Auditor General accuses senior officials of negligence in embezzlement of MVR 24 million from DMC

The Auditor General’s Office has accused senior government officials of negligence in the alleged embezzlement of MVR 24 million (US$1.6 million) through the Disaster Management Center (DMC) in 2009 and 2010.

In a presentation to parliament’s Finance Committee on Wednesday, Director General Ibrahim Aimon reportedly revealed that the Auditor General’s Office suspected former State Minister Abdulla Shahid, who was in charge of the DMC at the time, along with DMC Director General Mohamed Shahid and Deputy Director General Moosa Ali Kaleyfan as well as former State Minister for Finance Ahmed Assad and Finance Controller Ahmed Mohamed, were culpable in the scam or guilty of gross negligence.

Auditor General Niyaz Ibrahim told members of the Finance Committee that the negligence of the DMC and Finance Ministry in the embezzlement of funds was “very serious.”

Minivan News is seeking comment from the accused senior officials.

ABCs

On October 11, the Auditor General’s Office made public a special audit report (Dhivehi) of an investigation into misappropriation of MVR 24 million from the DMC, uncovered in the centre’s 2010 audit.

In the 2010 audit of the DMC, auditors discovered that payments were made for “hundreds of invoices from 2005”. As the DMC refused to comply with a request for all documentation relating to the transactions, the report noted that the files were eventually obtained from the Finance Ministry.

In 2005, the report explained, the DMC bought construction material for tsunami-related reconstruction from local businesses with “credit purchase order forms.”

The Finance Ministry paid the bills for credit purchases from the “tsunami recovery fund (TFR).”

A company named Allocate Business Company (ABC) was issued “a large number of purchase orders in 2005,” the report found, noting that the company was about a year-old and was not an importer or seller of construction material.

“Therefore invoices for all the purchase order forms released to ABC were submitted under the names of ‘Apollo Hardware Store’ and ‘Apollo Holdings Pvt Ltd,” the report stated, adding that the payments were made to Apollo in 2005 for the ABC purchase order forms.

The invoices submitted by Apollo Hardware and Apollo Holdings included references to the purchase order forms released to ABC, the report noted.

“Therefore it is believed that these two companies are strongly linked,” the report stated.

The scam

Meanwhile, in 2009 and 2010, ABC submitted over 700 new invoices to seek payments from the state with photocopies of the original purchase orders taken from the Apollo invoices.

The audit found that MVR 24,008,503.75 was paid out for 571 of the invoices.

The Finance Ministry prepared payment vouchers for the DMC and made the payments in four cheques between August 2009 and April 2010.

The fourth and final payment of MVR 13 million (US$843,060) was issued on April 27, 2010 for 193 fraudulent invoices.

While over 700 invoices were sent over by the DMC, the report noted that the Finance Ministry rejected 140 invoices worth over MVR 10 million (US$648,508) after the public accounting system showed that payments had already been made.

“Therefore, this showed that ABC attempted to obtain funds using invoices for which payments had been made [to the company],” the report noted.

“From one perspective, ABC was offered the opportunity to embezzle funds so openly because the company knew of the faulty arrangement between the Disaster Management Centre and and Ministry of Finance for issuing funds and took advantage of it. Or [it is because] the scam was carried out with the collaboration of senior officials of the Disaster Management Centre and Ministry of Finance and Treasury.”

Negligence or involvement of senior officials

The report added that the issuing of funds for forged invoices accepted by the public accounting system “raises serious questions regarding the integrity and capability of those entrusted with spending public funds.”

Moreover, the case demonstrated “extreme irresponsibility” on the part of the public officials, the report stated.

Among the reasons listed for suspecting either involvement or gross negligence of senior government officials, the report noted that as a rule public funds were released only for original documents, whereas the invoices in the DMC case contained photocopies of purchase order forms.

The Auditor General’s Office therefore believed that “this was done deliberately and with a plan rather than out of ignorance or because of mistakes.”

The report also noted that it was highly unlikely that either the state would have held payments owed to a private company without any reason or that the company would have waited four or five years to demand payment with no record of complaint or a court case.

The audit further discovered that officials from the DMC met with the state minister for finance regarding the payments to ABC, “however neither minutes nor any documentation of the discussion was maintained for any of these meetings.”

Moreover, the audit found that the Finance Ministry had rejected some invoices forwarded by the DMC that lacked purchase order forms. However, the audit investigation found that a Director General at the DMC instructed an employee to photocopy purchase order forms and attach the bill to the invoices, which were then sent again to the Finance Ministry.

In conclusion, the Auditor General recommended further investigations by the Anti-Corruption Commission (ACC) and Maldives Police Service (MPS) for prosecuting the directors of ABC Pvt Ltd as well as the culpable government officials.

According to local media reports, police have since arrested two individuals in connection with the ongoing investigation into the DMC scam. Police have however not revealed the identity of the suspects in custody.

At a press briefing on Thursday, parliament’s Finance Committee Chair MP Ahmed Nazim said that the committee has decided to summon Prosecutor General Ahmed Muiz and members of the ACC along with Finance Minister Abdulla Jihad and Finance Controller Ahmed Mohamed next week to discuss measures to prevent corruption and misappropriation of public funds.

Finance Controller Ahmed Mohamed is among the officials named by the Auditor General’s Office at the Finance Committee meeting last week.