In addition to staying silent on withdrawing statements on the “clean audit” declaration he made about the National Resource Fund (NRF), the Auditor General has also not clarified a number of issues relating to the 2012 Kares contract for building the $661 million Kato School, Former Auditor General, Anand Goolsarran says.
According to Goolsarran, the Auditor General has also to date, not pronounced on what should have been red flags concerning the award of the Kares contract to build the school back in 2012 and on subsequent investigations after the contractor was penalized for shoddy work.
“It is unclear why the Auditor General did not comment on the award of the contract for the Kato school in his 2012 report since the contract was entered into on the last day of the fiscal year 2012, the date when all appropriations lapse and unspent balances have to be returned to the Consolidated Fund,” Goolsarran wrote in his Accountability column this week.
Goolsarran pointed out that Section 30 of the Fiscal Management and Accountability Act “specifically prohibits entering into a contract or other arrangement providing for payment of public moneys unless there is a sufficient unencumbered balance available in the appropriation.”
“Additionally, the 2012 Estimates only provided for the design of the Kato Secondary School Project and not the actual construction which was to commence in 2013. Did it not dawn on the Auditor General that the contract might have been entered into on the last day of the fiscal year to facilitate the payment of a mobilization advance using the budgetary allocation for 2012? There was also no mention in the Auditor General’s reports for 2013 and 2014 as regards the progress of the works undertaken,” he noted.
Back in 2012, Kares Engineering was awarded the $728 million contract for the construction of a new secondary school at Kato in Region Eight (Potaro-Siparuni). The new school was constructed to ease overcrowding at Paramakatoi Secondary.
The school was not occupied for a long period after it was found to be riddled with major defects after construction ended in 2015. An audit by Rodrigues Architects Limited subsequently found that the building was unsafe for children and that at least $144 million would be required to fix the defects. Kares was subsequently allowed to complete all corrective works on the school, at no cost to the government, under the supervision of Vikab Engineering, which was selected to oversee the works at a cost of $29.2 million.
The school was officially commissioned in March of 2019 – some seven years after work started.
Goolsarran said that the Auditor General in his 2015 report and “in two small and innocuous paragraphs” had stated the contractor was granted three extensions, resulting in a revised contract completion date of 30 September 2015.
As at 31 December 2015, he said that the total amount paid to the contractor was $661.312 million; and at the time of reporting, in September 2016, the performance bond had expired.
He indicated that a special investigation was being undertaken, including physical verification of the works. However, to date the Auditor General has not stated the outcome of it.
“However, there was no mention about the outcome of the investigation in his 2016 report while for 2017 and 2018, the Auditor General merely repeated verbatim what he wrote in his 2015 report. His reports for 2019 and 2020 were also devoid of any commentary on the outcome of the investigation,” he said.
Turning to the same silence by the Auditor General, Goolsarran pointed to the financial reporting and audit arrangements relating to the Natural Resource Fund.
“The Auditor General has issued his opinion on the financial statements of the Fund for the year 2021, which opinion was unqualified, meaning that there were no issues of a material or fundamental nature that affected the fair presentation of the financial statements. Unfortunately, we have not been able to have sight of these audited accounts as they are not available on the website of the Ministry of Natural Resources,” he highlights.
He noted that civil society group, Article 13, has flayed the “clean” opinion given by the Auditor General and has called on him to withdraw it, citing the lack of compliance with the NRF Act.
The group stated that the taxes paid by the Natural Resources Minister were not properly accounted for in the financial statements. It referred to Article 15(4) of the 2016 Petroleum Agreement that requires ‘the appropriate portion of the Government’s share of Profit Oil… shall be accepted by the Minister as payment in full by the Contractor as the Contractor’s share of each of the following levies… which the Minister shall then pay on behalf of the Contractor to the Commissioner General, Guyana Revenue Authority…’ According to the group, the financial statements show no withdrawals were made from the Fund for the taxes paid by the Government to Exxon’s subsidiaries.
He noted too that in response to Article 13’s criticism, the Auditor General stated that while the Audit Office has completed its examination of the 2021 NRF financial statements, it is still not equipped to look into matters in the oil and gas sector. “He disclosed the audit merely examined the accountability for the moneys that were placed in the NRF, and not what should have been received and what should have been paid out. He indicated that the Audit Office is working to build capacity in order to provide a more comprehensive coverage of the audit of the NRF.”
Of note, he said that the Auditor General did not indicate whether he would withdraw his opinion and replace it with a qualified one but noted that it could be done when new evidence is brought to light.
“It is true that there is precedent for the withdrawal of the Auditor General’s opinion when, after the issuance of his opinion, fresh evidence was uncovered that rendered the original opinion incorrect. For example, in 1997, the Auditor General withdrew his “clean’ opinion on the World Bank-funded Essequibo Road Project and replaced it with a qualified opinion in the midst of new information received about the importation of inferior quality of stone; short shipment of stone; diversion of stone to an unrelated project; and falsification of invoices,” he related.
“There was one case where the Auditor General’s report was amended because the public debt was overstated due to a computation error in the conversion of the Japanese yen to Guyana dollar. Additionally, the report on the exportation of bottle-nosed dolphins was withdrawn and replaced with new one, which became known as the “Dolphin Scam” report, that precipitated the premature departure of the then Auditor General because of the Government’s reaction to the new report as well as of its scathing attack on him,” he added.
And as required by law, there should be an internal audit of the Fund, carried out by the Bank of Guyana’s Internal Audit Department, at least annually, Goolsarran notes.
He said that “it is not clear if any has been done but that the auditors are expected to conduct their audits in accordance with the standards promulgated by the Institute of Internal Auditors, and the related report is to be forwarded to the NRF Board for consideration.”
