AUDIT OF SPECIAL PROJECT ACCOUNT MINISTRY OF WORKS AND HOUSING
The Accounts and other related records of the Ministry of Works and Housing’s Special Project Account for the period March 2001 to 9th November 2001 have been examined.
2, Observations noted in the course of the audit were discussed with management and their responses have been embodied in this report where appropriate.
3, We shall be very grateful to receive your comments within 30 days of receipt of this report as stipulated in Section 29 of Part III of the Audit Service Act .’. (Act 584) 2000.
.For: AG. AUDITOR-GENERAL(MABEL IRENE KROW)
ASST. DIRECTOR/CGAD/MWH
THE HON. MINISTER
MINISTRY OF WORKS AND HOUSING
ACCRA
cc: The Auditor-General
Audit Service
Accra.
The Director (2) CGAD Audit Service,Accra.
The Ag. Chief Director
Ministry of Works and Housing
Hon. Kwamena Bartels
Former Minister of Works & Housing
Accra.
For the period under review the following officers played active part in planning, executing, monitoring and evaluating the Special Project Account. Name Rank - Hon. Kwamina Bartels Minister of Works and Housing Mr. Chene Okai Ag. Chief Director (MWH) Alhaji A. Dawuni Chief Technical Advisor (Housing) Mr. J. N. Asante Asst. Director (AESL) Mr. J.F. Arthur Ag. Engineer-ln-Chief (PWD)
5. Scope of Audit
The audit reviewed award of contracts, their administration procedures, monitoring and evaluation by the Ministry. We also reviewed the internal control system to ensure completeness, accuracy and reliability of records made available. Physical inspection of some completed projects were also carried out.
6. 0 b j e c t i v e
To ensure that ?15,200,500,817. 73 funds released under Special Budgetary Allocation have been utilized for the specific purpose of a) Renovation and Furnishing of 50 Government Bungalows (b) Construction of Offices for Private Sector Development ‘etc.c) Rehabilitation of the House of Dr. Busia at Odorkor
d) Renovation and Refurbishment of the castle and the Vice-President’s residence including Guest House.
e) Provision for AESL Fees for Consultancy, Supervision an Advertisements
f) Emergency Flood Control Works at flood prone channels.
To ensure that the funds were used effectively, efficiently and economically and to ensure that contracts were appropriately awarded effectively and efficiently executed.
To ensure that due procedures with regard to contract awards were followed. That execution of contracts were properly supervised by the Ministry - AESL and PWD.
To ensure that additional works were channeled through the right source and were properly authorized.
That retention monies and other taxes were paid by contractors.
SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS
7. Lack of co-ordination among key players at the helm of affairs at the Ministry, inadequate controls, monitoring, supervision over Special Project Account (SPA) resulted in the loss of ~577,019,585 to the State as detailed below
- a. ?150,000,000 paid to the Chief of Staff not accounted for
- b. ?162,526,525 spent on renovating 4 unauthorized bungalows
- c. ?59,374,750 renovated bungalows in ruins with an additional ?140Million under tussle.
- d. Non-adherence to directives on interior decoration resulted in loss of ?68,867,125.00 and ?28,561,000.00
- e. Landlords evaded tax amounting to ?12,200,000 f. Extra ?36,790,025 paid to MIS Marios Construction Works, in addition to the original contract sum of ?58, 700,160, in respect of bungalow No.33 Patrice Lumumba Road was irregular.
9. Further indiscriminate violations of Rules and Regulations with regard to mobilization advances under contract as stated in FAR 612 triggered the danger of ?294,528..980.22 financial loss to the State.
10. We urged Management to rectify the above anomalies to forestall the danger of financial loss to the State and to ensure that due procedures with regard to contract awards are followed.
11. Additional variation of ?533, 771,296.00 in the contract of ?325,509,1 00.00 awarded to MIS Fulki Limited for the renovation of the Vice President’s Residence was neither authorized nor approved.
We recommended that approval be sought for the additional work done to allow the expenditure stand charged to the account. I
13. Over ?112,609,138.00 spent on rehabilitating 3 Non-Ministerial Bungalows
14. A total amount of ?917,334,640.00 was prepaid to Carpetland Limited and Stepmen Furniture Centre without security guarantee.
15. We urged Management to regularize the anomaly and ensure that quality good are delivered according to the required specifications.
DETAILS OF FINDINGS
16. Between February and August 2001 a total amount of ?15,200,500,817.73 was released under Special Budgetary Allocation to renovate Government Bungalows for Vice President and Ministers, the Castle, Ministry of Women’s Affairs, Construction of offices for Private Sector Development the Rehabilitation of the House of Dr. Busia at Odorkor and Emergency flood control works at Flood Prone channels as detailed below:-WARRANT RELEASE AMOUNT PURPOSE
MF17 28/2/01 ?4.200.000,000.00 PWD (Prestige) To carryout Rehabilitation works MF. 19 29/6/01 ?3,500.000.000.00 PWD (Prestige) - do- MF. 100 6/8/01 ?3.500,000,817. 73 MWH for completion of Rehabilitation Works MF 120 21/8/01 ?2.000.000.00000 MWH for renovation works at the castle ?13,200,000.817.73 MF 98 28/6/01 e2.000.000.000.00 MWH to carry out Emergency Flood Control ?15.200,000.817.73 Works at Flood Prone Channels
17. When Hon. Kwamena Bartels handed over the administration of MWH on 9/11 /01 ?11,381,866,016.20 had been spent ?9,309,275,1 06.44 on Renovation, ?24,287,144.00 on Hydrological Services and ?2,O48,303,766.25 on desalting, leaving a balance. of ?3,818,634,800.80 as details below:-
Rehabilitation Works Amount Proposed Total Expenditure Bal. to Date
1. Castle Renovation 4,500,000,000.00 4,301,236,325.95 198,763,674.05 :
2. Renovation of 50 Govt. 3,300,000,000.00 2,173,948,028.96 1,126,051,971.04 :
3. Bungalows 500,500,817.00 280,995,090.00 219,505,727.00 .
4. Furnishing of 50 Govt. Bungalows 1,250,000,000.00 356,400,000.00 893,600,000.00
5. Women’s Ministry 950,000,000.00 210,922,097.40 739,077,902.60 -
6. Busia 500,000,000.00 264,528,488.08 235,471 ,511.92
7. Consultancy AESL 179,671,778.60 .Speaker of Parliament ,200,000,000.00 449,116,331.00 478,754,923.95 Court (1-6) 272,340,140.45 Vice President 13,200,500,81700 9,309,275,106.44 3,891,225,710.56
8. Sub total - 24,287,144.00 (24,287,144.00)
Hydrological Services - 9,333,562,250.00 -
9. Sub- total 2.000.000.000.00 2.048.303.766.25 (48.303.766.2)
Desilting 15,200,500,817 11,381,866,016.20 3,818,634,800.80 to enable us know the competence of the contractors and to follow the contracts judiciously. The essence of these two important documents have been expressed elsewhere in the report.
19. In all 77 contractors were awarded the jobs due to the limited time needed for the assignments to be completed.
20. This limited the amount of competition within the jobs which could have increased the effectiveness of their performance. Some of the contractors did not perform to the required standard resulting in a lot of complaints from the
Ministers after they moved in.
21. It was alleged that only furniture worth ?89,900,000.00 had been delivered to the Ministry of Private Sector Development.
BUDGETARY CONTROL
22. The total amount of ?5,200,500,817.73 released was not budgeted for.
Even though the first release of i4,200,000,000,00 was signed on 28/2/01 before the appropriation bill was singed. the Ministry of Works and Housing could not incorporate the entire allocation in the budget estimate. Notwithstanding the above, the Ministry failed to record the above expenditure in its end of 2001 year expenditure totals, resulting in understatement of the expenditure total presented to be captured in the National expenditure account. Efforts made to trace the actual proposals submitted have proved futile. Control over the Special Project Account was not adequate as depicted in the findings enumerated above.
PERFORMANCE
23. In February, 2001 the Minister of Finance, Hon. Yaw Osafo - Maafo (MP) authorized the Controller and Accountant General to release the sum of ?4.2 billion to the Regional Engineer (Prestige) PWD, through the Minister of Works and Housing to enable PWD carry out the Renovations and Rehabilitation works listed above.
24. In March, 2001 the then Minister of Works and Housing. Hon. Kwamena Bartels wrote a memo authorizing private contractors to undertake the renovation with PWD supervising the work as the whole assignment was supposed to be done in one month April, 2001.
25. The directives in that memo were not adhered to the letter because efforts made to get the PWD’s assessment of the work that needed to be done on the buildings proved futile, as such we could not get a base to measure the actual work done.
26. The other directive of the bungalows being handed over to a contractor as soon as an occupant vacates was not adhered to resulting in some bungalows being ‘burgled’ the brief period that they were vacant.
27. Attached as Appendix ‘A’ is the status report on the Ministerial Bungalows at 25th October, 2001.
INSPECTION
28. Some of the projects were inspected and Appendix B attached provide the details with comments. The team was not satisfied with the outcome of the inspection. We would like to inspect the rest of the projects when they are fully completed.
RENOVATION FUND OF ?150,000,000 PAID TO THE CHIEF OF STAFF NOT ACCOUNTED FOR
29. A total amount of ?150,000,000 was on two separate vouchers paid to the Chief of Staff from the Emergency fund. The amount was meant to pay for variation cost on the renovation of the Castle.
30. Because the work had been awarded to 12 contractors and it is being supervised by AESL it is inappropriate for the Chief of Staff to have used memo to collect an amount of ?150,000,OOO meant for the payment of the contract works.
31. The Ag. Chief Director alleged to have sent a letter reminding the Chief of Staff to account for the money but no response had been received. The matter had therefore been referred to the Deputy Minister of Works and Housing to pursue recovery.
32. Strenuous efforts should therefore be made to have the money accounted for or refunded to ensure speedy completion of the project.
?162.526.525 SPENT ON RENOVATING FOUR(4) UNATHOURISED BUNGALOWS
33. Under the Re-development of Government Residential Area Scheme, 25 bungalows were disposed of in the year 2000 and were therefore struck off from the Ministry’s pool.
34. Nevertheless, 4 of the above bungalows under the scheme which no longer belong to the Government were awarded contract for renovation under the current rehabilitation of 50 Government bungalows at a total cost of ?162,526,525 as indicated below:
BUNGALOW NO. NAME OF CONTRACTOR RENOVATION COST
30A 4th CIRCULAR ROAD R. ANIAGYA 51,094,915.00
21-2nd CIRCULAR ROAD ZIYMOIS LIMITED 29,913,716.00
35-2"’” CIRCULAR ROAD HOUR OF LATER ENT. 54,101,674.00
15-3"’” CIRCULAR ROAD MULTI HOME CO. LTD. 24,416.229.00
TOTAL 162,526:525.00
35. We noted from the above that there was lack of co-ordination among the key personnel at the Ministry of Works and Housing resulting in the error and loss of funds to the state. Similarly, monitoring and supervision was inadequate resulting in the wrongful renovation of the 4 bungalows.
36. In the Oversight Bungalow Rehabilitation Committee’s minutes of 29th August, 2001 a letter was supposed to be written to PWD on this matter. We would be grateful for a copy of the letter and the Ministry’s reaction thereon.
37. The Chief Technical Advisor/Housing explained that the error occurred due to the rush that had characterized the award and execution of the contract.
38. As stated in article 187 clause 7(b) of the 1992 constitution which states among others that “the Auditor-General may disallow any item of expenditure which is contrary to law and surcharge... ... ... ... ...... the amount of any loss or deficiency, upon any person by whose negligence or misconduct the loss or deficiency has been incurred.”
39. We are surcharging the CTA/Housing and the Former Minister Hon. Kwamena Bartels for the loss of ?162,526,525 to the State.
40. The CTA/Housing reiterated that the renovated bungalows would enhance the value for the plots for re-offer. Consequently, Bungalow plot No. 21-2nd Circular Cantonments had now been offered for sale to a potential developer for a sum of ?1,660,OOO,000.
41. In the course of the months materials worth ?9,271,OOO used in rehabilitation of the bungalows were retrieved and sent to stores as shown in
Appendix C.
A list of materials worth ?29,654,OOO as shown on Appendix attached were said to be retrievable.42. We therefore recommend that those materials retrieved should be efficiently used to renovate other bungalows.
?59.374.750.00 RENOVATED BUNGALOW IN TOTAL REJECTION
43. MIS BROCKWELL CONSTRUCTION ENGINEERING LIMITED was awarded contract to renovate Bungalow No.2 Mango Street Ridge at a total cost of ?59,374,750.00. On completion, a total cost of ?56,406,012 was paid leaving a retention fee of ?2,968, 737 .50
44. On handing over the renovated bungalow, the occupant who was the Former Chief of Staff rejected the materials used and claimed they were inferior and not suiting his desire.
45. Later agreement reached between the Chief of Staff (the occupant) and the Minister on one hand and the Chief Architect of PWD, the Contractor was re-awarded the contract for additional work to cost ?140Million. This new cost of ?140 Million excludes cost of aluminum sliding windows which is part of the occupant’s requirement.
46. According to CT A/Housing this new development of the 2nd phase of the renovation was not communicated to him and the Minister too had refused to endorse any payment for the 2nd phase. This controversy over payment had resulted in the work coming to a standstill.
47. The extravagant demand by the former Chief of Staff which came after the bungalow had been rehabilitated had caused the State a loss of ?59,374,750 owing to demolition and changes made on the renovated bungalow.
48. We recommended a thorough investigation into the matter and officers whose negligence and fault have caused the state to lose ?59Million be held responsible for recovery.
NON-ADHERANCE TO DIRECTIVES ON INTERIOR DECORATION HAS RESULTED IN LOSS OF e28.561.000.00 TO THE STATE
49. According to directives from the Hon. Minister with regards to Interior Decoration of Ministerial bungalows, the Ag. Engineer-ln-Chief was to supervise the work.
50. Another directive from Regional Engineer (Prestige) supposed to be adopted as a control mechanism in the Interior Decoration job of the Ministerial Bungalows was that, quotations for supply, sewing and hanging of curtains should not exceed ?15,000,000.00
51. We observed that these laid down procedures were not followed. As a result, the underlisted Seven (7) quotations submitted out of Ten (10) bungalows worked on and which was approved for payment, exceeded the limit recommended by management.
Date Bungalow No. Contractor Amount Excess52. Management realized that the limit had been exceeded and therefore requested for the re-measurement of the next batch of furnishings submitted by Interior Decorators for payment. An amount of ?68,867 ,125.00 was saved as a result of this exercise.
11/26/10/01 C38 Roman Ridge Mamedia Ventures 15,874,000.00 874,000.00
10/26/10/01 6-2nd Close R. Ridge Sakos Ent. 18,197,000.00 3,197,000.00
9/26/10/01 C42 Roman Ridge Varnes Enterprise 19,815,000.00 4,815,000.00
7/26/10/01 1(New) Ringway Est. Delightsome Vent. 17,889,500.00 2,889,500.00
6/26/10/01 2(New) Ringway Est. Hys-Mantle (Gh)Ltd. 17,615,750.00 2,615,750.00
5/26/10/01 202/4-2nd Roman Ridge Lilgeo Ent. Ltd. . 18,310,000.00 3,310,000.00
4/26/10/01 506 A/10 Roman Ridge Joe Hays Ventures 19,751,200.00 4,751,200.00
53. We were compelled under the circumstance to investigate further into the already paid consignment. As a result of the further investigation a savings of ?28,561,500.00 came to light as shown below;
No. Company Bungalow No. Amount Actual Difference1. Joe Hays 5 5O6A/10 Roman Ridge 19,751,200 17,952,200 1,799,000.00
2. Sakos Ent. 6-2nd CIose Roman Ridge 18,197,000 15,027,500 3,169,500.00
3.Yanes Ent. C-42 Roman Ridge 19,615,000 15,847,000 3,968,000.00
4.Liigoe Ent. Ltd 202/4-2"” Close R. Ridge 18,310,000 18,310,000 -
5.Good New Real Est Ltd. 3(New) 2nd Ave. Ridge 14,036,000 11,416,000 2,622,000.00
6.Mamedia Venture C36 Roman Ridge 15,674,000 10,966,000 4,886,000.00
7.Bu-Das Designers Ass. B5 off 1" R~ R. Ridge 14,490,000 13,658,500 831,500.00
8.Deligat Some Ventures 1 (New) Ringway Estates 17,689,500 12,433,500 5,456,000.00
9. Hys Mantle (Gh) Ltd. 2 (NeN) RirICJway Estate 17,615,750 11,786,250 5,829,500.00
155,960,450 127,418,950 28,561,500.00
54. We recommended that the affected eight Interior Decorators should refund the over payments indicated on above by 20th February 2002. Management should ensure that when procedures are laid down for the smooth, efficient, effective and economical implementation of any assignment it would be followed to the letter. The Decorators have been written to for the refunds.
LANDLORDS EVADED TAX AMOUNTING TO e12.200.000.00
55. Six (6) Landlords who were paid a total sum of ?172,600,OOO as rent advance failed to pay to Government a tax element of ?12,200,OOO.00 as , detailed below:
Date PV No. Payee Amount Tax Paid Tax Diff. ? 5/4/01 2 SQD LRD. Sowu ?48,000,000 ?2,400,000 ?2,400,000 5/4/01 3 Mrs. Osei Owusu ?28,000,000 ?1,400,000 ?1,400,000 26/4/01 4 Edward K. Dzakapasu ?24,000,000 ?1,200,000 ?1,200,000 30/4/01 5 Dr. Ebenezer Quarshie ?24,000,000 Nil ?2,400,000 3/5/01 6 Hon. Alhaji Abukari Sumani 24,000,000 Nil ?2,400,000 8/5/01 7 Esther Walker ?24,000,000 Nil ?2,400,000 TOTAL 172,000,000 12,200,000
56. This issue is contrary to IRS Regulations 2001 Legislative Instrument 1975 section 16 (1) which states that tax on rent which is 10% should be deducted and paid to the Commissioner of Internal Revenue Services.
57. In instances where tax was deducted only 5% was paid. The Senior Accountant explained that she was not aware of the law, efforts are being made to contact the Landlords for the rent tax. This omission had therefore resulted in a loss of funds totaling ?12,200,000 to the state.
58. We recommended that the respective landlords be contacted for the recovery of the amount.
IRREGULAR PAYMENT OF CONTRACT SUM
59. Renovation work on bungalow No.33 Patrice Lumumba Road was awarded to MIS Marios Construction Work. The contract sum was ?58,700,160 but when the contractor was taken to the site to t3kc possession, it was detected that a number of fittings/appliances were missing.
60. P.W.D. who were the consultants on the project wrote a report on 9/8/01 with provisional estimates for additional work which included cost of replacing the missing item at ?36,790,025 to the Ministry for approval.
61. Without fur1her contact with PWD the Ministry approved and paid the estimated amount, which was not certified by PWD to the contractor.
62. Until efforts are made to regularize the transaction, we recommended that, the amount of ?36, 790,025 paid for no work done be refunded by the contractor.
Management is alleged to have contacted PWD to regularize the payment and the award to the contractor.
PAYMENT OF MOBILISATION ADVANCE ON CONTRACT WITHOUT RESORT TO LAW
63. Apar1 from the uncertified amount of ?36,790,025 paid irregularly to M/S Marios Construction; reconciliation made between the Projects Repor1 and the Ministry’s Financial Document revealed the following;
a. An amount of ?40,000,000 was paid to M/S Restores Company Limited but the contract agreement was not signed by the contractor, valuation of work to be done is yet to be prepared and forwarded to the Ministry by the Consultant PWD.
b. Contrary to the law, the other five Contractors in the table below were also paid without the consent of the Consultant PWD. These payments were not supported with any certificate.
MIS Restores 10,000,000.00 40,000,000.00,
MIS Amos Mensah Co. Ltd. 73,770,685.50 33,000,000.00
28/9/01 53 MIS, Geodemens Complex Ltd. 38,767,223.00 11,628,366.90
26/9/01 23 MIS Rochfords Co. Ltd. 37,884,768.00 20,000,000.00
11/10101 30 MIS Nickoo Canst. 89,026,312.50 40,000,000.00
? ? A/tees Bldg. Const. Wks 15,455,013.75 10,595,378.00
Total 155,223,744.00
64. We recommend that, since as at now there is no agreement between MIS
Restore Co. Ltd. and the Ministry, the i40million paid to him is illegal and must be recovered from him.
65. To avoid a danger of financial loss to the state, we advise that, the following steps be taken immediately to rectify the above anomalies.
Application for mobilization advances should be channeled through the Consultants, (PWD) to the Ministry. Advice from the CT A/Housing should be sought before the payment is approved.
Every payment must be backed with certificate from the consultant.
OMISSION OF MOBILIZATION ADVANCE OF ?139,305,236.22 REGARD TO RENOVATION OF SPEAKER’S RESIDENCE
66. We observed that 50% mobilization advance of ?54,305,236.22 on a contract sum of ?108,610,473 was paid to MIS GREENWORLD LIMITED to execute Landscaping and beautification works at the Residence of the Speaker of Parliament. No Interim Payment Certification was issued to cover the mobilization advance by the consultant, P.W.D.
67. At the time the former Minister recommended that the contractor should be paid the mobilization advance, there was no formal agreement between the Ministry who was represented by PWD and MIS GREENWORLD LIMITED.
Evidence of this anomaly was shown in letter with reference number PWD/CONS/24022/88 dated 3151 August 2001 which invited the contractor to sign the agreement, and that of the contractor dated 27/7/2001 requesting for mobilization advance which was approved on 30107/2001 and paid to him. 68. An Interim Payment Certificate No.1 was later issued to cover the second payment for work completed to date without any reference whatsoever to the advance payment of ?54,305,236.22. The amount certified and paid on this Interim Payment Certificate No.1 was i42,491,108 resulting in a total of ?96.796,34422 out of a contract sum of 108,610,4731eaving a balance of only , ?11,814,129 to be paid.
69. Similarly an amount of ?85,000,000 being 50% of contract sum of ?170,000,000 was paid to MIS AWET CONST. & DECORATION WORKS LIMITED as a mobilization advance for painting, terrazzo and other works at the Speaker’s Residence. No certificate from the consultant AESL was issued to support the payment. Progress Report prepared by AESL indicated that the work is in progress but the amount of ?85,000,000 advanced to the Contractor was not shown.
70. It is evidently clear from the above elaborations that, the Ministry had been giving out mobilization Advances without consulting their representatives on the job. As a result, an amount of ?139,305,236.22 might have been lost to the state if these had not been uncovered by the Audit Team.
71. We recommended that the consultants should be made aware of mobilization advances granted to contractors to forestall future loss of money to the state.
The Ministry should not wait for the Contractor to inform the consultant before the deduction is done.
WARD OF ?533.771 ,296 CONTRACT
WITHOUT AUTHORITY AND APPROVAL
72. We observed during the audit that a contract for the renovation of the Vice President’s Residence was awarded to MIS FULKI LIMITED at a contract sum of i325,509,100. This amount had risen to i859,280.396 at the time of the audit though without authorization and approval.
73. According to directive on execution of contracts, any contract sum with variation exceeding 25% of the original contract sum should be re-tender foraward. However, the variation on the above contract was not re-tender for award.
AUDIT OF SPECIAL PROJECT ACCOUNT MINISTRY OF WORKS AND HOUSING
The Accounts and other related records of the Ministry of Works and Housing’s Special Project Account for the period March 2001 to 9th November 2001 have been examined.
2, Observations noted in the course of the audit were discussed with management and their responses have been embodied in this report where appropriate.
3, We shall be very grateful to receive your comments within 30 days of receipt of this report as stipulated in Section 29 of Part III of the Audit Service Act .’. (Act 584) 2000.
.For: AG. AUDITOR-GENERAL(MABEL IRENE KROW)
ASST. DIRECTOR/CGAD/MWH
THE HON. MINISTER
MINISTRY OF WORKS AND HOUSING
ACCRA
cc: The Auditor-General
Audit Service
Accra.
The Director (2) CGAD Audit Service,Accra.
The Ag. Chief Director
Ministry of Works and Housing
Hon. Kwamena Bartels
Former Minister of Works & Housing
Accra.
For the period under review the following officers played active part in planning, executing, monitoring and evaluating the Special Project Account. Name Rank - Hon. Kwamina Bartels Minister of Works and Housing Mr. Chene Okai Ag. Chief Director (MWH) Alhaji A. Dawuni Chief Technical Advisor (Housing) Mr. J. N. Asante Asst. Director (AESL) Mr. J.F. Arthur Ag. Engineer-ln-Chief (PWD)
5. Scope of Audit
The audit reviewed award of contracts, their administration procedures, monitoring and evaluation by the Ministry. We also reviewed the internal control system to ensure completeness, accuracy and reliability of records made available. Physical inspection of some completed projects were also carried out.
6. 0 b j e c t i v e
To ensure that ?15,200,500,817. 73 funds released under Special Budgetary Allocation have been utilized for the specific purpose of a) Renovation and Furnishing of 50 Government Bungalows (b) Construction of Offices for Private Sector Development ‘etc.c) Rehabilitation of the House of Dr. Busia at Odorkor
d) Renovation and Refurbishment of the castle and the Vice-President’s residence including Guest House.
e) Provision for AESL Fees for Consultancy, Supervision an Advertisements
f) Emergency Flood Control Works at flood prone channels.
To ensure that the funds were used effectively, efficiently and economically and to ensure that contracts were appropriately awarded effectively and efficiently executed.
To ensure that due procedures with regard to contract awards were followed. That execution of contracts were properly supervised by the Ministry - AESL and PWD.
To ensure that additional works were channeled through the right source and were properly authorized.
That retention monies and other taxes were paid by contractors.
SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS
7. Lack of co-ordination among key players at the helm of affairs at the Ministry, inadequate controls, monitoring, supervision over Special Project Account (SPA) resulted in the loss of ~577,019,585 to the State as detailed below
- a. ?150,000,000 paid to the Chief of Staff not accounted for
- b. ?162,526,525 spent on renovating 4 unauthorized bungalows
- c. ?59,374,750 renovated bungalows in ruins with an additional ?140Million under tussle.
- d. Non-adherence to directives on interior decoration resulted in loss of ?68,867,125.00 and ?28,561,000.00
- e. Landlords evaded tax amounting to ?12,200,000 f. Extra ?36,790,025 paid to MIS Marios Construction Works, in addition to the original contract sum of ?58, 700,160, in respect of bungalow No.33 Patrice Lumumba Road was irregular.
9. Further indiscriminate violations of Rules and Regulations with regard to mobilization advances under contract as stated in FAR 612 triggered the danger of ?294,528..980.22 financial loss to the State.
10. We urged Management to rectify the above anomalies to forestall the danger of financial loss to the State and to ensure that due procedures with regard to contract awards are followed.
11. Additional variation of ?533, 771,296.00 in the contract of ?325,509,1 00.00 awarded to MIS Fulki Limited for the renovation of the Vice President’s Residence was neither authorized nor approved.
We recommended that approval be sought for the additional work done to allow the expenditure stand charged to the account. I
13. Over ?112,609,138.00 spent on rehabilitating 3 Non-Ministerial Bungalows
14. A total amount of ?917,334,640.00 was prepaid to Carpetland Limited and Stepmen Furniture Centre without security guarantee.
15. We urged Management to regularize the anomaly and ensure that quality good are delivered according to the required specifications.
DETAILS OF FINDINGS
16. Between February and August 2001 a total amount of ?15,200,500,817.73 was released under Special Budgetary Allocation to renovate Government Bungalows for Vice President and Ministers, the Castle, Ministry of Women’s Affairs, Construction of offices for Private Sector Development the Rehabilitation of the House of Dr. Busia at Odorkor and Emergency flood control works at Flood Prone channels as detailed below:-WARRANT RELEASE AMOUNT PURPOSE
MF17 28/2/01 ?4.200.000,000.00 PWD (Prestige) To carryout Rehabilitation works MF. 19 29/6/01 ?3,500.000.000.00 PWD (Prestige) - do- MF. 100 6/8/01 ?3.500,000,817. 73 MWH for completion of Rehabilitation Works MF 120 21/8/01 ?2.000.000.00000 MWH for renovation works at the castle ?13,200,000.817.73 MF 98 28/6/01 e2.000.000.000.00 MWH to carry out Emergency Flood Control ?15.200,000.817.73 Works at Flood Prone Channels
17. When Hon. Kwamena Bartels handed over the administration of MWH on 9/11 /01 ?11,381,866,016.20 had been spent ?9,309,275,1 06.44 on Renovation, ?24,287,144.00 on Hydrological Services and ?2,O48,303,766.25 on desalting, leaving a balance. of ?3,818,634,800.80 as details below:-
Rehabilitation Works Amount Proposed Total Expenditure Bal. to Date
1. Castle Renovation 4,500,000,000.00 4,301,236,325.95 198,763,674.05 :
2. Renovation of 50 Govt. 3,300,000,000.00 2,173,948,028.96 1,126,051,971.04 :
3. Bungalows 500,500,817.00 280,995,090.00 219,505,727.00 .
4. Furnishing of 50 Govt. Bungalows 1,250,000,000.00 356,400,000.00 893,600,000.00
5. Women’s Ministry 950,000,000.00 210,922,097.40 739,077,902.60 -
6. Busia 500,000,000.00 264,528,488.08 235,471 ,511.92
7. Consultancy AESL 179,671,778.60 .Speaker of Parliament ,200,000,000.00 449,116,331.00 478,754,923.95 Court (1-6) 272,340,140.45 Vice President 13,200,500,81700 9,309,275,106.44 3,891,225,710.56
8. Sub total - 24,287,144.00 (24,287,144.00)
Hydrological Services - 9,333,562,250.00 -
9. Sub- total 2.000.000.000.00 2.048.303.766.25 (48.303.766.2)
Desilting 15,200,500,817 11,381,866,016.20 3,818,634,800.80 to enable us know the competence of the contractors and to follow the contracts judiciously. The essence of these two important documents have been expressed elsewhere in the report.
19. In all 77 contractors were awarded the jobs due to the limited time needed for the assignments to be completed.
20. This limited the amount of competition within the jobs which could have increased the effectiveness of their performance. Some of the contractors did not perform to the required standard resulting in a lot of complaints from the
Ministers after they moved in.
21. It was alleged that only furniture worth ?89,900,000.00 had been delivered to the Ministry of Private Sector Development.
BUDGETARY CONTROL
22. The total amount of ?5,200,500,817.73 released was not budgeted for.
Even though the first release of i4,200,000,000,00 was signed on 28/2/01 before the appropriation bill was singed. the Ministry of Works and Housing could not incorporate the entire allocation in the budget estimate. Notwithstanding the above, the Ministry failed to record the above expenditure in its end of 2001 year expenditure totals, resulting in understatement of the expenditure total presented to be captured in the National expenditure account. Efforts made to trace the actual proposals submitted have proved futile. Control over the Special Project Account was not adequate as depicted in the findings enumerated above.
PERFORMANCE
23. In February, 2001 the Minister of Finance, Hon. Yaw Osafo - Maafo (MP) authorized the Controller and Accountant General to release the sum of ?4.2 billion to the Regional Engineer (Prestige) PWD, through the Minister of Works and Housing to enable PWD carry out the Renovations and Rehabilitation works listed above.
24. In March, 2001 the then Minister of Works and Housing. Hon. Kwamena Bartels wrote a memo authorizing private contractors to undertake the renovation with PWD supervising the work as the whole assignment was supposed to be done in one month April, 2001.
25. The directives in that memo were not adhered to the letter because efforts made to get the PWD’s assessment of the work that needed to be done on the buildings proved futile, as such we could not get a base to measure the actual work done.
26. The other directive of the bungalows being handed over to a contractor as soon as an occupant vacates was not adhered to resulting in some bungalows being ‘burgled’ the brief period that they were vacant.
27. Attached as Appendix ‘A’ is the status report on the Ministerial Bungalows at 25th October, 2001.
INSPECTION
28. Some of the projects were inspected and Appendix B attached provide the details with comments. The team was not satisfied with the outcome of the inspection. We would like to inspect the rest of the projects when they are fully completed.
RENOVATION FUND OF ?150,000,000 PAID TO THE CHIEF OF STAFF NOT ACCOUNTED FOR
29. A total amount of ?150,000,000 was on two separate vouchers paid to the Chief of Staff from the Emergency fund. The amount was meant to pay for variation cost on the renovation of the Castle.
30. Because the work had been awarded to 12 contractors and it is being supervised by AESL it is inappropriate for the Chief of Staff to have used memo to collect an amount of ?150,000,OOO meant for the payment of the contract works.
31. The Ag. Chief Director alleged to have sent a letter reminding the Chief of Staff to account for the money but no response had been received. The matter had therefore been referred to the Deputy Minister of Works and Housing to pursue recovery.
32. Strenuous efforts should therefore be made to have the money accounted for or refunded to ensure speedy completion of the project.
?162.526.525 SPENT ON RENOVATING FOUR(4) UNATHOURISED BUNGALOWS
33. Under the Re-development of Government Residential Area Scheme, 25 bungalows were disposed of in the year 2000 and were therefore struck off from the Ministry’s pool.
34. Nevertheless, 4 of the above bungalows under the scheme which no longer belong to the Government were awarded contract for renovation under the current rehabilitation of 50 Government bungalows at a total cost of ?162,526,525 as indicated below:
BUNGALOW NO. NAME OF CONTRACTOR RENOVATION COST
30A 4th CIRCULAR ROAD R. ANIAGYA 51,094,915.00
21-2nd CIRCULAR ROAD ZIYMOIS LIMITED 29,913,716.00
35-2"’” CIRCULAR ROAD HOUR OF LATER ENT. 54,101,674.00
15-3"’” CIRCULAR ROAD MULTI HOME CO. LTD. 24,416.229.00
TOTAL 162,526:525.00
35. We noted from the above that there was lack of co-ordination among the key personnel at the Ministry of Works and Housing resulting in the error and loss of funds to the state. Similarly, monitoring and supervision was inadequate resulting in the wrongful renovation of the 4 bungalows.
36. In the Oversight Bungalow Rehabilitation Committee’s minutes of 29th August, 2001 a letter was supposed to be written to PWD on this matter. We would be grateful for a copy of the letter and the Ministry’s reaction thereon.
37. The Chief Technical Advisor/Housing explained that the error occurred due to the rush that had characterized the award and execution of the contract.
38. As stated in article 187 clause 7(b) of the 1992 constitution which states among others that “the Auditor-General may disallow any item of expenditure which is contrary to law and surcharge... ... ... ... ...... the amount of any loss or deficiency, upon any person by whose negligence or misconduct the loss or deficiency has been incurred.”
39. We are surcharging the CTA/Housing and the Former Minister Hon. Kwamena Bartels for the loss of ?162,526,525 to the State.
40. The CTA/Housing reiterated that the renovated bungalows would enhance the value for the plots for re-offer. Consequently, Bungalow plot No. 21-2nd Circular Cantonments had now been offered for sale to a potential developer for a sum of ?1,660,OOO,000.
41. In the course of the months materials worth ?9,271,OOO used in rehabilitation of the bungalows were retrieved and sent to stores as shown in
Appendix C.
A list of materials worth ?29,654,OOO as shown on Appendix attached were said to be retrievable.42. We therefore recommend that those materials retrieved should be efficiently used to renovate other bungalows.
?59.374.750.00 RENOVATED BUNGALOW IN TOTAL REJECTION
43. MIS BROCKWELL CONSTRUCTION ENGINEERING LIMITED was awarded contract to renovate Bungalow No.2 Mango Street Ridge at a total cost of ?59,374,750.00. On completion, a total cost of ?56,406,012 was paid leaving a retention fee of ?2,968, 737 .50
44. On handing over the renovated bungalow, the occupant who was the Former Chief of Staff rejected the materials used and claimed they were inferior and not suiting his desire.
45. Later agreement reached between the Chief of Staff (the occupant) and the Minister on one hand and the Chief Architect of PWD, the Contractor was re-awarded the contract for additional work to cost ?140Million. This new cost of ?140 Million excludes cost of aluminum sliding windows which is part of the occupant’s requirement.
46. According to CT A/Housing this new development of the 2nd phase of the renovation was not communicated to him and the Minister too had refused to endorse any payment for the 2nd phase. This controversy over payment had resulted in the work coming to a standstill.
47. The extravagant demand by the former Chief of Staff which came after the bungalow had been rehabilitated had caused the State a loss of ?59,374,750 owing to demolition and changes made on the renovated bungalow.
48. We recommended a thorough investigation into the matter and officers whose negligence and fault have caused the state to lose ?59Million be held responsible for recovery.
NON-ADHERANCE TO DIRECTIVES ON INTERIOR DECORATION HAS RESULTED IN LOSS OF e28.561.000.00 TO THE STATE
49. According to directives from the Hon. Minister with regards to Interior Decoration of Ministerial bungalows, the Ag. Engineer-ln-Chief was to supervise the work.
50. Another directive from Regional Engineer (Prestige) supposed to be adopted as a control mechanism in the Interior Decoration job of the Ministerial Bungalows was that, quotations for supply, sewing and hanging of curtains should not exceed ?15,000,000.00
51. We observed that these laid down procedures were not followed. As a result, the underlisted Seven (7) quotations submitted out of Ten (10) bungalows worked on and which was approved for payment, exceeded the limit recommended by management.
Date Bungalow No. Contractor Amount Excess52. Management realized that the limit had been exceeded and therefore requested for the re-measurement of the next batch of furnishings submitted by Interior Decorators for payment. An amount of ?68,867 ,125.00 was saved as a result of this exercise.
11/26/10/01 C38 Roman Ridge Mamedia Ventures 15,874,000.00 874,000.00
10/26/10/01 6-2nd Close R. Ridge Sakos Ent. 18,197,000.00 3,197,000.00
9/26/10/01 C42 Roman Ridge Varnes Enterprise 19,815,000.00 4,815,000.00
7/26/10/01 1(New) Ringway Est. Delightsome Vent. 17,889,500.00 2,889,500.00
6/26/10/01 2(New) Ringway Est. Hys-Mantle (Gh)Ltd. 17,615,750.00 2,615,750.00
5/26/10/01 202/4-2nd Roman Ridge Lilgeo Ent. Ltd. . 18,310,000.00 3,310,000.00
4/26/10/01 506 A/10 Roman Ridge Joe Hays Ventures 19,751,200.00 4,751,200.00
53. We were compelled under the circumstance to investigate further into the already paid consignment. As a result of the further investigation a savings of ?28,561,500.00 came to light as shown below;
No. Company Bungalow No. Amount Actual Difference1. Joe Hays 5 5O6A/10 Roman Ridge 19,751,200 17,952,200 1,799,000.00
2. Sakos Ent. 6-2nd CIose Roman Ridge 18,197,000 15,027,500 3,169,500.00
3.Yanes Ent. C-42 Roman Ridge 19,615,000 15,847,000 3,968,000.00
4.Liigoe Ent. Ltd 202/4-2"” Close R. Ridge 18,310,000 18,310,000 -
5.Good New Real Est Ltd. 3(New) 2nd Ave. Ridge 14,036,000 11,416,000 2,622,000.00
6.Mamedia Venture C36 Roman Ridge 15,674,000 10,966,000 4,886,000.00
7.Bu-Das Designers Ass. B5 off 1" R~ R. Ridge 14,490,000 13,658,500 831,500.00
8.Deligat Some Ventures 1 (New) Ringway Estates 17,689,500 12,433,500 5,456,000.00
9. Hys Mantle (Gh) Ltd. 2 (NeN) RirICJway Estate 17,615,750 11,786,250 5,829,500.00
155,960,450 127,418,950 28,561,500.00
54. We recommended that the affected eight Interior Decorators should refund the over payments indicated on above by 20th February 2002. Management should ensure that when procedures are laid down for the smooth, efficient, effective and economical implementation of any assignment it would be followed to the letter. The Decorators have been written to for the refunds.
LANDLORDS EVADED TAX AMOUNTING TO e12.200.000.00
55. Six (6) Landlords who were paid a total sum of ?172,600,OOO as rent advance failed to pay to Government a tax element of ?12,200,OOO.00 as , detailed below:
Date PV No. Payee Amount Tax Paid Tax Diff. ? 5/4/01 2 SQD LRD. Sowu ?48,000,000 ?2,400,000 ?2,400,000 5/4/01 3 Mrs. Osei Owusu ?28,000,000 ?1,400,000 ?1,400,000 26/4/01 4 Edward K. Dzakapasu ?24,000,000 ?1,200,000 ?1,200,000 30/4/01 5 Dr. Ebenezer Quarshie ?24,000,000 Nil ?2,400,000 3/5/01 6 Hon. Alhaji Abukari Sumani 24,000,000 Nil ?2,400,000 8/5/01 7 Esther Walker ?24,000,000 Nil ?2,400,000 TOTAL 172,000,000 12,200,000
56. This issue is contrary to IRS Regulations 2001 Legislative Instrument 1975 section 16 (1) which states that tax on rent which is 10% should be deducted and paid to the Commissioner of Internal Revenue Services.
57. In instances where tax was deducted only 5% was paid. The Senior Accountant explained that she was not aware of the law, efforts are being made to contact the Landlords for the rent tax. This omission had therefore resulted in a loss of funds totaling ?12,200,000 to the state.
58. We recommended that the respective landlords be contacted for the recovery of the amount.
IRREGULAR PAYMENT OF CONTRACT SUM
59. Renovation work on bungalow No.33 Patrice Lumumba Road was awarded to MIS Marios Construction Work. The contract sum was ?58,700,160 but when the contractor was taken to the site to t3kc possession, it was detected that a number of fittings/appliances were missing.
60. P.W.D. who were the consultants on the project wrote a report on 9/8/01 with provisional estimates for additional work which included cost of replacing the missing item at ?36,790,025 to the Ministry for approval.
61. Without fur1her contact with PWD the Ministry approved and paid the estimated amount, which was not certified by PWD to the contractor.
62. Until efforts are made to regularize the transaction, we recommended that, the amount of ?36, 790,025 paid for no work done be refunded by the contractor.
Management is alleged to have contacted PWD to regularize the payment and the award to the contractor.
PAYMENT OF MOBILISATION ADVANCE ON CONTRACT WITHOUT RESORT TO LAW
63. Apar1 from the uncertified amount of ?36,790,025 paid irregularly to M/S Marios Construction; reconciliation made between the Projects Repor1 and the Ministry’s Financial Document revealed the following;
a. An amount of ?40,000,000 was paid to M/S Restores Company Limited but the contract agreement was not signed by the contractor, valuation of work to be done is yet to be prepared and forwarded to the Ministry by the Consultant PWD.
b. Contrary to the law, the other five Contractors in the table below were also paid without the consent of the Consultant PWD. These payments were not supported with any certificate.
MIS Restores 10,000,000.00 40,000,000.00,
MIS Amos Mensah Co. Ltd. 73,770,685.50 33,000,000.00
28/9/01 53 MIS, Geodemens Complex Ltd. 38,767,223.00 11,628,366.90
26/9/01 23 MIS Rochfords Co. Ltd. 37,884,768.00 20,000,000.00
11/10101 30 MIS Nickoo Canst. 89,026,312.50 40,000,000.00
? ? A/tees Bldg. Const. Wks 15,455,013.75 10,595,378.00
Total 155,223,744.00
64. We recommend that, since as at now there is no agreement between MIS
Restore Co. Ltd. and the Ministry, the i40million paid to him is illegal and must be recovered from him.
65. To avoid a danger of financial loss to the state, we advise that, the following steps be taken immediately to rectify the above anomalies.
Application for mobilization advances should be channeled through the Consultants, (PWD) to the Ministry. Advice from the CT A/Housing should be sought before the payment is approved.
Every payment must be backed with certificate from the consultant.
OMISSION OF MOBILIZATION ADVANCE OF ?139,305,236.22 REGARD TO RENOVATION OF SPEAKER’S RESIDENCE
66. We observed that 50% mobilization advance of ?54,305,236.22 on a contract sum of ?108,610,473 was paid to MIS GREENWORLD LIMITED to execute Landscaping and beautification works at the Residence of the Speaker of Parliament. No Interim Payment Certification was issued to cover the mobilization advance by the consultant, P.W.D.
67. At the time the former Minister recommended that the contractor should be paid the mobilization advance, there was no formal agreement between the Ministry who was represented by PWD and MIS GREENWORLD LIMITED.
Evidence of this anomaly was shown in letter with reference number PWD/CONS/24022/88 dated 3151 August 2001 which invited the contractor to sign the agreement, and that of the contractor dated 27/7/2001 requesting for mobilization advance which was approved on 30107/2001 and paid to him. 68. An Interim Payment Certificate No.1 was later issued to cover the second payment for work completed to date without any reference whatsoever to the advance payment of ?54,305,236.22. The amount certified and paid on this Interim Payment Certificate No.1 was i42,491,108 resulting in a total of ?96.796,34422 out of a contract sum of 108,610,4731eaving a balance of only , ?11,814,129 to be paid.
69. Similarly an amount of ?85,000,000 being 50% of contract sum of ?170,000,000 was paid to MIS AWET CONST. & DECORATION WORKS LIMITED as a mobilization advance for painting, terrazzo and other works at the Speaker’s Residence. No certificate from the consultant AESL was issued to support the payment. Progress Report prepared by AESL indicated that the work is in progress but the amount of ?85,000,000 advanced to the Contractor was not shown.
70. It is evidently clear from the above elaborations that, the Ministry had been giving out mobilization Advances without consulting their representatives on the job. As a result, an amount of ?139,305,236.22 might have been lost to the state if these had not been uncovered by the Audit Team.
71. We recommended that the consultants should be made aware of mobilization advances granted to contractors to forestall future loss of money to the state.
The Ministry should not wait for the Contractor to inform the consultant before the deduction is done.
WARD OF ?533.771 ,296 CONTRACT
WITHOUT AUTHORITY AND APPROVAL
72. We observed during the audit that a contract for the renovation of the Vice President’s Residence was awarded to MIS FULKI LIMITED at a contract sum of i325,509,100. This amount had risen to i859,280.396 at the time of the audit though without authorization and approval.
73. According to directive on execution of contracts, any contract sum with variation exceeding 25% of the original contract sum should be re-tender foraward. However, the variation on the above contract was not re-tender for award.
