Tag: Auditor General Niyaz Ibrahim

Audit reports released in first quarter revealed illegal expenditure worth MVR2.2 billion

Audit reports released in the first quarter of 2014 reveal financial transactions worth MVR2.2 billion (US$142 million) were conducted illegally by state institutions and corporations, according to the quarterly report (Dhivehi) of the audit office made public yesterday (April 29).

In the 14 audit reports released between January and March, the auditor general recommended recovering MVR294 million (US$19 million) from the officials responsible for the illegal expenditure.

These included MVR256.9 million (US$16.6 million) worth of unpaid dividends owed by state-owned corporations, MVR1.2 million (US$77,821) paid out as allowances to soldiers studying in the Maldives and overseas in addition to their basic salary, MVR166,324 (US$10,786) owed by an atoll councillor for residing in the atoll house free of charge, MVR23,927 (US$1,551) spent on plane tickets for a minister, and several millions owed by the Works Corporation.

The 14 reports covered the financial years 2011 and 2012 for a number of government ministries and companies, including the Defence Ministry, Finance Ministry, Civil Aviation Ministry and the Works Corporation.

The quarterly report noted that the auditor general also recommended that the Anti-Corruption Commission (ACC) investigate several cases of alleged corruption and embezzlement flagged in the 14 audits, which uncovered 163 instances of illegal expenditure or violations of public finance regulations.

In an appearance on state broadcaster Television Maldives in January, Auditor General Niyaz Ibrahim asserted that releasing audit reports was “futile” as the accountability process has so far failed.

While the audit office’s role was to conduct audits and review financial statements, Niyaz noted that the office was not legally empowered to file cases at court to recover funds or hold officials accountable for lapses.

Niyaz insisted that there was no political motive behind the timing of damaging audit reports, noting that the audit office adheres to a timetable or schedule shared with a parliamentary committee.

He also assured the public that the audit office was free of undue influence from any state official.

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Road Development Corporation purchased goods worth MVR2.2 million without bidding process, audit reveals

The Maldives Road Development Corporation (MRDC) purchased material worth MVR2.2 million (US$142,671) without a bidding process, the 2011 audit report (Dhivehi) of the 100 percent government-owned company made public last week has revealed.

Noting that the MRDC has not formulated procurement rules to date, Auditor General Niyaz Ibrahim recommended drafting regulations in consultation with the Finance Ministry within a period of one month.

“As a large amount of the company’s money had been spent for various purpose without establishing sound rules, and as we believe the company’s board members have been negligent in carrying out their responsibility of protecting the company’s resources, action should be taken against [the board members] to hold them accountable,” the auditor general recommended.

The MRDC was formed in August 2010 by the administration of former President Mohamed Nasheed to facilitate road construction under a sustainable business model.

As the company failed to compile its financial statement for 2011, the audit was based on a review of a sample of the MRDC’s business transactions as well as “problems related to performance and governance.”

In the absence of the financial statement, the report stated that the auditor general’s office was unable to assess the company’s financial health, assets, and the results achieved during the year.

The report further noted the lack of a mechanism to collect information required to compile the financial statement, adding that “basic documentation” of business transactions was not properly maintained.

The audit office recommended legal action against the officials responsible for failing to submit the financial statement for auditing as mandated by the company’s charter and the Company’s Act.

Moreover, as the MRDC had not maintained an updated registry of its assets, the report stated that auditors could not verify whether all assets purchased for the company’s purposes remained in its inventory.

The absence of an updated registry leaves open the opportunity to sell off the MRDC’s assets, the report noted.

The auditor general also recommended establishing a sound accounting system to record daily financial transactions.

While MVR175,039 (US$11,351) was spent in 2011 as overtime payments for staff, the report noted that auditors could not verify whether the payments were made for services received.

Moreover, upon scrutinising available financial records, auditors discovered that bills and invoices of materials sold by MRDC did not include purchase orders from customers while quotations sent to businesses were not authorised by senior officials.

The MRDC audit came on the heels of a damning report on the Works Corporations, which concluded that the government-owned corporation was mismanaged and had not served its purpose.

Of the 34 infrastructure projects awarded to the company, the report noted that only one had been completed.

Meanwhile, the audit report of the state-owned Waste Management Company released in December revealed that a board member had embezzled MVR610,000 (US$ 39,354) by doctoring cheques.

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Audit uncovers illegal expenditure by Works Corporation

The audit report of the Works Corporation Ltd (WCL) for 2011 has exposed allegedly corrupt practices at the 100 percent government-owned company.

In a press release issued with the report (Dhivehi), the Auditor General’s Office stated that its audit uncovered numerous violations of the law as well as “problems related to performance and governance.”

Since the corporation did not compile its financial statement for 2011, as mandated by its charter and the Company’s Act, the press release noted that auditors reviewed selected transactions of the WCL.

The WCL was created by the administration of former President Mohamed Nasheed on March 25, 2009 to facilitate or carry out infrastructure projects.

Of the 34 projects awarded to the company in 2010 and 2011, the audit found that the government canceled 24 after the WCL failed to commence work.

“The government awarded the projects without adequate planning and without assessing the company’s capability to carry out the work,” the press release stated.

As the company had completed only one infrastructure project to date, the Auditor General’s Office suggested that the WCL had not served the purpose for which it was formed.

Managing director

Auditors discovered that the company’s managing director withdrew MVR180,000 (US$11,673), ostensibly to cover expenses for assisting the President’s Office in preparations for a ceremony held in Gulhifalhu.

While the company’s employees actively participated in the preparations, the report noted that the sum was withdrawn without any documentation proving the actual cost borne by the WCL.

Although the audit report did not identify the managing director, local media has revealed that the WCL MD in 2011 was Abdulla Javid ‘Jaa’, son-in-law of the then-ruling Maldivian Democratic Party’s (MDP) Chairperson ‘Reeko’ Moosa Manik.

Auditors also found that MVR146,999 (US$9,533) was transferred to the MD’s personal bank account to purchase a “total station” containing special tools from Singapore’s Tepcon Posting Sales Pvt Ltd.

However, the company had received neither the tools nor the transferred amount as of the report’s publication date.

Moreover, the WCL did not recover 14 sheet piles provided in May 2011 to Heavy Load Maldives Pvt Ltd, which was owned by the MD’s father-in-law MP ‘Reeko’ Moosa.

The WCL’s staff informed auditors that the 40-feet sheet piles were released after the MD called the deputy manager at the company’s Thilafushi site and instructed him to do so.

The audit report revealed that on the orders of the MD the WCL also provided electricity from its Thilafushi site to the Yacht Tours Maldives’ site on the industrial island.

Yacht Tours Maldives – owned by MDP MP Abdulla Jabir – had not paid WCL for 37,376 units of electricity used from December 28, 2010 to October 1, 2012, the audit found.

Violations

The WCL awarded 12 projects worth MVR198.6 million (US$13 million) to various parties in violation of the company’s procurement rules, the audit found.

The company’s procurement procedures manual stated that contracts worth MVR1.5 million (US$97,276) or higher must be awarded through the Finance Ministry’s tender evaluation board.

However, the audit noted, the 12 projects were awarded without either a bidding process or the involvement of the tender evaluation board.

An Indian company – identified as MM Export Pvt Ltd – contracted to supply reinforcement boulders was paid MVR2.7 million (US$175,097) in violation of the procurement rules as well as the WCL’s agreement with the company.

In another instance, a Sri Lankan company named Sri Krithika International was paid in excess of the stipulated amount for supplying construction material after the company imported a higher volume than was agreed upon.

Moreover, the WCL failed to recover MVR1.7 million (US$110,246) paid to Design-built Solutions Pvt Ltd as an advance payment for the Noonu Velidhoo harbour project despite termination of the agreement after the company did not commence work.

In a similar case, a company named Coastal Ventures Pvt Ltd was paid MVR5 million (US$324,254) for the construction of a harbour in Raa Fainu despite the company only completing a portion of the project.

As the portion completed by the company was worth MVR2.9 million (US$188,067), the audit noted that the company was paid MVR2.1 million (US$136,186) for work not done.

The report also contended that the WCL prioritised the interests of subcontractors in drafting agreements to the detriment of the company.

Auditors discovered that the company was owed MVR134,055 (US$8,694) in unpaid rentals and sale of equipment.

The WCL also misused a MVR50 million (US$3.2 million) stand-by credit facility provided by the Indian government to establish a sewerage system in Noonu Miladhoo and to construct a harbour in Noonu Kudafari.

Interest for the loan was rising as a result of the WCL failing to make regular payments, the report noted.

Meanwhile, as a result of poor record keeping, auditors were unable to ascertain the amount of money kept in the WCL safe when it was stolen in 2011.

While the company’s accounting systems showed that it was owed MVR22.5 million (US$1.5 million) from various parties, the audit report noted that the company’s financial book-keeping was too unreliable to establish the validity of the figure.

Similarly, auditors could not verify whether the MVR60.7 million (US$4 million) owed by the WCL for procurements and services was authentic.

The company also paid its chairman more than MVR600,000 (US$38,910) as a “special allowance” from June 2009 to February 2012 against the pay scheme for board members of state-owned enterprises.

Moreover, the company’s hiring and firing practices as well as promotions for staff contravened its “employment, benefits and salary policy.”

Lastly, the WCL had not maintained a registry of its assets since April 14, 2010, auditors found.

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Auditor General questions legitimacy of telco license fees

The Communication Authority of Maldives (CAM) did not examine annual financial statements of telecommunication companies before collecting license fees, the audit report of the former Ministry of Civil Aviation and Communication for 2009 has revealed.

The audit report (Dhivehi) made public this week noted that CAM was authorised under its agreement with telcos to check and review financial statements of the companies at any time.

However, there was no documentation showing that financial statements were scrutinised by CAM in order to calculate the license fees, the audit found.

“Therefore, we note that it cannot be verified whether the amount of money paid by telecommunication companies to the state as license fees was in truth the full amount owed by the parties,” the report stated.

Based on the findings, Auditor General Niyaz Ibrahim recommended that CAM check audited financial statements of the companies at the end of the financial year to ensure that the license fees were paid in full.

The Ministry of Civil Aviation and Communication was later renamed Ministry of Transport and Communication. In addition to CAM, the Department of Civil Aviation and the National Centre for Information Technology (NCIT) also operated under the ministry.

Among three other cases flagged in the audit report was the absence of overtime work sheets for employees at the NCIT.

While MVR106,702 (US$6,920) was spent in 2009 for overtime pay with written authorisation from senior officials, “we note that due to the lack of records at the office for employees’ overtime work (overtime work sheet) the actual overtime work and time spent could not be verified,” the report stated.

As a result, the report added, auditors could not guarantee the legitimacy of the overtime pay in 2009.

The auditor general recommended ensuring proper maintenance of records and taking action against responsible officials in line with public finance regulations.

The audit also discovered that the ministry attempted to pay a contractor MVR68,000 (US$4,410) to set up a biometric attendance system before the installation work was complete.

While the agreement was signed on December 31, 2009, to complete installation within 30 days, the audit report noted that the contractor billed the ministry on the same day, which then submitted an expense voucher to the Ministry of Finance and Treasury.

“However, we note that there were no documents at the ministry to guarantee that the work was complete before the contractor billed the ministry. Therefore, we believe that the ministry attempted to pay the contractor before the work was completed,” the report stated.

Moreover, there were no records at the ministry of estimates submitted by three interested parties, the report noted, and the evaluation committee chose the contractor with the lowest point score.

While minutes of the evaluation committee’s meetings showed that two proposals were disregarded due to lack of technical specifications, auditors found that the required technical specifications were included in one of the disqualified bids.

The auditor general recommended taking action against the official responsible for submitting the expense voucher to the Finance Ministry without confirming completion of the outsourced task.

Additionally, the audit office recommended an investigation by the Anti-Corruption Commission into the awarding of the contract by the evaluation committee.

In the third case highlighted in the report, auditors found that the ministry was not reimbursed the MVR23,927 (US$1,552) spent on a plane ticket for the minister to attend a ministerial  meeting of the Asia Pacific Telecommunity (APT) in Bali, Indonesia.

As travel and other expenses for the trip were to be covered by the APT, the auditor general recommended recovering the money.

Aside from the flagged cases of ostensible violations of public finance law, the audit report concluded that financial transactions of the ministry and the institutions operating under its remit was in compliance with the Public Finance Act and regulations under the law.

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“Poor financial record keeping” poses challenges to audit state enterprises: AG

The Auditor General Niyaz Ibrahim has expressed concern over poor record keeping at State Owned Enterprises (SOEs), and said the public is entitled to know how much the state makes from an enterprise it owns or if the enterprise is making a profit or loss.

Speaking to Minivan News today, Niyaz said the independent audit office faces severe challenges in auditing SOEs, especially those in which the state is a minority share holder.

In some cases, even when a company is liquidated, there are no financial statements or audits, he said.

“As you know, there are over 80 companies in which the government owns shares, including minority share holding enterprises. While we don’t have adequate legal authority to appoint external auditors to the companies in which the state is a minority share-holder, the Audit Act allows us to do so with majority State-owned enterprises,” Niyaz explained.

It was the norm of the board of directors to appoint an external auditor, inhibiting the auditor’s work as they are bound to follow instructions from and report to the company’s board. However. starting in 2011 the Auditor General’s Office (AGO) has begun appointing external auditors to SOEs, thereby giving auditors more protection and independence.

The AGO will have auditors at all SOE’s except for Island Aviation for the 2013 accounts, Niyaz said.

Annual audits

The Company Act mandates audits be conducted annually, however there is no way to see how many SOEs are faring as they do not even produce financial statements, Niyaz said.

“Many of the companies which have been formed recently are in this very poor state of financial record keeping,” he continued. Even while some of these companies are now to be liquidated, there is no record of financial statements, nor has there been any audits. This is state resources we are speaking of. The people have a right to know what is being done with this money. Usually, public listed companies get more attention as they sell shares to people. How we see it, though, is that every citizen has ownership of state enterprises, and thereby public interest is much higher in such companies,” he said.

SOE’s must be far more transparent and accountable than listed companies, Niyaz stressed

The AGO has now commenced work on preparing a report documenting the status of all SOEs, he added.

“The public is entitled to get the basic information as to how much the state makes from an enterprise it owns, whether the enterprise is making profit or loss, whether it is accountable and transparent.”

Unexplained share-holding

Niyaz said there were many unexplained cases where the state owned minority shares, especially in the tourism industry.

“There is room to suspect that the legal provision within tourism laws of special provisions in the assignment of islands for tourism sector if the state owns some shares of the company or island is being abused,” Niyaz alleged.

Challenges in auditing state enterprises

Niyaz said that the Auditor General’s office has a practice of submitting a detailed work plan of all programs planned for the upcoming year with their budget proposal, and that the special audit of state-owned enterprises has not been included in the submitted proposal.

He said that his office will need to find means to fund the process in other ways, as plans for this were made after the budget proposal had already been submitted in late October.

Niyaz further noted the lack of cooperation extended to external auditors from the management and board of some state owned companies.

“Jobs for politicians”

The management of SOEs need to be strengthened, especially that of the board of directors, Niyaz said. SOEs must not be formed to create jobs for politicians, Niyaz said.

“As evident, if the top management of a company, enterprise or even an institution keeps being changed every now and then, it proves to be a strategical loss to that entity. Each of these management will have plans for its development, but if this keeps changing frequently, there will be no stability there. Therefore, there really needs to be a change in how the state runs the enterprises it holds shares in or owns,” he continued.

The state must end the appointment of individuals to management level jobs at SOEs on the basis of their political affiliation, Niyaz said.

“Even the board must consist of financially literate people who understand what it means to run a business, if the company’s governance is to be improved. I will give you an example of the level some current board members have, and this doesn’t change no matter which government is in place. A team from my office met with a company’s board members recently, after multiple attempts to meet them previously. For purposes of auditing, they asked the board for the financial statement. Members of the board then said at my staff members, ‘who do you think you are to come here and question us? We don’t have to give you any financial statements’ and then threatened to throw them out of a window. This is the calibre of some appointees to the boards of state enterprises. It is way beyond their authority to speak in that manner to a team of auditors who are their to fulfill legally stipulated duties,” Niyaz said.

Parliament initiative to run audits

Parliament’s Public Accounts Committee Chair Abdulla Jabir told Minivan News today that the committee has rescheduled the initial debate on the matter from Sunday to Tuesday, for which both the Auditor General and Attorney General Mohamed Anil will be summoned.

According to Jabir, the objectives of conducting a special audit are to have all state companies operating under a single holding company and to find a way to liquidate companies that fail to make profit.

Attorney General Mohamed Anil was not responding to calls at the time of press.

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SAARC Audit report failed to account for grant aid: MDP

The opposition Maldivian Democratic Party (MDP) has slammed an audit report on the expenses of the 2011 SAARC Summit released recently by the Auditor General, alleging the report was factually inaccurate and had based its findings on erroneous information.

The report (Dhivehi) –  compiled through audits of expenditure by the Ministry of Housing, the Ministry of Foreign Affairs, the President’s Office and the Maldives National Defense Force (MNDF) – revealed several financial discrepancies by then MDP-led government including an overspend of more than MVR 430 million (US$27.9 million) on the event’s allocated budget.

The report claimed that former President Mohamed Nasheed’s government spent MVR 667,874,870.84 (US$ 43.3 million) on the summit – 188.82 percent more than the MVR 231,240,000 (US$14.99 million) budget passed by parliament.

Others inconsistencies included payment of MVR 61.8 million (US$4 million) more the amount agreed for the construction of the Equatorial Convention Centre built for the summit, financial losses incurred by the government, violations of Public Finance Act and Public Finance Regulation and wasteful spending.

The Auditor General in the report also made several recommendations including the recovery of money spent, as well as urging action against those found responsible for the expenses.

Former President Mohamed Nasheed previously dismissed the political bickering by his opponents regarding the findings, contending that his government had not embezzled state funds but admitting it was possible money had been spent contrary to the Public Finance Act.

“Since the ratification of the 2008 constitution, and since the beginning of word to word enforcement of laws that came after the ratification, it is quite possible that there may be certain things carried out in contrast with the public finance act. This is because senior officials of the government wanted things to get done quickly,” Nasheed said at the time.

In a press conference held last Monday evening, MDP government’s Housing Minister Mohamed Aslam slammed the Auditor General over the findings, claiming he had been “negligent” and “irresponsible” in compiling the report.

He said that a state institution releasing such reports ahead of the presidential elections implicating a specific political group was “highly concerning”.

However despite the claims, Auditor General Niyaz Ibrahim has disputed the claim that the timing of the audit report before the election was politically motivated, stating that the information contained in such reports was necessary for people to make informed decisions.

“Some fundamental elements have been disregarded as false information in the report. Some have even been labelled as unlawful [spending]. Other expenses have been presented in a very misleading manner. We have highlighted these issues to the Auditor General in a meeting held today,” Aslam said.

Responding to the Auditor General’s claim that the former government had overspent more than MVR 430 million (US$27.9 million), Aslam said the Indian government had provided grant aid of MVR 267 million (US$17.3 million), the South Korean government had given up to MVR 3 million (US$194,552.53) in grant aid, while an additional MVR 2 million (US$129,701.69) was given from a trust fund.

According to the former Minister, when the grant aid was accounted for the deficit stood at MVR 167 million (US$10.83 million), which had been settled by government’s contingency budget.

“The Auditor General is doing the math and arithmetic without taking these key figures into account. You simply can’t count apples and oranges and decide the total sum of both in apples. We see his findings something similar to counting apples in this manner,” Aslam said.

He also claimed that MVR 64 million (US$4.15 million) spent on building roads in both Addu City and Fuvahmulah was directed to improve the capacity of Southern Utilities Company Limited (SUL) because other companies who proposed to construct the road, including the government’s Maldives Transport and Construction Company (MTCC), were too expensive.

“The Auditor General claimed the government incurred financial losses by giving the project to SUL, and that the Maldives National Defense Force (MNDF) was actively involved in the construction work. And that government had paid SUL for the voluntary work carried out by the military personnel. What we are highlighting here is that if mathematically calculated, the amount spent on the project did not result in financial losses to the government,” Aslam said.

He acknowledged that MNDF officers “had a role” in constructing of the roads, but said that since Nasheed’s ousting in 2012 the work was not being carried out, and therefore there was nothing to pay.

He also questioned as to how the Auditor General came to the conclusion that the MNDF had contributed to 60 percent of the total work carried out to hold the SAARC Summit, stating that there was no justification given for the figure.

MDP MP and Lawyer Ahmed Hamza said he believed a possible reason for the report’s alleged inaccuracy was that the government had withheld certain financial records from the Auditor General, which would otherwise have substantiated the MDP’s account.

Auditor General responds

Responding to the allegations by the MDP, Auditor General Niyaz Ibrahim told local media that the party’s allegations did not carry any weight and that it was “not the fault of the Auditor General if the government did not share certain documents with the auditors”.

“The allegations levelled against the Auditor General’s office do not carry any weight. Our reports are based on information received from government agencies and authorities. Likewise, the report on SAARC summit was compiled in a similar manner,” Niyaz said.

“The [MDP] is alleging that the current government was witholding information from us. We can’t do anything about that. We base our reports based on the  information we receive.”

Niyaz also said that if the MDP were having doubts over the accuracy of the reports – due to government’s failure to share of information – the matter should be raised with the relevant parliamentary oversight committees.

The reason behind allegations made against the audit reports by politicians were, Niyaz said, due to the lack of knowledge regarding how government finances were handled. He also expressed concern over attempts made by politicians to mislead the public.

The Auditor General also claimed that he had not released the reports with the intention to “bombard” a certain political camp, and contested that the mandate of his office was not to attack politicians.

“We execute our responsibilities and try to complete our work as soon as possible to hold governments accountable,” Niyaz said.

“Our job is to hold the government accountable. To ensure that the government strictly follows the law and due procedure in handling the finances of the state. I believe the parliament has a central role in enforcing the recommendations made in the audit reports. We have released almost 200 audit reports. But parliament has only decided to act on just two,” he noted.

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EC disputes claims in audit report

Elections Commission (EC) Chair Fuad Thaufeeq has disputed the Auditor General’s Office’s contention in the commission’s audit report for 2012 that recommendations in previous audit reports have not been implemented.

Fuad Thaufeeq told local media yesterday (June 30) that efforts were made to follow through on the recommendations, including the recovery of mobile phones provided to staff and clearing up issues involving funds sent to the atolls dating back from before the EC was set up as an independent institution under the new constitution.

In the case of mobile phones, Fuad said, the commission has either recovered the phones or received compensation from staff, including former Elections Commissioner ‘Kaaf Dhaal’ Ahmed Manik.

Staff responsible for lost laptops have also been told to settle the cost of the lost items in two years, he added.

With regard to MVR50,438 (US$3,270) of additional expenditure on overseas trips by commission members incurred as a result of extending the duration of stays, Fuad said the EC was unable to determine which members or which overseas trips the Auditor General was referring to and had asked for clarification.

On awarding a contract worth MVR 4.9 million (US$317,769) to a local company to print ballot papers without going through the tender evaluation board, Fuad explained that there was no time after candidates had applied to “send it to the Finance [Ministry’s] bid committee for a decision.”

Fuad told newspaper Haveeru that it was “regrettable” that the audit report did not acknowledge the corrective measures taken by the commission.

“We cannot correct what is unclear to us. That is why I am saying there are illegitimate claims in this report. I will prove that anywhere I have to,” he was quoted as saying.

Fuad contended that such reports should not raise unwarranted doubts among the public concerning the commission’s integrity.

While the 2011 audit report had flagged 20 cases of ostensible violations of public finance laws, the 2012 report highlighted two cases and stated that the commission’s expenditures were for the most part in line with the public finance law and regulations and the budget approved by parliament.

Auditor General Niyaz Ibrahim however dismissed the claims and insisting that all the information presented in the report was valid.

He however observed that government ministries and independent institutions were “slowly coming round to accepting what is in these reports.”

“These things will happen in the early days. But it will get better,” he was quoted as saying.

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Nasheed welcomes scrutiny of MDP government finances, calls for ACC investigations

Former President Mohamed Nasheed has called for investigations by the Anti-Corruption Commission (ACC) into government spending during his administration flagged by the Auditor General’s Office as ostensible violations of the Public Finance Act.

Speaking at a campaign rally in the Henveiru ward of Male’ on Wednesday night (June 19), Nasheed said he accepted the findings of audit reports concerning public finances during the three years of the Maldivian Democratic Party (MDP) government.

“We were the government that first started work with independent institutions in place. We were the government that had the good fortune of having been the target of audits by an independent Auditor General for the first time; and the government that had the opportunity to govern with the oversight of an independent Anti-Corruption Commission,” the MDP presidential candidate said.

“Our purpose, our wish, is for all government funds to be accounted for and for all expenditures to be transparent. I assure all citizens of the Maldives, I will not touch a single cent of your money,” he added.

Nasheed said he was pleased that of the MVR 31 billion (US$2 billion) spent by the MDP government from 2009 to 2011, the Auditor General’s Office only estimated that approximately six percent was “not spent in accordance with public finance regulations.”

“No one has said that [these expenses] involved corrupt dealings or facilitated corruption,” he stressed, calling for investigations by the ACC to determine whether corruption or misappropriation of funds had taken place.

Nasheed said he had studied all the audit reports of government ministries from 2009 to 2011 released by the Auditor General’s Office so far.

“What I want to note is that [expenditure] not being in line with public finance regulations does not mean corruption has taken place or that a criminal offence was committed,” he contended.

The Auditor General’s role was identifying expenditures made in breach of regulations, Nasheed explained, while the financial loss to the state as a result of the ostensibly illegal spending would be determined in light of investigations.

Taking examples of cases highlighted in audit reports, Nasheed referred to the purchase of five cars for government use flagged in the 2011 audit report of the finance ministry.

The audit report noted that a local company was contracted in December 2010 to buy five Nissan Sunny N16 Super Saloon cars for MVR 2.9 million (US$193,904).

However, the company delivered Nissan cars of the Ex Saloon model, the audit found.

“So what we have to find out is whether there was a difference in price between the two brands and which [brand] was cheaper,” Nasheed said.

The case reminded him of the Violet House group in Majeedhiyya School ordering a set of football boots when he was in school, Nasheed said.

“What they received was a set of key chain boots,” he said.

On the Auditor General discovering that the MDP government spent MVR 13.9 million (US$901,426) to train 259 participants of the ‘Hunaru’ skills programme, Nasheed said the programme was brought to a halt after the “coup d’etat” on February 7, 2012 and no further participants were trained despite being enrolled.

The initial spending included capital expenditures for the skills training programme, which targeted leading 8,500 youth to the job market, Nasheed noted.

While the Auditor General’s Office calculated that MVR 50,000 (US$3,242) on average was spent to train a single participant, Nasheed contended that if the programme had concluded successfully, “we estimated at the time that the Hunaru programme could be conducted for about MVR 7,000 or MVR 8,000 per participant.”

On MVR 8.1 million (US$525,291) worth of unpaid bills in the aviation sector owed to the government, Nasheed called on the Auditor General’s Office to forward the case to the ACC for further investigation and to recover the outstanding payments.

“The national administration office of the North [Province] made illegal expenditures for travel [according to the audit report],” Nasheed continued “In this case, if these trips were made in violation of the regulations, we want it to be stopped and for those who do it – even if they were under our government – to receive the just punishment.”

Referring to the Auditor General alleging illegal expenditures for the November 2011 SAARC (South Asian Association for Regional Cooperation) in Addu City, Nasheed said the party wished to determine the nature of the expenses in question.

“I can certainly see the convention center built there, the roads laid in Hithadhoo and the water and sewerage systems as well as the harbour there,” Nasheed said, contending that the costs would not exceed the “concrete work” that was done.

However, he added, if the Auditor General believes there were instances of illegal spending for the SAARC summit, the cases should be properly investigated.

On MVR 168.4 million (US$10.9 million) worth of unpaid expatriate work permit fees owed to the government, Nasheed said the oversight was “worrying” and called for the Prosecutor General’s Office (PGO) to file court cases to recover the outstanding payments.

The former president also took note of the ACC’s recent investigative report that cleared the previous government of corruption in the awarding of a concession agreement to a consortium of Indian infrastructure giant GMR and the Malaysian Airports Holdings Berhard (MAHB) to develop and manage the Ibrahim Nasir International Airport (INIA).

Nasheed said he had rejected requests for meetings by the companies that had submitted proposals for the airport privatisation project as he believed such interaction ahead of the conclusion of the bidding process would not be appropriate.

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Cancelled agreement to develop IGMH cost US$150,000, reveals audit

The termination of an agreement between the Ministry of Health and Family with Indian company Apollo Hospitals Enterprises to manage and develop the Indira Gandhi Memorial Hospital (IGMH) cost the government US$150,000, the Ministry of Finance and Treasury’s audit report for 2010 has revealed.

The audit report (Dhivehi) made public on Thursday (June 6) flagged an advance payment of US$ 150,000 from the finance ministry’s special budget to Apollo Hospitals as 20 percent of a transition management fee under the “management and development agreement” (MDA) signed on January 23, 2010.

Auditor General Niyaz Ibrahim contended that the payment was made by the finance ministry in violation of budgetary rules and accounting principles, adding that expenses of another office or institution should not be included in the finance ministry’s financial statement.

Moreover, the privatisation of the government hospital was not overseen by the privatisation committee as stipulated in public finance regulations amended in late 2009, the audit report noted.

The secretariat of the privatisation committee, which functioned under the Ministry of Economic Development, informed auditors that interested parties were invited to submit detailed proposals for developing IGMH in a public-private partnership deal in January 2009.

However, none of the detailed bids met the criteria set by the health ministry and the privatisation project was scrapped.

Following a visit by then-President Mohamed Nasheed to India, Health Minister Dr Aminath Jameel told the press on January 25, 2010 that Apollo was awarded the project because none of the bidders fit the criteria.

Apollo was chosen following consultation with the Indian government and based on legal advice, she added.

However, in August 2010, the Male’ Health Services Corporation – which operated IGMH – advised the health ministry against proceeding with the privatisation deal as Apollo’s proposal was not financially feasible for the government-owned health corporation.

On September 30, 2010, the health ministry informed Apollo that the government has decided to scrap the project since the necessary financial capital had not been arranged.

The audit report also noted that a transition management agreement and an operation management agreement that was required under the MDA was not signed in the stipulated 180-day period.

“Therefore, the US$ 150,000 paid to Apollo Hospitals under the MoU [Memorandum of Understanding] signed with IGMH in 2010 was a waste of funds with no benefit to the state,” the audit report stated.

It added that the loss was incurred as a result of “inadequate planning” before hastily signing the MoU without obtaining legal advice, considering the financial burden on the state and determining a source of capital.

The Auditor General recommended asking the Anti-Corruption Commission (ACC) to determine whether any state official abused their authority in awarding the project to Apollo Hospitals without a bidding process.

Other cases

Among eight other cases highlighted in the report where expenses were made ostensibly in violation of public finance law, the audit revealed that in 2007 the government incurred a loss of MVR 30.8 million (US$1.9 million) after paying for 150,000 copies of the Quran Dhivehi translation with numerous errors.

The audit report noted that the project was awarded to Novelty Printers without a bidding process through the tender evaluation board.

Moreover, an advance payment of 85 percent of the contracted amount was made to Novelty Printers in violation of existing regulations, the audit discovered.

In June 2010, the Fiqh Academy decided to destroy the copies printed in 2007 as the errors could not be easily corrected. The decision was made following a year-long review by scholars of the academy.

The audit discovered that the errors in the final version were not present in the proofed copy approved by the President’s Office in 2007 – during the final years of former President Maumoon Abdul Gayoom’s reign – suggesting that Novelty was responsible for the errors.

Novelty Printers wrote to the President’s Office in November 2008 apologising for the printing errors, which they explained occurred due to a problem in the computer file used to make the printing plates.

The audit also discovered that Novelty was paid the remaining 15 percent of the contracted amount in May 2010 after a state minister at the finance ministry approved the payment.

The state minister sent a memo to the budget section falsely claiming that the government had received all 150,000 copies, the audit report noted.

The Auditor General recommended that the ACC should investigate the culpable official for alleged corruption and that the state should either recover the MVR 30 million paid to Novelty or demand 150,000 copies without errors.

The audit report also noted that the government was ordered by the Civil Court in January 2010 to pay US$119,616 as compensation for a former deputy general manager of the Maldives National Shipping Line (MNSL) for unlawful termination in 2002.

The Auditor General recommended legal action against the government officials responsible for incurring the financial loss by unlawfully sacking the MNSL deputy manager in 2002.

The audit further revealed that in 2009 and 2010 the finance ministry paid US$ 4 million to two American companies under a “settlement agreement” while arbitration proceedings were ongoing in Singapore.

In 2006, a consortium formed by the International Medical Group and Sirius International Insurance Corporation was awarded a contract to provide health insurance for government employees.

The companies sought arbitration in Singapore following a contract dispute with the now-defunct Ministry of Higher Education, Employment and Social Security. However, the US$4 million settlement was reached out of arbitration in May 2009 by the new government that took office in November 2008.

The settlement was paid out of the finance ministry’s special budget in 2009 and 2010.

The Auditor General recommended “a thorough investigation” to recover the financial loss incurred by the government as a result of the contract.

The audit report also contended that the finance ministry had not undertaken “adequate efforts” to recover MVR 51.4 million (US$3.3 million) owed to the government as loan repayments as of December 2010.

The loans worth a total of MVR 69.4 million (US$4.5 million) were provided to select individuals by the President’s Office from 1992 to 2006 under special privileges afforded to then-President Gayoom.

The loans were given with a six percent interest rate to be paid back within two to five years, the report found, noting that the repayment period would have lapsed in 2011 for the most recent loans.

However, in a letter sent to the finance ministry on November 6, 2008 – five days before Gayoom left office – the repayment period was extended to five years.

As the loans were given to senior officials of the outgoing government, the audit report contended that the decision to extend the repayment period amounted to corruption.

The Auditor General therefore asked for an investigation by the ACC into the extension and recommended that the finance ministry file court cases to recover the unpaid amounts.

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