Sunday, June 29, 2014

Illegal procurement, unsupported expenditure .... and more

The first of a series of articles dealing with corruption and financial irregularities in World Bank and international donor supported Bangladesh government programs is published in Today's New Age. (if you cannot access the article on New Age website, it is republished here)

In relation to today's article, there was no space for a number of other articles providing more details of the irregularities in the program - on procurements, unsupported expenditure, no goods received and unnecessary purchases. So here they are.

Please note if you want to download the original audit document, you can do so from here

1. Illegal procurements comprise 40 percent of financial irregularities
According to the audit undertaken by the government’s Comptroller Auditor General into the joint government/donor aided health programme for the year 2012/13, there were 25 illegal procurements amounting to a total of $29 million (Tk 223 crore) - 40 percent of the total financial irregularities. Here are just a few examples.

Moulvibazaar hospital – Tk 132 crore: The audit committee found that a tender for the supply of medical equipment for the 250 bed hospital in Moulvibazaar, won by M/S Techno Trade at a price of 132 crore ($17 mil), was ‘irregular’. The tender was inappropriately split into 13 different parts, all of which the company won, and payment was partly made to the company without having received the authorization of the Cabinet Committee on Government Purchase.

Dinajpur Medical College – Tk 25 Crore: Without obtaining authorisation from the ministry, the college purchased equipment, books and journals at a total cost of Tk25 crore ($3.2 mil) from Techno Trade, though the college principal only had the authority to sign a cheque upto Tk 4 crore. The college principal did this by signing 15 separate cheques, all of them below the TK 4 crore maximum – with seven of these cheques signed on a single day.

Dhaka Dental College – Tk 13.14 crore: The college authorized the spending of Tk 13.14 crore ($1.7 mil) on the purchase of equipment but the auditors could not find basic tender documents, including tender schedule, comparative statements, the report of technical committee, trade certificate, and the experience certificate of the tendering companies. As a result, the audit stated ‘the genuine[ness] of expenditure could not be ascertained by the audit,’

Dhaka Dental College Hospital and Suhrawardi Medical College Hospital – Tk12.5 crore; The operational plans of both Dhaka Dental College Hospital and Suhrawrdi Medical College Hospital allowed them, in coordination with the public works department, to install an oxygen gas plant and construct a pipe line. The Dental hospital paid 3eye Merchandise Tk 4.88 crore ($630,000)and Suhwardi hospital paid IMEX Tk 7.59 crore ($980,000) to undertake the work.

The audit found that although the work required was highly technical, the hospitals did not undertake any engineering surveys and there was no evidence of any engineering supervision or monitoring.

It also found that both tender processes were faulty. The tender stated that it involved the ‘purchase of heavy machinery and equipment’ rather than the installation of a gas plant and construction pipe line and the evaluation committee was also not formed with the approval of the competent authority, and did not include those with appropriate professional experience; there was no engineer in the Dhaka Dental College Hospital tender evaluation committee and only one sub-assistant engineer in the tender committee set up by the Suhwardy Hospital

The audit report added that the tender was not approved by the Public Works Department, and the money was paid without the contractor providing any ‘Measurement book’ which is supposed to sets out the details of material purchased and work done.

Non Communicable Diseases Control programme – 6.8 crore: The programme purchased Tk6.8 crore ($874,000) worth of stationery for a series of training workshops in different upazillas. The audit however found that this was all paid in cash, all the stationery was purchased from one shop and there had been no tender process which was in ‘violation of the public procurement rules and [a] competitive price was not ensured.’

On another occasion, the programme avoided the tendering of the supply of office equipment, furniture, and printing materials by splitting the work into 45 separate contracts to ensure that each contract did not exceed the 5 lakh limit that would have triggered the requirement to tender. The audit said that the Tk2.3 crore paid was as a result not a ‘competitive price’.

TB-Leprosy Program – 99 lakh: The audit found that there had been ‘collusive practice’ involved in giving a 99 lakh ($129,000) contract to a company (unnamed), for the supply of chemicals in the TB-Leprosy Control programe. It observed that although 19 schedules relating to the tender were sold, only 3 companies bid, and that the serial numbers on pay orders of each of their bid securities were consecutive, ‘so it is clearly understood that the contract was awarded through unfair practice with the supplier’.
2. $18 million spent, but no corroborating documents
The 2012/3 government audit into the donor supported health programme found that financial irregularities amounting to 139 crore taka ($18 million) - 26 percent of the total amount– were due to the lack of proper documentation supporting the expenditure

According to the audit, the ‘In-service training’ programme, spent 46.07 crore ($6 mil) without keeping basic records or documents, described by the audit team as ‘important and vital’ to support the expenditure. The audit claimed that the line director, kept no petty cash book , no advance control ledger, no budget deduction register, no inventory control register, no suppliers security deposit register nor a Bank reconciliation statement. ‘Due to non-maintenance of records and documents … audit is unable [to] ascertain the transparency of transactions’ the audit stated.

The audit also claimed that the same line director had given documents supporting the expenditure of 20.89 crore taka on overseas training, including payment for thirteen trips to Thailand, but that 13 crore ($1.7 mil) of this amount was supported by ‘fictitious’ vouchers. ‘All adjustment vouchers were supposed to be fake,’ the audit report stated. ‘Adjustment of advances were not true and fair … so Payment as well as adjustments were fictitious.’

In another incident, the ‘Non Communicable Disease control’ programme was given a cash cheque for Tk 45.54 crore ($5.9 mil) to pay honorariums relating to workshops and surveys that the program was undertaking. However, the audit team found no cash book or any information on the payment made to different people, as required by ‘fundamental’ accounting principles. ‘As a result audit could not ascertain [the] accuracy of disbursements against the cash drawn from the bank,’ the report stated

The Khulna Public Work Department also approved the payment of Tk17.13 crore (Tk2.2 mil) for the construction of an intensive care and casualty Unit, a 250 bed specialized hospital, a 100 bed diabetic hospital and other work at Khulna Medical college. However, when the audit team came to look at how the money was used, it found that there was no approved official estimates of the work, no drawing and design, no tender documents, contract agreements or measurement books. ‘The adult could not justify the genuineness of payments,’ the audit said.

In addition, the audit claimed that Dr Md Ashek Hossain, the line director of the ‘TB-Leprosy Control’ programe spent 10 crore ($1.3 mil) on different heads of expenditure – including consultancy, printing, stationery, training, and surveys - but the department did not contain any cash book establishing how the money was used and who received it. The Auditors said that ‘the authority did not maintain cash book for drawn cash from the bank and payment made to different persons.’
3. Lack of goods
Another $4.3 million was also spent on goods that the audit team were uncertain whether they had been received, or if they were received, were damaged or unused.

The audit team was not able to determine ‘the actual position’ of 12.06 crore ($1.6 mil) of assets purchased by the National Nutrition Services programme including 10.82 crore of medicine. It found that the programme had not undertaken an inventory or physical verification of the goods that were supposed to have been purchased, and as a result the ‘proper use and position of the above assets could not be verified.’

An amount of Tk 2.6 crore ($340 mil) was spent by the 250 Bedded General Hospital in Gopalganj from M/S 3Eye Merchndise for the procurement of equipment, medicines and clothing – however ‘scrutinising of bill/voucher, stock register and physical verification of store’ none of the purchased material was found.

In addition the Dhaka Dental College paid 1 crore taka for equipment that had not yet been received.

The audit found that Rangpur Medical College Hospital was involved in a fictitious payment of 97 lakh ($126,000) for the purchase of 46 types of reagent and cell analyzer. It noted that a new stock register was specifically opened to note the receipt of the chemicals where it was stated to have been received on one day and removed from the stock room the very next day – though there was no evidence of anyone requesting the materials for use, or of anyone using them. The audit found that ‘it is evidence that the stated amount was misappropriated by the local authority.’

In another part of the programme, a total of 87 lakh ($112,000) was spent on equipment for two char hospitals, but it was found that all the equipment was either damaged or unused. ‘Huge number of valuable medical equipment and machineries were damaged’ resulting in a ‘loss of project money’ the audit said.

Dhaka Medical College spent 39 lakh ($50,000) on equipment from M/S Techno Trade but the equipment was found not to work and a nurse told the auditors that the equipment had not been used since they were purchased. The auditors stated that the project money was ‘misused’.
4. $6.8 million of unnecessary purchases
$6.8 million (Taka 52.5 crore) was spent in the health programme in 2012/3 which the audit team considered was useless or unnecessary. This amounted to 10 percent of the total financial irregularities found in the programe. Examples include:

Community Based Health Care programme purchased 19 cross country vehicles, 25 three wheel vans, 13, 500 bicycles and, 62777 steel cabinets. However, the audit team found that only 2 of the 19 cross country vehicles most of the three wheel vans, and 13,057 bicycles, altogether worth 12.38 crore ($1.6 mil), had not been distributed.

The audit team found that the National Nutrition Service programme had spent Tk11 crore (Tk1.5 mil) on purchasing vitamins, but that Tk 8.13 crore worth of the vitamins were not required. The Audit team argued that this was a ‘misuse’ of project money.

In the procurement plan for the one of the projects, there was a provision for the procurement of 3000 desktop computers – however a total of 5080 computers were purchased, which the audit team stated was excess expenditure’ of Taka 8.8 crore taka ($1.8 mil).

The Non-communicable Disease Control progamme organized 2,158 workshops involving 56,331 people from 418 upazillas, but purchased stationary for 75,540 participants – 34 % more than required. As a result 7.7 crore taka ($992,000) was spent in excess of what was necessary. Whilst the audit team accepted that this could be utilized at the next worship, it also found that there was no stock register of goods in storage.

7.16 crore taka ($924,000) was also on machinery equipment and furniture which the audit team considered was ‘useless’. The purchased items, which included a public address system, were said to have been required by Seikh Fazilatunessa Mujib Memorial specialized hospital and Nursing College but the audit team did not find any need for it. The audit team also said that there was no provision in the operational plan for the purchase of the equipment

The Central Medical Storage Depot were given a bill from M/S Trade House of 5.8 crore taka for supply of different chemicals which was paid. However the audit team found that the actual bill added up to Tk 2.8 crore taka – and so Tk3 crore ($387 mil) was over paid to the supplier

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