Major lapses discovered in MARAD internal controls
– special audit
– former DG, Shore Chief Engineer, Accounts/Admin Officer interviewed
A special audit into the operations of the Maritime Administration Department (MARAD) has unearthed “a total breakdown of internal controls” at the agency during the period 2015-2020.
This was revealed in the report of the special internal audit conducted by the Work Services Group, an agency within the Ministry of Public Works.
The report cited the ineffective segregation of duty at the agency as a major issue.
Under the former administration, the then Director General of MARAD also functioned as the Chairman of the Maritime Administration Advisory Board. Holding the two positions, the auditor said, is a conflict of interest since the Board functions as the oversight body for MARAD.
Another glaring finding is that the agency made several payments without proper documentation.
The internal auditor added that Courtney Benn Contracting Services Limited (CBCSL) and its subsidiary, Brenco Shipping Company were given huge contract sums without proper certification of works through progress and valuation reports.
Further, there were numerous instances where contracts were skewed in favour of the contractor, rather than MARAD.
With regard to the $359.1 million contract for the docking and rehabilitation of the Baramani vessel, 56 per cent advance mobilisation was paid, although 50 per cent was outlined. The auditor noted the payment occurred without variation or approval.
In another instance, MARAD paid 80 per cent of a $400.2 million contract as an advance mobilisation while only 50 per cent of the work was completed, representing an overpayment of 30 per cent.
Additionally, the auditor pointed out an occasion where the agency paid 90 per cent advance mobilisation to a contractor for the completion of 75 per cent of works, representing an overpayment of 15 per cent at that particular stage of the project.
Although the National Procurement and Tender Administration Board (NPTAB) stipulates mobilisation advances should be paid between 15 and 30 per cent, MARAD was flagged for releasing a far higher percentage on numerous occasions, mainly benefiting CBCSL and its subsidiary.
The auditor also put the Baramani contract under the microscope, like many others, for being ‘open-ended’, whereby there was no stipulated execution period and no commencement order or project completion date.
Commenting on this finding, the auditor stated the agency’s actions can result in potential legal challenges.
Further, the payments to the Courtney Benn and Brenco Shipping companies were cited as either being preferential or devoid of information since there are documents missing that hamper a full examination.
Incomplete works on vessels
The Seamang, ML Allan Young, MB Baramani and the split barge were all inspected at the Mazaruni Dock Yard with each vessel showing signs of incomplete contractual works.
For the Seamang, the auditor stated that there was minimal evidence of recent works, although $73.32 million was expended to dock and rehabilitate the vessel in 2017 and for further repairs in 2019.
While there are signs that a new engine base was constructed on the MB Baramani, the other parts of the vessel appeared untouched.
Meanwhile, full payment was made for the rehabilitation of the ML Allan Young while there are outstanding works. The vessel is in dry dock with both propeller shaft and rudder stock extracted, a sand blasted hull with epoxy applied to some parts. However, the severely corroded sections of the hull have no epoxy coating.
Additionally, the main deck of the split barge and sections above the waterlines were observed to be coated with grey epoxy. CBCSL benefitted from $56.46 million out of $75.723 million in works on that vessel, which was docked and rehabilitated in 2017, 2018 and 2020.
The Bill of Quantities for the works is missing, which would have permitted a detailed assessment of what was done compared with the payments made.
The auditor noted that a ‘Docking List’ that both identifies the issues on the vessel and serve as a guide for the preparation of the Bill of Quantities was not supplied to the audit team.
This document was to be prepared by the Shore Chief Engineer.
The former Director General, Shore Chief Engineer and the Accounts/Administrative Officer were all interviewed to provide answers to the audit findings.
The auditor has recommended that a forensic audit be conducted to obtain a comprehensive overview of the irregularities at MARAD.
Minister of Public Works, Hon. Bishop Juan Edghill on Monday formally requested that the Auditor General conduct a forensic audit into the agency.