Saturday, July 12, 2014

World Bank gets its audit numbers wrong

Will heads roll? The Bangladesh office of World Bank has got a key figure completely wrong in its rejoinder to New Age's article which was published on 29 June, titled 'World Bank health programme: Audit finds $70m spending irregularities'.

In its rejoinder, which is printed in full below (an edited version was published in New Age along with the paper's response), the World Bank claimed that there were a number of errors in the article - the main one being that the 2012/13 audit of the health program did not find $70 million of irregularities but instead $25.6 million.

$25.6 million is of course a large number, but nowhere near as large as $70 million, and if the World Bank was correct, would indicate that the article had made a serious error.

However, the World Bank was not correct.

Below is a table setting out each of the observations (dealing with expenditure) which is set out in the audit along with the amount of Bangladeshi taka involved and then in US dollars. The taka/dollar exchange rate used was Tk77.75 = $1, which is the exchange rate used in the audit itself.

As you will see the total amount of these financial irregularities is Tk 533.02 crore which is equivalent to $69.44 million.

Tuesday, July 8, 2014

World Bank scrutiny of government audits - a tip of an iceberg?

Below is the second op-ed in New Age relating to the audit reports of the donor supported health program. You can read the first one here looking at the transparency of donors in providing access to these audit reports.

The relevant New Age articles upon which this op-ed is based are:
'Audit finds $70m irregularities' and
'$428m or irregularities in 8 years'.

WB scrutiny of govt audits: a tip of the iceberg?

by David Bergman
Whilst the World Bank can certainly be applauded for making public the government audits on donor-supported health programmes (‘Donors and audit transparency,’ New Age, 5 July), a more pressing question is how well it, and, indeed, other donors, responded to the reports themselves.
The audit reports would not have made easy reading for donors, suggesting as they do, that millions of dollars were stolen or misused on these two  programmes.
So what did the World Bank, which is not only responsible for its own money but also that of other donors, do when it received these reports?

Saturday, July 5, 2014

Over half of education sector procurement 'corrupt'

Following on from previous articles on financial irregularities in a donor support health programme in Bangladesh, here is an article, published today in New Age, on corruption in procurements involving a donor supported education program.

The article is based on an Annual Fiduciary Review of the program - the relevant parts of which can be downloaded here

55pc of edn sector procurement ‘shady’

Donor commissioned probe finds

David Bergman
The extent of corrupt and collusive government-run procurements in Bangladesh has been laid bare in an independent scrutiny of tenders undertaken for a donor funded development programme, which was conducted in 15 different districts by an audit firm hired by a consortium of donors.
The procurements were investigated as part of an ‘annual fiduciary review’ of the $5.8 billion Third Primary Education Development Programme supported by the World Bank, the Asian Development Bank, the British government and the European Union along with other international donors.
The review, conducted by the chartered accountant firm A Qasem and Company, found that in 91 out of 163 procurement packages which it had investigated, there was ‘fraud and corruption, syndicated bidding, collusion, and malpractice.’  155 of the tenders had been conducted by the Local Government Engineering Department and 8 by the Department of Public Health Engineering
Assuming this level of corruption was reflected in all $1.6 billion worth of procurement, which the World Bank estimated would take place during the five years of the primary education programme, this would amount to about $880 million of corrupt tenders for goods and contracts.
Shyamal Kanti Ghosh, director general of the Directorate of Primary Education, told New Age that it was not true that there was corruption in the
procurement. ‘No procurement is going wrong. There is no corruption, as [donors] approved those before they could happen. So how can the [donors] now make such comments.’
On Sunday, New Age reported that corrupt or illegal procurement counted for nearly half of $70 million of the financial irregularities identified by the Comptroller and Auditor General in one year of a donor-supported health programme.
The chartered accountant’s ‘interim’ report, which has been obtained by New Age, was commissioned by a consortium of donors led by the Asian Development Bank. The report relates to the 2011-12 financial year, the first year of the primary education programme.
Dated May 2013, the 17-page report sets out nine ‘indications of syndicated bidding’ which it found within the 91 corrupt procurement packages.
These included the ‘same spelling mistake’ and ‘similar handwriting’ found in different documents submitted by different bidders; the ‘same format, wording and content found in different documents submitted by different bidders’; ‘identical unit cost rate in most cases, and unusually higher unit rate in a few cases quoted to avoid winning the contract’; ‘sequential tender securities’ submitted by different bidders; and ‘tender security’ withdrawn by ‘same person on behalf of different contractor.’
The report also listed 18 different kinds of irregularities and deficiencies in the bids which were not identified by those conducting the procurement. These included ‘fake documents’; ‘inauthentic’ accounts; missing details in documentation, including information on annual construction turnover, qualification certificates of employees, and equipment lists; and different tax identification numbers found in different documents of the same bidder.
According to the Asian Development Bank, the 163 contracts scrutinised by the chartered accountant’s firm were randomly chosen and were worth a total of $11.6 million.
In an appraisal document, written by the World Bank before it agreed to provide the government a loan of $300 million for this primary education programme, ‘fraud and corruption’ was considered to be one of three ‘key risks’.
The appraisal report stated that ‘certain systemic weaknesses in some aspects of the programme, such as delivery of stipends, contracts for books, hiring of teachers, and civil works expose the project to a risk of corruption and non-transparent or inefficient practices. Furthermore, enforcement of GOB‘s procurement regulatory system may not meet the needed level of governance and accountability.’
The report added that the Bangladesh government’s regulatory system would be ‘strengthened in line with internationally accepted procedures, and procurement capacity would be enhanced as needed, including through recruitment of procurement (and financial management) consultants.’
The programme is mainly funded by the government of Bangladesh, but the Asian Development Bank and the World Bank loaned the government $320 million and $300 million respectively, and the UK government gave $110 million, the European Union $55 million and the Canadian government $48 million, along with smaller amounts by other donors.
Rudi van Dael, senior social sector specialist, Bangladesh Resident Mission, Asian Development Bank, told New Age that it was currently discussing 15 of the contracts (valued at approximately $2.04 million) with the government. ‘As we are still in the midst of discussions, ADB is unable to provide any further details.’
He said, ‘ADB, World Bank and other development partners, in common with the ministry of primary and mass education, take a zero tolerance approach to fraud and corruption.’
The ADB does not explain why out of the report’s initial findings of 91 ‘corrupt’ procurement packages, it was only concerned with 15.
A spokesperson for the European Union Delegation told New Age, ‘We appreciate that several important initiatives have been taken by the government to strengthen and improve capacity in the area of procurement. We also appreciate that LGED analysed the findings from the reviews and took its own actions – firms involved in the collusive malpractice are blacklisted.’
The World Bank disputed that 91 contracts were ever in question, and told New Age that it had ‘zero tolerance’ to corruption. ‘The World Bank maintains due diligence to ensure that every dollar is spent for the purpose intended.
Donors point out that the education programme has ‘gone a long way to improving the quality and reach of primary education in Bangladesh, which will, in turn, support longer-term economic and social development.’

Donors and Audit Transparency

Here is a first of a number of opinion pieces published today in New Age, relating to the two previously published reports on financial irregularities in the World Bank and donor supported health sector programmes. The two articles are:  'Audit finds $70m irregularities' and '$428m or irregularities in 8 years'.

The article below contains links to relevant documents:

Donors and audit transparency

by David Bergman
THE financial irregularities identified in the donor-supported ministry of health programmes, implemented between 2003 and 2012, involve mind-bogglingly large numbers.
In the recently completed eight-year programme, irregularities involving $470 million were identified (‘428m irregularities in 8 years’, New Age, June 30) and in 2012–3, the most recent audit of the current health programme identified $70 million, which is nearly a third of the total audited expenditure. (‘Audit finds $70m spending irregularities’, New Age, June 29).
This does not mean that all the money was gobbled up by greedy ministry officials — some of it was also wasted, or spent on contracts given through illegal procedures.
The audits themselves raise a number of important questions about the integrity of development programmes in Bangladesh and how donors should respond to information about financial irregularities. However, this first article considers the transparency of donors towards the audit reports which they receive from government.