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Audit uncovers illegal expenses by housing ministry in 2014

A compliance audit for 2014 found that the ministry made an illegal advance payment of MVR120 million (US$7.8 million) to the state-owned Maldives Roads Development Corporation for a project to build roads in seven islands.



The ministry of housing and infrastructure made an illegal advance payment of MVR120 million (US$7.8 million) to the Maldives Roads Development Corporation in 2014, a compliance audit has revealed.

While the public finance regulations limit advance payments to 15 percent of a project’s total cost, the audit office found that the ministry paid 25 percent to the state-owned corporation for an MVR480 million (US$31 million) project to build roads in seven islands.

In a letter seeking approval from the finance ministry to release the funds, the housing ministry had claimed that the decision to pay 25 percent was made following consultations with senior officials from the anti-corruption watchdog and the audit office in January 2014.

However, according to the minutes of the meeting, the housing ministry was told that the advance payment ceiling could only be raised by amending the public finance regulations, the audit report noted.

The report made public last week suggested that the housing ministry gave “false information” to mislead the finance ministry into approving the payment.

The audit also found that MVR12 million (US$778,200) was spent for road construction on the island of Dhidhoo in Haa Alif atoll, but the funds were not earmarked in the ministry’s budget for 2014.

The ministry also failed to collect a performance guarantee of 10 percent from the MRDC as stipulated in the agreement for the road development projects.

The agreement for the two-year project was signed in February 2014, after which the MRDC hired Sri Lanka’s Sierra Construction Pvt Ltd as a subcontractor.

The agreement also stipulated that MRDC must provide a guarantee equal to the advance payment. However, a US$5.6 million guarantee offered by the Sri Lankan subcontractor was MVR33 million (US$2.1 million) less than the advance payment.

In June last year, MRDC Managing Director Ibrahim Nazeem was sacked from the post and appointed deputy housing minister.

The dismissal came after Nazeem was accused by the Anti-Corruption Commission of arranging an advance payment for a shipment of cement without the approval of the company’s board of directors.

The ACC also sought corruption charges against the former MRDC chief.

The compliance audit meanwhile went on to flag the ministry’s failure to submit details of budgeted spending and income for 2014 “despite repeated requests”.

“And because financial statements for 2012 and 2013 have not been submitted either, we note that the auditor general has not been able to give his opinion on the ministry’s financial statements for the past three years,” the report stated.

The public finance law mandates ministries to submit annual statements to the audit office.

Current Housing Minister Dr Mohamed Muiz has been in the cabinet since his appointment by former President Dr Mohamed Waheed in early 2012, retaining his post after President Abdulla Yameen’s election in November 2013.

Other issues highlighted in the report include failure to collect MVR1.5 million (US$97,200) owed as rent from leasing halls in the Dharubaaruge convention centre as well as the failure to maintain proper records of assets, machinery and equipment.

The ministry also spent MVR526,537 (US$34,100) on various projects without signing formal agreements as required by the public finance regulations, including MVR278,800 (US$18,000) spent by the ministry’s Public Works Division.

Lastly, the ministry hired an employee on a contract basis in violation of the civil service regulations, which calls for a job announcement in the government gazette and an interview process. The unnamed employee was paid MVR52,537 (US$3,400) from May to November 2014.