the caption ‘Breach of Procurement Act more frequent under APNU+AFC Govt’, reported the Auditor General to having stated:

I believe it is more frequent now. There are a lot of sole sourced contracts and every other day you have some issue with breaches of contractual or tender board procedures. Even the recommendations for corrective action, most of them are not being implemented’.

The Financial Secretary of the Ministry of Finance took issue with the above statement, contending that the Auditor General provided no evidence to substantiate his claim nor did he provide any comparative data. In referring to the 45 forensic audits of State institutions, the Finance Secretary contended that since the Auditor General has audit oversight responsibility for these institutions, he was yet to comment on the improprieties highlighted in the forensic audit reports. He further stated that the Auditor General was cherry-picking projects, programmes and entities for audit scrutiny, and reminded him of his professional responsibility to observe the spirit and letter of the code of ethics as well as the international auditing standards lest he be seen to be ‘guilty of bias, subjectivity and political influence’.

   Review and analysis of the Auditor General’s reports

Since the restoration of public accountability in 1992, successive reports of the Auditor General have been highlighting significant breaches in procurement at Government agencies.  In today’s article, we provide extracts from the executive summaries of seven reports of the Auditor General (1995, 1999, 2003, 2007, 2011, 2014 and 2017) highlighting his findings and recommendations on the subject to enable readers to view the matter in perspective. As far as possible, we have maintained the text of these extracts, and where we have made changes this was done for clarity and conciseness. Of course, we cannot cover all the years in this article – 26 in total over the period 1992 to 2017.

An explanation of the basis of selection is in order. The year 1992 is not a good starting point because in that year the process had restarted after a gap in financial reporting for ten years, and there were tremendous difficulties in accessing records, documents, information and explanations to enable the Auditor General to finalise his report, not to mention the resistance shown to the decision to restart the process. Besides, it was a transition year form one Administration to another.  Reports for the years 1993 and 1994 are not on the Audit Office’s website, and therefore our review and analysis begins with the year 1995. Thereafter, we consider reports at intervals of four years up to 2011. We have not selected 2015 because it was also a year of transition from one Administration to another. We consider the report for 2014 instead. The report for 2018 is not yet available and therefore we have chosen 2017 as the final report.

It is important to note that prior to 2004, public procurement was regulated by the Tender Board Regulations which were not codified in the form of legislation. Following successive recommendations by the Auditor General, the Procurement Act 2003 was drafted and passed in the National Assembly in June 2003. It became operational in 2004.

1995 Report (pages 5-7)

An evaluation of the operations of the Central Tender Board (CTB) revealed that it was not functioning in a manner to facilitate an independent review. The record-keeping and filing were completely neglected, and the minutes of the various meetings held to adjudicate on the award of major contracts were not available. It is indeed inconceivable where the Cabinet made major decisions relative to the award of contracts, and documentation of the logical sequence of events leading up to such awards could not be produced.

Significant breaches in the financial, stores and tender board regulations were observed at several agencies, the most notable being the Guyana Defence Force (GDF), the Ministry of Health and Regions 3, 5 and 9. As a result, it could not be satisfactorily determined whether full value was obtained for the goods purchased or services rendered.

At GDF, there were unauthorised liabilities totalling $239M mainly due to the circumvention of the Tender Board Regulations and unauthorised credit purchases. In relation to the Ministry of Health, drugs and medical supplies totalling $300M were purchased mainly through the subdivision of contracts to bring them within the authority limits of the Accounting Officer, thereby avoiding adjudication by both the Ministerial and Central Tender boards. In addition, the controls necessary for the proper accountability of the drugs and medical supplies were substantially overridden. As a result, it was difficult to establish whether the Ministry actually received all the items for which payments were made. 

At Region 3, there were several instances of overpayments to contractors resulting from inflating the works that were required to be done, indicating apparent collusion between contractors and Regional officials. The vast majority of the contracts awarded in Region 5 were subdivided to bring them within the authority limits of the Accounting Officer, thereby avoiding a system of competitive bidding and adjudication by the Regional Tender Board. In addition, a contractor was paid twice on a contract valued at $821,750. At Region 9, a total of 110 contracts valued at $5.274M were awarded for various works. Physical inspection, however, revealed that these contracts were fictitious in nature and a Regional official was the beneficiary of the payments made. At the time of reporting, the Police were investigating the matter.

1999 Report (pages ix – xii)

In previous reports, reference was made to the need for a complete reorganisation of the operations of the CTB to reflect membership from outside the Public Service e.g. the professional engineering bodies, trade unions, the Consumers’ Association and the University of Guyana. However, no action was taken to implement this recommendation. With the assistance of consultants, draft legislation on public procurement was prepared. However, at the time of reporting, there was no evidence of any action taken to reform the Government’s tendering procedures by way of legislation, despite an assurance that this would be done.

The tender documents relating to the award of a significant number of contracts by the CTB were not made available during the audit. The minutes kept of meetings held were also found to be deficient. As a result, the basis of the award of these contracts could not be determined. The Manager of the CTB attributed this state of affairs to: (i) the fire which destroyed the Ministry of Finance building in 1998 (ii) the lack of a computerised database; and (iii) resource constraints, having regard to the large number of contracts required to be adjudicated upon.

Significant breaches in the Tender Board Regulations at the GDF were again drawn to the attention of the Accounting Officer. These include the absence of a system of competitive bidding and numerous instances of contract-splitting to avoid adjudication by the CTB. In addition, the involvement of the Departmental Tender Board appeared to be mere cosmetic to facilitate payments by the Sub-Treasury.

There were numerous breaches in the Tender Board Regulations at the Supreme Court. In particular, there was evidence of contract-splitting to avoid adjudication by the Departmental and Central Tender boards. The Ministerial Tender Board at the Ministry of Home Affairs functioned only in the last month of 1999. As a result, the basis of the award of most contracts entered into for goods and services and for works falling within the limits of $180,000 and $600,000 and $450,000 and $900,000 respectively, could not be determined.

In relation to the Ministry of Public Works, a number of irregularities were uncovered mainly in relation to building contracts. An official of the Ministry was in collusion with certain contractors, and in a number of cases there were overpayments on the contracts. These matters were referred to the Police for investigation. The bridge at Mandela Avenue was also poorly constructed, resulting in a final construction cost of approximately $25M, including rectification costs.

2003 Report (page v)

Significant breaches in the Tender Board Regulations at the GDF were again drawn to the attention of the Accounting Officer. These include the absence of a system of competitive bidding and numerous instances of contract-splitting to avoid adjudication by the CTB.

There were numerous breaches in the Tender Board Regulations at the Ministry of Home Affairs (Police). In particular, there was evidence of contract-splitting to avoid adjudication by the CTB. This practice has resulted in irregularities in excess of $50M in the purchase of uniform material. At the time of reporting, the Police were investigating the matter. 

2007 Report (pages vii-ix)

Significant amounts of overpayments occurred for contracts undertaken in recent years, with several agencies facing difficulties in recovering the amounts involved. There was also no evidence that disciplinary action against those involved in the assessment of works and the certification of payments. In several instances, the Transport and Harbours Department did not observe the requirements of the Procurement Act where …blanket waivers of these requirements were granted from the National Procurement and Tender Administration Board. As a result, capital works executed on vessels were not publicly advertised, resulting in the Audit Office’s inability to determine whether contracts were awarded at the most competitive prices or to the best responsive bidder.

At the Ministry of Education, several deficiencies in the preparation of contract documents were observed. The Ministry was therefore at risk should contractors fail to honour their contractual obligations or execute substandard works. Region 6 acquired a reconditioned …lowbed and hauler for $11.7M instead of new equipment as specified in the advertisement. The supplier was paid in full prior to the signing of the agreement, and when the equipment was received, the chassis numbers did not correspond with those stated in the agreement of sale and the certificates of registration. The physical condition of the equipment was found to be unsatisfactory.

2011 Report (page vii)

Significant amounts of overpayments occurred on measured works for contracts undertaken in recent years, with several agencies facing difficulties in recovering the amounts involved. There was also no evidence that disciplinary action against those involved in the assessment of the works and the certification of payments. Included in the overpayments were amounts of $22.863M, $33.247M and $13.247M in respect of the Regions 1, 8 and 10 respectively.

2014 Report (pages vi – vii)

Overpayments amounting to $31.315M were made on measured works for 19 contracts, including an amount of $13.562M for the construction of two bridges in Region 9. Up to the time of reporting, the works had not commenced. Total overpayments still to be recovered amounted to $237.597M in respect of Ministries, Departments and Regions. Whilst some entities have made progress in recovering overpayments, others faced serious challenges. There was also no evidence of disciplinary action against staff involved in the assessment of works and the certification payments.

2017 Report (pages iv – v)

Overpayments totalling $71.738M were made on 79 contracts, of which $37.093M were in relation to the Regions. The GDF and the Ministry of Public Security accounted for $20.117M and $9.336M respectively. At the time of reporting, amounts totalling $21.276M were recovered. In addition, there were breaches of the Procurement Act at Regions 5 and 6 where contracts were awarded using (the) restricted tender approach instead of open tendering. Contracts were also incorrectly awarded using the system of quotation at Region 2.

A contractor from Region 10 received an advance payment of $39M. However, at the time of reporting, no works had commenced, and the site was abandoned. The same contractor received (a) $73.1M advance payment from the Ministry of Public Health. At the time of reporting, no significant works had commenced. There was also a continuation of the practice to “cut and hold” cheques at the end of the year in anticipation of the completion of the works, in breach of the FMA Act. Other deficiencies include poorly prepared bills of quantities and contract documents as well as sub-standard works performed.

Conclusion

We do not condone mismanagement, waste and extravagance, violations of our financial and procurement laws and indeed corrupt behaviour when it comes to the utilization of public resources, regardless of which Administration is in place. Where there is evidence of these undesirable practices, we let our voices be heard despite the risks involved. From the above review and analysis of the Auditor General’s reports, it is evident that procurement breaches are not unique to any one administration. Rather, they span successive administrations.

On a final note, we had warned the Auditor General on several occasions of the need to avoid playing to the gallery, to display quiet competence and to allow his reports to speak for themselves. Both the Financial Secretary and the Auditor General hold important public offices. As such, they  should refrain from making public statements that have political overtones, especially in a period in the run-up to national elections.

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