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Defence ministry overpaid contractor for housing project

The ministry of defence and national security overpaid a private contractor MVR92 million (US$6 million) for a housing project in 2015, an audit report has found.



The ministry of defence and national security overpaid a private contractor MVR92 million (US$6 million) for an unfinished housing project, the ministry’s 2015 audit has found.

According to an audit report released Sunday, the military’s cooperative society SIFCO made payments to the contractor without overseeing the construction process.

The contract awarded to Noomadi Resorts and Residences in 2013 for constructing 300 housing units in Hulhumalé was cancelled on January 27, 2016.

The audit report noted that SIFCO had released US$8 million to Noomadi by the end of 2015, including US$691,044 paid by the military officers and soldiers who were promised the flats.

But the value of the construction work completed by Noomadi amounted to US$216,812, the audit found.

The contractor later agreed to pay back the extra amount but two out of three post-dated cheques issued to SIFCO were rejected by the bank.

Overseeing construction work before issuing payments is mandatory by law, the report noted, and accepting post-dated cheques is against the public finance regulations.

The regulations also prohibit making payments before contracted work is complete. But the ministry made payments based on a schedule, the report noted.

The MVR571 million (US$37 million) SIFCO Hiya flats project was later awarded to Island Expert in February 2016.

The housing project to build 600 flats in the capital’s suburb Hulhumalé for soldiers and police officers was announced in 2013 by the administration of former President Dr Mohamed Waheed and construction work began in late 2014.

The 300 police officers and 300 soldiers who were awarded the apartments have reportedly been paying monthly down-payments since late 2013.

Defence Minister Adam Shareef Umar told state media last August that the project is expected to be completed in October this year.

Other cases highlighted by the audit report meanwhile includes the defence ministry’s purchase of property worth US$1.9 million from SIFCO without the mandatory open bidding process.

The ministry also paid US$79,535 as a “variation cost” to the state-owned Maldives Transport and Contracting Company for 160 housing units built in Laamu atoll Gan with the support of the French Red Cross.

But the reported noted that funds for the project were not earmarked in the ministry’s budget and auditors were unable to find any documentation for the variation construction work.

The defence ministry was also found to be negligent in failing to recover US$453,175 owed as bond money and other overdue payments by former staff and retired officers.

The ministry also spent US$39,905 as goods and services tax in a payment made to Event Managers and Catering Services to provide food for soldiers posted in Addu City. 

But the regulations require GST to be included in the payment, the report said.

In a similar case, the National Disaster Management Center, which operates under the ministry paid US$26,038 as GST to Tug Services Marine Pvt Ltd for providing drinking water to islands.