Tag: auditor general

SAARC Summit ran US$28 million over budget: Auditor General

The Auditor General’s report on government expenses for the 17th SAARC Summit held in Addu City and Fuvahmulah in 2010 has revealed several financial discrepancies including an overspend of more than MVR 430 million (US$27.9 million) on the event’s allocated budget.

According to the report (Dhivehi), 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.

The report was 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).

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

The release of the report comes at a time when former President Nasheed – who headed the Maldivian delegation at the summit – is campaigning for a second term in the upcoming 2013 election as the opposition Maldivian Democratic Party (MDP) presidential candidate.

More than a year after the summit, Nasheed was ousted from government in what his party described as a “bloodless coup d’état”, amid a mutiny by sections of the police and military. His controversial resignation followed weeks of anti-government protests that began in January 2012 after the detention of the Chief Judge of Criminal Court Abdulla Mohamed over allegations he posed a threat to national security.

Progressive Party of Maldives (PPM) presidential candidate Abdulla Yameen Abdul Gayoom condemned the financial discrepancies highlighted in the report, prior to its release.

Discrepancies

“Until the end of March 2013, excluding the grant aid and projects, a sum of MVR 667,874,870.84 (US$43.3 million) was spent. This figure is MVR 436,634,870 (US$ 28.5 million) or 188.82 percent more than the budget passed by the parliament to conduct the SAARC summit. The figure that was passed by parliament was MVR 231,240,000. No parliamentary consent as required by Article 96(c) of the constitution was obtained in spending the sum,” read the Auditor General’s report.

Other discrepancies pointed out in the report included an additional MVR 61.8 million (US$4 million) being paid for the construction of the Equatorial Convention Centre built for the summit.

The report stated that the initial cost of the project proposed by the contractor Ameen Construction Private Limited stood at MVR 210.4 million (US$13.7 million). However, after negotiations and changes to the materials being used and the overall design of the structure, a figure of MVR 150 million (US$9.7 million) was agreed between the contractor and the Ministry of Housing and Environment.

“However, due to changes brought to the plan by the government, the cost of completing the convention centre stood at MVR 211,852,834.84 (US$13.8 million). [This was] MVR 61,852,834.84 (US$4 million) or 41 percent excess of the amount that was agreed,” the report claimed.

The report noted the cost, which was more than the initial proposition from contractor, resulted from failure in properly planning the project and frequent changes brought to the agreed design in a non ad-hoc manner.

Apart from the costs, due to a delay in depositing the advance guarantee, the government claimed that the SAARC Convention centre needed to be built as quickly as possible, an advance payment of MVR 30 million (US$ 1.9 million) was paid to the contractor. The report added that the advance guarantee, which included both the advance payment and performance guarantee, had not been deposited.

The advance payment of MVR 30 million was given by the government after converting the retention money taken from the same contractor on a different government contract as the payment guarantee of the convention centre project.

This conversion, the report said, could be perceived as an attempt by the government to financially support a specific party contravening existing laws, since other companies who had proposed their bid did not have any retention money owed by the government and could not therefore enjoy the same privileges.

The Auditor General’s findings said that the advance MVR 30 million payment was made in contrast to section 8.23 of Public Finance Regulation, which states that any such advance payment should not exceed 15 percent of total costs. The MVR 30 million advance stands at around 20 percent of the cost, the report added.

Other discrepancies highlighted in the report included financial losses incurred by the government, violations of Public Finance Act and Public Finance Regulation and wasteful spending.

MDP response

Former ruling party MDP Spokesperson Hamid Abdul Ghafoor described the report as “naive” and “misguided political posturing”, while challenging its credibility.

“What we are saying is that after an audit report is released, the litigation based on the findings must begin as soon as possible. The longer time between the release of the report and start of litigation means such reports are open for political manipulation,” he said.

Ghafoor claimed that MDP came out to reform the country, which included fighting against corruption.

“It is not possible for the MDP-led government to be involved in blatant corruption. Because we came with a plan and strategy for reforms,” Ghafoor contended.

He also said that the public will judge the audit reports and will know how politically motivated the report is.

“Looking at perspective of development and progress, we see this report as just ‘petty accusations’. The report lacked due procedure, impartiality and transparency. It may have been possibly influenced by the political vibe in the country,” Ghafoor alleged.

Auditor General Niyaz Ibrahim meanwhile disputed in local media that the timing of the audit report before the election was political, stating that information contained in such reports was necessary for people to make informed decisions.

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Auditor General’s Office to verify disputed figures in finance ministry audit report

The Auditor General’s Office has said it is verifying whether Vimla Construction Pvt Ltd was in fact given an advance payment of MVR 198.1 million (US$12.8 million) in February 2009 as flagged in the finance ministry’s 2011 audit report.

In a press release last week, the Auditor General’s Office said it was in the process of “further checking and verifying” the disputed figure stated in the audit report (Dhivehi) released earlier this month following questions raised in the media over its authenticity.

The case highlighted in the report concerned a large advance payment for delivery of construction materials for a tsunami-related housing project in Gaaf Alif Atoll.

Vimla has claimed in local media that the company received MVR 5 million (US$324,254).

“The audit report did not state that the advance payment to Vimla Construction for the Gaaf Alif housing project was made in violation of the law and regulations,” the press release stressed, adding that the audit office did not make any recommendations concerning the advance payment.

The case was uncovered during auditing of the finance ministry records, the press release added, and the figures were based on information collected from the ministry for its 2011 audit.

Auditors met with senior officials of the finance ministry on February 24, 2013 to verify the figures stated in the audit report and invited feedback from the ministry in a letter sent on March 19, 2013, the press release revealed.

“However, as a result of not receiving comments for the Ministry of Finance and Treasury’s 2011 audit report as of its publication date, this office believes that errors in the figures concerning the cases highlighted in the report are possible,” the Auditor General’s Office conceded.

The press release added that the Auditor General’s Office regretted “any difficulties” or “diminished name or reputation” caused by inaccuracies contained in its audit reports.

The press statement concluded by providing assurances to the public on the professionalism and impartiality of the audits conducted by the office.

The case flagged in the finance ministry’s audit report for 2011 concerned payments made on February 18, 2009 – just over three months after the Maldivian Democratic Party (MDP) administration took office.

However, following the controversial transfer of presidential power on February 7, 2012, President Dr Mohamed Waheed appointed members of then-opposition parties to cabinet and senior government posts.

Current Finance Minister Abdulla Jihad was also the finance minister during the last year of former President Maumoon Abdul Gayoom’s 30-year reign.

Auditor General Niyaz Ibrahim meanwhile told newspaper Haveeru last week that the office has uncovered a number of issues in the tsunami-related reconstruction projects commenced by the Gayoom government in Gaaf Alif atoll.

Niyaz told the local daily that the finance ministry’s audit report for 2011 was published after a long period awaiting comments from the ministry.

“There could be a mistake since they have not said whether there is anything they object to or not,” he was quoted as saying.

Tsunami reconstruction

Niyaz also revealed that the Auditor General’s Office was in the process of completing a special audit of the tsunami reconstruction projects, which would also shed light on the disputed advance payment made to Vimla Construction.

According to the section of the audit report dealing with the advance payment, the “Reconstruction and Development of Gaaf Alif Atoll Project” was to be undertaken with loan assistance from the Saudi Fund.

However, in 2011, the finance ministry spent MVR 17.6 million (US$1.1 million) out of its special budget to transport material needed for the project from the Hithadhoo Regional Port in Addu City to Gaaf Alif atoll.

While Vimla was contracted for the project and given an advance payment, the report explained that a foreign company named Performance Builders was contracted under a “deeds of assignment” on March 25, 2010 to replace Vimla on the project as the local company had been unable to complete the contracted work.

According to local media, the project was eventually awarded to the Maldives Transport and Contracting Company (MTCC) after Performance Builders also failed to complete the work. The government-owned company reportedly faced a loss of MVR 17 million (US$1 million) due to nonpayment.

The case is currently the subject of an inquiry by parliament’s Finance Committee.

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No corruption in GMR airport deal, concludes ACC

The Anti-Corruption Commission (ACC) has ruled out corruption in the awarding of a concession agreement in June 2010 to a consortium of Indian infrastructure giant GMR and Malaysia Airports Holdings Berhard (MAHB) to develop and manage the Ibrahim Nasir International Airport (INIA).

In a 61-page investigative report (Dhivehi) made public yesterday (June 17), the ACC concluded that the bidding process was conducted fairly by the World Bank’s International Finance Corporation (IFC) and that the GMR-MAHB consortium won the contract by proposing the highest net present value of the concession fee.

The ACC further concluded that the awarding of the contract did not contravene amendments brought to the Public Finance Act requiring parliamentary approval for such agreements.

The amendments were published in the government gazette after the concession agreement was signed, the ACC noted.

The concession agreement was signed on June 28, 2010, while the amendments were gazetted on December 13, 2010, following a Supreme Court ruling. The amendments were voted through for a second time in August 2010 following a presidential veto.

On the previous administration’s decision to replace the board of directors at the 100 percent government-owned Maldives Airports Company Ltd (MACL) – after they refused to sign the concession agreement claiming insufficient information – the ACC observed that there was “no legal obstacle” for the move.

The ACC report also concluded that the government would benefit more from privatising the airport.

“Considering the situation (2008, 2009 and 2010) when the decision was made to privatise the Male’ International Airport,” the ACC’s calculations showed that MACL would make a profit of about US$254 million in 25 years if the airport was operated by the government-owned company.

Conversely, the government would receive about US$534 million in the same period from the GMR consortium if the airport was privatised, the ACC found.

The privatisation of the airport by the ousted Maldivian Democratic Party (MDP) government in June 2010 was strongly condemned by opposition parties on nationalistic grounds.

The Dhivehi Rayyithunge Party (DRP), Peoples Alliance (PA), Dhivehi Qaumee Party (DQP) and Jumhooree Party (JP) signed an agreement to work against the privatisation process and launched a media offensive alleging “massive corruption” in the awarding of the contract.

The ACC report this week meanwhile followed a special audit conducted by the Auditor General’s Office with the assistance of a British consultant concerning the airport privatisation deal.

The AG’s report stated that evidence to back allegations of “improper interference” during the technical bidding process “is not conclusive on this point” and deferred the matter to the ACC.

The AG’s report also noted that the IFC’s terms of reference involved “securing the best deal for the government in terms of the concession fee paid to the government and MACL, and did not consider impacts on the Maldivian economy.”

Government stance

In November 2012, the current government – made up of a coalition of parties opposed to the MDP government’s privatisation policy – declared the concession agreement with the GMR-led consortium “void ab initio” (invalid from the outset) and abruptly terminated the contract.

In April this year, the Attorney General’s Office confirmed that arbitration proceedings resulting from the contract cancellation would begin by mid-2014.

Responding to the ACC’s findings yesterday, the government insisted that the report would have no impact on its legal position to declare the GMR concession agreement void, contending that President Dr Mohamed Waheed’s decision had nothing to do with corruption allegations levelled by “some people”.

President’s Office Media Secretary Masood Imad told Minivan News that the contract was declared void from the beginning due to the negative impact on state finances in 2012.

“Back before the government took back control of the airport from GMR, the reason we gave was that the deal was bleeding the country’s economy. We were paying GMR to keep them here,” he explained.

Masood said that despite “speculation from some people” concerning corruption by the former administration in signing the deal, the present government was not responsible for filing a case with the ACC.

He added that the government’s concerns over the deal had been in relation to the imposition of a US$25 Airport Development Charge (ADC) by GMR that was blocked by the Civil Court in 2011 after the then-opposition DQP filed a case on the matter.

The DQP, now part of President Waheed’s coalition government, attempted to block payment of the charge on the grounds that it was effectively a tax not approved by parliament.

In response, the MDP government agreed to deduct the ADC from the concession fees payable, while GMR later offered to exempt Maldives nationals from paying the ADC as it moved to appeal the verdict.

However, former President Mohamed Nasheed resigned under controversial circumstances on February 7, 2012 amidst a violent mutiny by elements of the police and military before the Civil Court verdict was appealed at the High Court.

Consequently, in the first quarter of 2012, Dr Waheed’s government received US$525,355 of an expected US$8.7 million, after the deduction of the ADC. That was followed by a US$1.5 million bill for the second quarter, after the ADC payable eclipsed the revenue due the government.

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Failure to recover misappropriated state funds to be investigated: Parliament Public Accounts Committee

Parliament’s Public Accounts Committee will investigate the failure of authorities to recover funds highlighted by the auditor general as misappropriated.

In a meeting held on Monday (February 25), Committee Chairperson MP Ahmed Nazim revealed that the committee intended to send a letter to Attorney General Aishath Azima Shakoor regarding the failure to recover the misappropriated funds.

Majlis Finance Committee member MP Ahmed Hamza told Minivan News today (February 26) that the Public Accounts Committee was still going through the reports and was unable to give an estimate as to how much money is still owed as a result of the misuse of state funds.

“We are having to look into past audit reports starting from when they first began under [former President Maumoon Abdul] Gayoom was president. We are not able to scrutinise the spending from any year before audit reports were introduced.

“We have agreed that in order to scrutinise Gayoom’s government accounts, the majority of those looking into them will be held by opposition parties. This will also be the same when [former President Mohamed] Nasheed’s accounts are looked into,” Hamza said.

The finance committee member said that there were two issues in regard to the failure of recovering misused funds.

“If the government incurs a loss due to the misappropriation of funds, rather than recover the money, the guilty party is faced with criminal punishment instead.

“Secondly, it is a case of certain members finding it not possible to recover the funds that had been misused,” Hamza added.

When asked whether there had been any effort to recover the money in the past, Hamza stressed that some had been returned, but he was unable to give a rough figure as to how much.

Dhivehi Rayyithunge Party (DRP) MP Visam Ali was reported by local media as saying that government offices do not correct issues relating to how funds are managed, even after repeatedly being advised to do so in audit reports.

The Attorney General Aishath Azima Shakoor and Head of Majlis Finance Committee and MP Ahmed Nazim were not responding to calls from Minivan News at time of press.

Finance Committee member and Maldivian Democratic Party (MDP) MP Abdul Ghafoor Moosa answered his phone when contacted by Minivan News stating that he was “in a meeting”.

Extravagant spending

Previous reports compiled by the auditor general have uncovered extravagant spending by former Presidents and ministerial officials.

Earlier this year, an audit report for 2010 highlighted 12 instances whereby the President’s Office – under Nasheed’s government – had acted in breach of laws and regulations.

The report noted that in 2010, the President’s Office spent MVR 7,415,960 (US$480,931) over the parliament approved budget for the office.

In addition, the report also highlighted Nasheed’s chartering of an Island Aviation flight from Colombo to Male’ on November 19, 2010. This had cost MVR 146,490 (US$9500).

The audit report states that while all these were paid from state funds, no records were available to prove that Nasheed booked this flight for official purposes.

The report further reveals that President Mohamed Waheed Hassan, then Vice President, had spent MVR 764,121 (US$49,554) on a trip to Malaysia and America with his own family.

Meanwhile, the expenses of Former President Gayoom were leaked last year revealing the excessive spending on Gayoom’s family from money allocated to helping the poor.

Dhivehi Rayyithunge Party (DRP) MP Rozaina Adam leaked the invoices revealing Gayoom’s spending through Twitter in 2012.

In a statement, Rozaina noted that a total of MVR 905,636 (US$58,807) was spent on various items for Gayoom’s family, including MVR 193,209 (US$12,546) on trouser material in 2008.

Auditor General Niyaz Ibrahim told newspaper Haveeru back in October 2012 that the state should recover funds used by former presidents on their families and associates.

Lack of legislation explicitly prohibiting such expenses was not an obstacle to recovering the misappropriated funds, the Auditor General contended.

He noted that there was no law that authorised the use of public funds for personal expenses, adding that assistance from state funds should be provided on an equal and fair basis.

“Even if its Nasheed, Waheed or Maumoon, no one can spend state funds for their own personal use,” Niyaz was quoted as saying.

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High Court releases suspects arrested over DMC fraud investigation

The High Court has released the five people arrested in connection with a MVR 24 million (US$1.55 million) corruption investigation involving the Disaster Management Centre (DMC).

The suspects arrested included the Former Head of Disaster Management Centre Abdulla Shahid and the brother of the Speaker of Parliament.

The five individually appealed in the High Court arguing that the Criminal Court’s decision to extend their detention was unlawful.

The High Court ruled there was no need to keep the five detained as the suspects were arrested after their statements had already been obtained,  and because the case was already being investigated by the Anti-Corruption Commission and the Auditor General.

The case involving the Disaster Management Centre fraud concerns an audit report into the Centre produced by the Auditor General. In the report, the Auditor General alleged that the MVR 24 million was fraudulently obtained from the budget allocated for the Centre for the years 2009 and 2010.

The Auditor General (AG) later conducted a special audit into the MVR24 million believed to be fraudulently obtained.

The AG”s report alleged that the Disaster Management Centre had photocopied, edited and reused ‘Credit Purchase Order Forms’ used in 2005 to withdraw MVR 24 million from the Centre’s budget at the Finance Ministry.

The ‘Credit Purchase Order Forms’ were originally given to the Disaster Management Centre in 2005 to withdraw cash from the Tsunami Recovery Fund. The Auditor General’s report also suggested that the Finance Ministry was complicit in the alleged fraud.

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President’s Office budget exceeded by MVR 7 million in 2010: audit report

President’s Office spent in spent MVR 7,415,960 (US$480,931) over the parliament approved budget for the office in 2010, according to the auditor general’s office.

The audit report, released on Thursday, focused on the expenses of the President’s Office and the residences of the President and the Vice President.

The report spells out explicitly 12 instances in which the Auditor General believes the President’s Office acted in breach of laws and regulations.

In addition to the excess expenditure of MVR 7 million, the report also highlights then-President Mohamed Nasheed’s chartering of an Island Aviation flight from Colombo to Male’ on November 19, 2010. This had cost MVR 146,490 (US$9500) for the charter itself, together with the ground handling fee of MVR 3,097 (US$ 201) paid to Sri Lankan Airlines, and fuel charges of MVR 11,925 (US$773) paid to Ceylon Petroleum Corporation.

The audit report states that while all these were paid from state funds, no records were available to prove that Nasheed booked this flight for official purposes. It stated that the trip was there considered to have been made for personal reasons and that Nasheed has not yet paid back this amount to the state.

The report also points out that the state had used the special budget of the Ministry of Finance and Treasury to settle payments worth MVR 21.9 million (US$1.4 million) to two foreign companies who were assisting an investigation which was being conducted by the Presidential Commission, understood to be an investigation of the former government’s sale of oil to the Burmese military junta.

Another transaction considered unlawful by the Auditor General’s report was the settling of pending bills dated between 2005 and 2008 submitted by a Malaysian company for the purchase of items for the presidential palace during former President Maumoon Abdul Gayoom’s administration.

Other incidents stated in the report include failure to submit reports on official trips made abroad or documents to highlight achievements made in these trips, hiring consultants outside of recruitment procedure and without specifying their duties, payment of fines levied due to failure to process bill payments by deadlines and incurring additional spending due to lack of timely organising of trips to local atolls.

The report details the amounts spend in the year 2010 on the annual paid vacation of 30 days with their respective families by the President and the Vice President.

Former President Nasheed is said to have spent MVR 446,578 (US$28,961) on a trip to Singapore with family, while  President Mohamed Waheed Hassan, then Vice President, had spent MVR 764,121 (US$49,554) on a trip to Malaysia and America with his own family.

The report calls on the state to put in place policies to govern limits of the amounts that can be spent by the President and Vice President on their annual vacation.

It also points out the lack of documentation to prove that trips made by families of the President or Vice President citing medical purposes were indeed made for those reasons.

The report emphasises that the amounts spent on the President’s official residence had significantly decreased, offering a comparison of the amounts spent since 2007. According to the report, the President’s official residence spent MVR 68.8 million in 2007, MVR 79.7 million in 2008, MVR 42.04 million in 2009 and MVR 27.13 million in 2010.

It cites staff cuts from 313 to 154 personnel, and lower spending on official trips among other reasons for the decreased spending.

Chief of Staff during Nasheed’s administration and current Deputy Chair, Finance, of MDP Ahmed Mausoom was not responding to calls at the time of press. Minivan News was also unable to reach President’s Office Spokesperson Masood Imad.

Read the full report (Dhivehi) here.

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Population consolidation, rightsizing public sector essential to address budget deficit: Auditor General

A policy of population consolidation together with effective measures to reduce the public sector wage bill is necessary to address continuing budget deficits, the Auditor General has advised parliament.

The recommendations were made in a report (Dhivehi) submitted to parliament with the Auditor General’s professional opinion on the proposed state budget for 2013.

Auditor General Niyaz Ibrahim observed that of the estimated MVR 12 billion (US$778 million) of recurrent expenditure, MVR 7 billion (US$453.9 million) would be spent on employees, including MVR 743 million (US$48 million) as pension payments.

Consequently, 59 percent of recurrent expenditure and 42 percent of the total budget would be spent on state employees.

“We note that the yearly increase in employees hired for state posts and jobs has been at a worrying level and that sound measures are needed,” the report stated. “It is unlikely that the budget deficit issue could be resolved without making big changes to the number of state employees as well as salaries and allowances to control state expenditure.”

The report noted that the bill on state wage policy recently passed by parliament would not address the issue as the legislation focused “mainly on reviewing salaries of state institutions.”

The Auditor General’s Office contended that “major changes” were needed to right-size the public sector and “control the salary of state employees and expenditure related to employees.”

The report observed that compared to 2012, the number of state employees is set to increase from 32,868 to 40,333 – resulting in MVR 1.3 billion (US$84.3 million) of additional expenditure in 2013.

This anticipated increase included 864 new staff to be hired by the Maldives Police Service (MPS) and Maldives National Defence Force (MNDF), the report noted.

In light of “existing inefficiencies” in the state, the Auditor General contended that hiring more staff for various independent institutions would be “a waste of public funds” as it would divert resources from service provision and development projects.

“Moreover, we note that increasing the number of employees would lead to an increase in office expenses and expenditure on employees’ retirement and pensions, decrease the number of people left to do productive work in the private sector (decrease the labour force), and slow the growth of the country’s economy,” the report stated.

Details of the state’s wage bill included in the report showed that MVR 187 million (US$12 million) was budgeted as salaries and allowances for 545 political appointees in 2012.

In addition, MVR 1.98 billion (US$128.4 million) was to be spent on 18,538 civil servants; MVR 999 million (US$64.7 million) on 6,244 police and army officers; MVR 362 million (US$23.4 million) on 1,455 elected representatives and attendant staff; MVR 485 million (US$31.4 million) on 3,372 employees of independent institutions; and MVR 345 million (US$22.3 million) on 2,714 contract staff.

In 2011, the Finance Ministry revealed that MVR 99 million (US$6.4 million) would be spent on 244 political appointees annually as salaries and allowances.

According to the weekly financial statement released by the Finance Ministry, recurrent expenditure as of December 20, 2012 has reached MVR 8.9 billion (US$577 million). Roughly half was spent on employees.

Fiscal imbalance

A report by the World Bank in May 2010 identified the dramatic growth of the public sector wage bill as the origin of the Maldives’ ongoing fiscal imbalances.

According to the report, increases to the salaries and allowances of government employees between 2006 and 2008 reached 66 percent, which was “by far the highest increase in compensation over a three year period to government employees of any country in the world.”

“Between 2004 and 2009, the average monthly salary of a government sector worker increased from MVR 3,223 (US$250) to MVR 11, 136 (US$866),” explained a UNDP paper on achieving debt sustainability in the Maldives published in December 2010.

Former President Maumoon Abdul Gayoom responded to growing calls for democratisation with “a substantial fiscal stimulus programme” of increased government spending, “much of which was not related to post-tsunami reconstruction efforts.”

“This strategy led to a large increase in the number of civil servants from around 26,000 in 2004 to around 34,000 by 2008 or 11 percent of the total population. Thus the government simultaneously increased the number of public sector workers as well as their salaries,” the paper noted.

Consequently, recurrent expenditure – wage bill and administrative costs – exceeded 82 percent of total government spending in 2010. Presenting the estimated budget for 2013, Finance Minister Abdulla Jihad noted that more than 70 percent was recurrent expenditure.

“As in other years, the highest portion of recurrent expenditure is expenditure on [salaries and allowances for government] employees,” Jihad explained. “That is 48 percent of total recurrent expenditure.”

Population consolidation

Meanwhile, the Auditor General’s report noted that the government planned to carry out 406 projects under the public sector investment programme (PSIP) at a cost of MVR 3 billion (US$194 million).

The Auditor General however contended that the projects were formulated “without a national development plan” and that there was “no relation between the PSIP’s purpose and the proposed projects.”

While the stated purpose and policy of the government was population consolidation, the report stated that the harbour, sewerage, land reclamation, housing, coastal protection and other projects were included in the budget “without a plan” for integrating island populations in urban centres.

The Auditor General’s Office therefore advised against carrying out the projects planned for 2013 in the absence of a plan for population consolidation.

The report observed that “the main reason the state’s recurrent expenditure has increased” was developing 200 inhabited islands “as single units” and attempting to provide healthcare, education, social, administrative and legal services to small island populations.

The report stated that pursuing a policy of population consolidation was “essential”.

It added that the return on the investment for relocating populations of small islands would be seen in savings from the state’s budget for providing services to geographically dispersed islands.

While implementing such a policy could prove difficult, the Auditor General’s Office believed that “a national consensus” could be reached on the need for consolidating population.

Moreover, a glance at the state’s expenditure showed that continuing fiscal imbalances or budget deficits were “inevitable” if such a policy was not formulated, the report stated.

Deficit

The Auditor General explained that the fiscal deficit in 2012 was MVR 1.5 billion (US$97.2 million) more than forecast because of a shortfall in projected revenue from taxes and import duties as well as higher than budgeted expenditure on government companies and subsidies.

However, while revenue from Goods and Services Tax (GST), import duties and tourism land rent was lower than budgeted estimates, income from Business Profit Tax was more than expected at MVR 613.3 million (US$39.7 million).

The government also spent MVR 862.3 million (US$55.9 million) from the 2012 budget to settle bills outsanding from the previous year, the report noted

The Auditor General’s Office observed that revenue from the newly introduced GST was not enough to offset lost income from reducing and eliminating import duties.

“As a result of the change to the state’s taxation system, income to the state declined by MVR 495 million (US$32 million),” the report noted.

As reducing import duties had not resulted in a noticeable drop in prices, the Auditor General recommended reviewing the changes in consultation with the relevant authorities and amending the tax laws.

The 2013 budget

The Auditor General observed that the budget proposed for 2013 was 2.7 percent higher than 2012 and 19 percent higher than 2011.

An estimated budget deficit of MVR 2.33 billion (US$149 million) was to be financed by MVR 1.15 billion (US$74.5 million) in foreign loans and MVR 1.17 billion (US$75.8 million) in domestic finance.

Echoing a concern expressed by MPs during the recent budget debate, the Auditor General noted that projected revenue included MVR 1.8 billion (US$116 million) expected from new revenue raising measures that require parliamentary approval.

A recent mission from the International Monetary Fund (IMF) had urged the government to implement a raft of measures to raise revenues, advising that strengthening government finances was “the most pressing macroeconomic priority for the Maldives.”

The measures proposed by the Finance Ministry included revising import duties, hiking T-GST from 8 to 15 percent in July 2013, raising airport service charge or departure tax from US$18 to US$30, introducing GST for telecom services and leasing 14 new islands for resort development.

On the last proposal, the Auditor General advised that the islands should not be leased without consulting the tourism industry and studying the impact of the decision in consideration of the tourism master plan.

The Auditor General concluded that it was “unlikely” that the new revenue would be collected in 2013.

Consequently, if there was a significant shortfall in income, the Auditor General warned that government revenue would not be enough to cover recurrent expenditure.

“Therefore, we note that it is very likely that MVR 509.9 million (US$33 million) would have to taken as loans to cover recurrent expenditure,” the Auditor General stated, advising that it was “necessary” to reduce recurrent expenditure by that amount before the budget is passed.

As a result of financing budget deficits with loans for the past six years, the Finance Ministry revealed earlier this month that government spending on loan repayment and interest payments was expected to reach MVR 3.1 billion (US$201 million) in 2012.

Moreover, the total public debt would stand at MVR 27 billion (US$1.7 billion) in 2012 and MVR 31 billion (US$2 billion) in 2013 – 82 percent of GDP.

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Case alleging corruption in parliament’s chamber automation project forwarded to ACC

A case submitted by the Auditor General alleging corruption in the Parliament Chamber Automation Project has been forwarded to the Anti Corruption Commission (ACC).

The audit report of the parliament for 2010 highlighted issues with the MVR 2.1 million (US$136,000) project to install touch screens on every desk inside the parliament chamber.

The case was forwarded to the ACC by parliament after Speaker Abdulla Shahid had informed the parliament secretariat to comply with the request of the Auditor General, a statement by parliament revealed.

The audit report alleges that sufficient assessment was not carried out for the project, despite it being required to have gone through the tender evaluation board.

This resulted in the company awarded the contract to allegedly reap excessive profits due to the oversight.

The project was installed to facilitate viewing documents and to create an almost ‘paperless environment’.

The audit report noted that the project was awarded to a Maldivian company for MVR 1.3 million (US$84,300) on March 25 2010.

Despite being given 37 days to complete the project, the company took a total of 81 days, costing an additional MVR 720,425 (US$46,720) to complete the work.

The report added that additional funds had to be spent on the project because the software requested by the Parliament Secretariat turned out to be incompatible with the hardware used in parliament.

The software, called Thin Client, also turned out to be incompatible with the touch screens and touch keyboards used in the project.

Despite MVR 24,000 (US$1550) being spent on obtaining expert advice, the consultant was not held responsible for the additional money spend on the project.

The mistake led to the 100 Thin Client touch pads being removed and replaced by Nettops.

A company was awarded MVR 830,000 (US$53,617) to provide Nettops after winning a bid to supply the hardware.

MVR 1.3 million (US$84,300) was then paid to the new company for the installation of six servers, eight server switches and 100 touch screens.

The audit report noted that the parliament secretariat had conferred undue advantage to the contractor.

The secretariat did not deduct liquidated damages following the contractor failing to complete the project before the agreed deadline, as required by the Finance Act.

It was instead stated in the contract that the secretariat can decide whether to deduct liquidated damages or not.

Several opinions were included in the report indicating that the project was undertaken without proper studies, and in a manner that was not beneficial to the parliament.

Despite one aim of the project being to create a ‘paperless environment’, the report noted that parliament expenditure on photocopying and toner cartridges had not gone down.

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Funds for essential state projects “trapped” in parliament

Essential state projects are suffering from a lack of funds due to an excessive annual budget assigned for parliament, a 2011 audit report has revealed.

The audit report of the parliament states that MVR 35.4 million and MVR 20.7 million from the parliament budget was unused at the end of 2010 and 2009 respectively.

In 2010, MVR 89.2 million out of MVR 124.5 million was spent from the budget assigned for parliament.

The report states that: “Lack of proper studies in this regard results in money necessary for other state projects being trapped in the parliament.”

In 2009, only MVR 68.5 million out of MVR 241.6 million was spent from the budget assigned for parliament.

MVR 70.1 million and MVR 54.3 million went on the salaries of parliament employees in 2010 and 2009 respectively, and parliament travel expenses took up MVR 3.3 million and MVR 2.1 million in 2010 and 2009 respectively.

The parliament spent MVR 302,169 on phone bills, MVR 1.5 million on electricity, and MVR 3.8 million on insurance.

The audit report recommended the parliament to conduct proper studies, and determine planned activities when preparing the budget.

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