‘CEP abused, misappropriated public funds’

‘CEP abused, misappropriated public funds’
By Chibaula Silwamba
Tue 11 May 2010, 03:10 CAT

THE Office of the Auditor General has revealed that Copperbelt Environmental Project (CEP) manager Solomon Phiri and his management allegedly abused and misappropriated public funds.

And CEP Environmental Management Facility (EMF) finance and administration sub-committee has recommended that Phiri and the two accountants should be sent on forced leave to pave way for investigations for abuse of office and public resources for possible prosecution. But Phiri described the finding of the auditors as malicious.

According to an audit report, OAG/101/48/87, submitted to the Secretary to the Treasury on February 1, 2010, there was misappropriation of public funds, distortion of financial administration and failure to follow laid down approval procedures among other irregularities at CEP.

“(ii) Irregular renewal of contracts: A review of contracts of employment for project staff revealed that between 2003 and December 2008 environmental facility manager’s contract and the rest of the project staff were approved by the Secretary to the Treasury or appointed representative. However, contracts of employment entered into between January 2009 to December 2009 revealed that two contracts of employment for the environmental facility manager entered into on 16th March, 2009 and 5th October, 2009 were approved by his subordinate, the finance officer and he approved contracts of employment for the finance officer and the rest of the staff without the authority of the Secretary to the Treasury or the Permanent Secretary, budgets and economic affairs or appointed representative,” the report stated. “Recommendation: Management should ensure that all contracts of employment are approved and signed by the Secretary to the Treasury or permanent secretary, budgets and economic affairs or appointed representative after obtaining the ‘no objection’ from the World Bank.”

It stated that a review of contracts of employment for project staff revealed that the contract durations or tenure were revised four times between August 1, 2008 and December 31, 2010 but with different start date and on each of the contracts, the salaries were adjusted upwards and affected the annual gratuity payable at the end of the contract.

It stated that the revision of the contract tenure were done without the authority of the Secretary to the Treasury, and in that regard, about K3.4 billion was paid in gratuity to all members of staff during the period under review.

“…Out of which a total amount of K1,027, 197,900 was paid in gratuity to the EMF manager, K880,185,397 to the finance manager and K159,240,556 to the project assistant,” the report revealed. “Risk: loss of public funds. Recommendation: The Secretary to the Treasury should recover all gratuity payments made as a result of salary adjustments made without his authority and ‘no objection’ from the World Bank.”

The report stated that contrary to GRZ and World Bank requirements that all salary increments be subjected to a ‘no objection’ by the World Bank, Phiri had his salary and that of his staff increased on three occasions in May 2008, August 2008 and February 2009 without obtaining ‘no objection’ from the World Bank and the authority of the Secretary to the Treasury.

“In this regard, a sum of K158,977,774 was irregularly paid to seven members of staff under the project in salaries,” the report revealed. “Risk: Loss of public funds. Recommendation: The Secretary to the Treasury should recover all salaries paid as a result of salary adjustments made without his authority and ‘no objection’ from the World Bank. Management should implement appropriate salaries adjustments in line with GRZ and World Bank requirement.”

It stated that salary advances for Phiri were supposed to be approved by the Secretary to the Treasury or permanent secretary in charge of budgets and economic affairs or appointed representative.
However, the audit report revealed that salary advances amounting to K135 million were paid to Phiri between 2008 and 2009.

It stated that salary advances paid to Phiri were approved by his subordinate, the finance officer.
However, the audit report stated that Phiri repaid the K135 million, which he had received as salary advance.

The report further revealed that all projects vehicles were not insured as of January 2010 from November 30, 2009.

“In December 2009, a project vehicle, Nissan Navara, ABT 52 97 valued at K165,502,700 US ,900 was involved in a road traffic accident. No police or loss reports had been processed for the vehicle hence no insurance claims as of January 2010,” the report stated. “It was also observed that the project procured three Nokia 5210 and Sonny/Erickson cell phones, whose value could not be ascertained, for use by project staff. An inquiry made with project management in December 2009 revealed that the cell phones produced for physical inspection were different from the ones in the asset register. Risk: theft or loss of public stores. Recommendation: The Secretary to the Treasury should ensure that management accounts for the cell phones otherwise money must be recovered from the concerned officers.”

The report further revealed that on March 15, 2006 ZCCM IH entered into a contract with Turner Construction Limited for the construction of 90 low cost houses to settle 90 families whose houses were demolished as they were deemed unfit due to mining activities in the area at a contract sum of over K7.8 billion.

“The scope of works consisted construction of 22 one bedroom houses, 49 two bedroom houses and 15 three bedroom houses and four (4) four bedroom houses. Due to delayed completion, ZCCM IH took over the construction project in August 2008 and a sum of K3,719,220,693 had been paid to Turner Construction. At the time of takeover, Turner Construction had constructed 22 houses,” it stated.

“The project had delayed for a period of three years and four months beyond its completion date resulting in excess expenditure on rental expenses of K689,327,544 for the affected families for the period November 2006 to January 2010. There is no liquidated damages claimed from the contractor for failing to execute the project as agreed. Recommendation: The Secretary to the Treasury should ensure that the construction works are quickly completed to avoid excess expenditure; and liquidation damages must be claimed.”

It revealed that Able Construction also delayed to complete the construction of Kamuchanga houses.
“The delayed construction works has resulted in payment of excess rental payments of K161,300,012. There were no liquidated damages claimed from the contractor for failing to execute the project as agreed,” it stated. “Contrary to public stores regulations no. 67 (b), fuel costing K76,810,292 could not be uncounted for.”

It further revealed that there were double payments in respect of the branding of a water tank in Kabwe in that two different companies were paid for the same job.

“It was observed that Saultis Entrepreneur was paid K19.8 million on 27th August, 2009 and K2.2 million on 25th August, 2009; and Culture Afrink Enterprises was paid K3 million being 10 per cent of the total cost on 11th November, 2009 for the same job,” the report revealed. “Risk: Misappropriation of public funds.”

And EMF finance and administrative sub-committee chairperson Engwase Mwale stated that given the gravity of the findings of the auditors as captured in the report, the sub-committee was now of the view that there was enough ground to take disciplinary and other relevant actions to safeguard public resources.

Mwale stated this on behalf of the sub-committee in a letter dated March 10, 2010 and titled forensic report on allegations of misappropriation and abuse of office at the Copperbelt Environment Project (CEP), addressed to EMF steering committee chairperson.

“Accordingly, we recommend the following actions: (i) No more payments from project accounts should be made without approval by the controlling officer at MoFNP. It is important to underline that the project management has abused the trust accorded to it and it can no longer be entrusted with public resources. (ii) bank signatories of project accounts be immediately reviewed to bring in a panel from MoFNP as a way of further safeguarding public resources given that the project management has a reputation of not adhering to laid down guidelines and procedures such as (i) above,” Mwale recommended. “(iii) Senior management of the project (project manager and the two accountants) should be sent on forced leave once they have submitted their responses to the findings (i.e. as of 16th March, 2010) in order to pave way for investigations for abuse of office and public resources. (iv) Related to (iii) above, investigative wings of government be called to investigate further the alleged abuse of office and public resources with a view of prosecuting the culprits, should it be possible.”

Mwale stated that the finding of the Office of the Auditor General were in line with what her committee had found.

“As you may recall, at the last extra-ordinary meeting of the EMF steering committee held on 18th January 2010, it was decided to mandate the finance and administration sub-committee, to take all necessary administrative actions to deal with the alleged abuse of resources by CEP project management.