The Auditor General carried out a special audit of the fees paid by the Ministry of Legal Affairs for legal services during the period May 2015 to August 2020. He found 71 contracts valued at $170.828 million that were awarded to 26 Attorneys-at-law and law firms using the sole source method of procurement, instead of the application of competitive bidding procedures, as provided for by the Procurement Act.
In today’s article we discuss the Auditor General’s report on the matter.
Request for special audit
By letter dated 24 August 2020, the Attorney General wrote to the Auditor General requesting a special audit of the fees paid for legal services by the Ministry of Legal Affairs under the previous Administration. Two days earlier at a virtual media briefing, the Attorney General had disclosed that the previous Administration spent hundreds of millions of dollars in private retainer contracts and that a forensic audit would have to be conducted to determine whether these payments were properly made. He cited several cases where the Ministry entered into contracts for the provision of legal services in relation to a number of high-profile political cases.
Section 11(1)(b) Fiscal Management and Account-ability Act requires each Ministry or Department to have an effective internal audit capability. The Ministry of Finance’s Internal Audit also provides internal audit services to other Ministries and Departments in the event they do not have such capability. Therefore, where a Government agency has a concern about the apparent misuse of the resources allocated to it by Parliament, its first line of action should be to request the Internal Audit to conduct a review of the area identified. In the event that agency does not have such capability, it can request the Ministry of Finance’s Internal Audit to carry out the review.
If the area of concern relates to procurement, it would be more appropriate to enlist the services of the Public Procurement Commission whose responsibility it is ‘to monitor all public procurement and the procedures therefor in order to ensure that the procurement of goods, services and execution of works are conducted in a fair, transparent, competitive and cost effective manner according to law and such policy guidelines as may be determined by the National Assembly’. Regrettably, since October 2019, the Commission has been functioning without the services of three of its five Commision-ers because their tenure office had expired, and no new appointments were made. The remaining two Commissioners – the Chair and Deputy Chair – demitted office last October for the same reason, leaving the Commission devoid of the services of any Commissioner.
The Auditor General is the external auditor of the Government with reporting relationship to the Legislature and not the Executive. He is the holder of a constitutional office and, in the exercise of his duties, he is not under the direction or control of any person or authority. As such, he is under no obligation to act on any request for a special audit. He may, however, on his own volition, initiate a special audit if he considers it necessary, and report the results to the Legislature. The Auditor General must therefore carefully weigh any request from a government agency for a special audit to ensure that such a request is devoid of any political consideration, before agreeing to undertake the assignment. This is to ensure the independence and constitutionality of his office are safeguarded. The failure to do so can result in accusations of bias, especially in the current politically charged environment.
Authority for undertaking the special audit
In conducting the special audit, the Auditor General cited Section 26 of the Audit Act 2004 as his authority for doing so. That section states that ‘[d]uring the course of the year, the Auditor General may choose to conduct special audits and at his discretion prepare special reports when such audits are completed’. (Emphasis added.) In addition, by Section 28, the Auditor General is required to submit his reports to the Speaker of the National Assembly, who shall cause them to be laid before the Assembly.
In agreeing to undertake the audit, the Auditor General could have modified the request. Instead of reviewing what took place at the Ministry during the period May 2015 to August 2020, that is, throughout the tenure of the previous Administration, it would have been more appropriate for him to extend his review to include the previous five years, that is, from May 2011 to May 2015. In this way, he would have had a meaningful basis for comparison between the two periods, and any possible accusation of bias could have been avoided. Having done so, the results should have been presented to the Assembly via the Speaker. The Auditor General’s report was, however, submitted to the Attorney General’s office and found its way in the public domain.
We examined the audited accounts of the Ministry for the years 2010 through 2019. The payments of fees for legal services were included under Programme 523 – Attorney General’s Chambers, line item 6284 – Other. For the period 2010 to 2014, a minimal amount was expended under this line item, that is, on average $1 million annually. This suggests that most, if not all, legal services were undertaken in-house via the State Solicitor’s Office. However, for the period 2015 to 2020, a significant amount of legal services was contracted out to Attorneys-at-law and law firms at a total cost of $151.960 million. According to the Auditor General, $102.503 million was expended in 2019 alone on 29 contracts. This was the period during which the previous Administration sought judicial review of the Speaker’s ruling on the no confidence vote and other election-related matters.
Auditor General’s reports for 2015 to 2019
A review of the Auditor General’s reports for the years 2015, 2016, 2017 and 2018 indicated that they were no findings as regards any breaches in the Procure-ment Act at the Ministry concerning fees paid for the provision of legal services. This is despite the fact that 33 of the 71 contracts valued at $52.817 million were awarded during this four-year period. However, in his 2019 report, the Auditor General commented that fees totalling $99.650 million were paid to seven Attorneys-at-law and three law firms for the provision of legal services, despite the fact that the Solicitor-General’s office was staffed with ten Attorneys-at-law, including the Solicitor-General and his/her Deputy. He indicated an investigation was underway.
Considering that the Attorney General’s request was made on 24 August 2020 and the fact that the Auditor General’s 2019 report was dated 10 December 2020, one could legitimately ask whether the above comment was inserted after the commencement of the special audit.
The Auditor General’s findings
In his report dated 22 December 2020, the Auditor General identified his audit objective as ‘to ascertain whether proper procedures were followed in relation to Retainer Agreements of the Attorney General’s Chambers. He found that during the period May 2015 to August 2020, 71 contracts valued at $170.828 million were awarded to 26 Attorneys-at-law and law firms using the sole source method of procurement, instead of competitive bidding procedures as provided for under Sections 10(1) and 25(1) of the Procurement Act.
The Auditor General also stated that there was non-adherence to the Guide to the Public Procurement Procedures. The Guide states that ‘where contracts are to be awarded regularly, or are to be renewed within a specified period of time, the contract value is established on the basis of the actual aggregate cost of similar contracts or services awarded over the previous twelve months or financial year, adjusted where possible for anticipated changes in the value or quantity’. The Auditor General nevertheless noted that in cases where the Attorneys-at-law or law firms represented the Ministry at more than one court hearing, approval was sought from Ministry’s tender board and subsequently the National Procurement and Tender Administration Board (NPTAB) in relation to the cost for the additional hearing. Given that legal services on a case-by-case basis will vary in complexity, it is debatable whether the above requirement can be made applicable, hence the involvement of the NPTAB to assess the reasonableness of the contract sums.
Apart from concerns about its quality, the report provided no explanations from the concerned officials of the Ministry nor from the former Attorney General in relation to the findings. This is not only normal auditing practice but also a requirement of the Audit Act. Section 27 states as follows:
At the conclusion of any audit, the Auditor General shall provide the relevant Head of a budget agency, or the governing body in the case of other public entities, with a draft report including findings and recommendations, and the Head of the budget agency or the governing body shall provide a written response to the Auditor General within thirty days, which response the Auditor General shall include in his report to be submitted for laying before the National Assembly. (Emphasis added.)
A finding is not a finding without due regard for the explanations provided for any apparent deficiency or shortcoming arising out of an audit, and a conclusion cannot be drawn without such explanations. The framework normally used to develop a finding comprises the following: Criteria – what should be; Condition – what has happened; Cause – the contributory factors and explanations provided; Effect – the implications of what has happened; Conclusion – the auditor’s assessment having regard to the three Cs; Recommendation – must be specific, measurable, achievable, relevant and time-bound (SMART).
Requirements of the Procurement Act
The Auditor General’s main finding was that Sections 10(1) and 25(1) of the Procurement Act were breached in the award of contracts for legal services. Section 10(1) refers to the maintenance of records of procurement proceedings while Section 25(1) states that public tendering is mandatory. The Auditor General referred to the Ministry’s application of the single source method to award the contracts for legal services and questioned the use of this method. However, he might have overlooked the requirements of Section 49 that permit a procuring entity to engage in single source procurement where the services to be procured require that a particular consultant be selected ‘due to the consultant’s unique qualifications or where it is necessary to continue a project with the same consultant’. However, the selected contractor must agree to be to be subjected to cost verification during the performance of the contract. Additionally, by Section 51, the procuring entity may negotiate the terms of the contract with the selected consultant.
The Auditor General’s recommendations
Having regard to the findings contained in his report, the Auditor General has made the following recommendations:
(a) The Ministry of Legal Affairs should ensure full compliance with the Procurement Act;
(b) The Ministry should take disciplinary action against those responsible for non-compliance with the Act; and
(c) The Police be called in to further investigate the matter and institute charges where necessary.
Concluding remarks
The article is not an attempt to defend of the actions of the previous Administra-tion, especially in relation to seeking judicial review of the validity of the Speaker of the National Assembly’s ruling on the no confidence vote and other election-related matters. To the extent that State resources were used to mount these legal challenges, there has been a tremendous waste of such resources which could have been put to better use in the delivery of public services. That apart, where individuals, as opposed to the Government, have sought judicial review, the related costs are not a legitimate charge against public funds. Those costs should therefore be recovered, and appropriate sanctions applied against those who have approved of such arrangements.
