By: Paul Emanuelli
This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
Recent years have witnessed a significant increase in the level of audit scrutiny directed at procurement governance across Africa. In fact, recent public audits have found serious deficiencies in procurement governance across a broad range of African jurisdictions, including South Africa, Eswatini, Mauritius, Ghana, Malawi, and Sierra Leone.
In its 2017-18 audit of local government, South Africa’s Auditor-General raised a series of concerns over irregularities in local government procurement. In fact, the report found that “material non-compliance with key legislation at 92% of the municipalities” with compliance issues “on supply chain management increased from 72% to 81%,” which represented “the highest percentages of non-compliance since 2011-12.”
The report also pointed to a concentration of non-compliance, finding that “the top 10 contributors to irregular expenditure were responsible for just over half of the total amount of irregular expenditure.” The Auditor-General raised concerns over a lack of consequences for transgressions and irregularities, noting that “74% of the municipalities did not adequately follow up allegations of financial and supply chain management misconduct and fraud, that 45% of the municipalities did not have all the required mechanisms for reporting and investigating transgressions or possible fraud” and that “more than half of the municipalities did not investigate any of the findings reported.” Furthermore, the report found that “where investigations did take place, 34% of the municipalities failed to resolve all of the findings satisfactorily.” The Auditor-General also found that “at 62% of the municipalities, the council failed to conduct the required investigations into all instances of unauthorised, irregular and fruitless and wasteful expenditure reported.”
The report also noted that there was an “increasingly difficult environment for auditors and other role players in accountability” since “the audit environment became more hostile with increased contestation of audit findings and pushbacks whereby our audit processes and the motives of our audit teams were questioned.” In fact, the Auditor-General found that “at some municipalities, pressure was placed on audit teams to change conclusions purely to avoid negative audit outcomes or the disclosure of irregular expenditure – without sufficient grounds” and that “instances of threats and intimidation were experienced in most of the provinces.” The report also stated that “the lack of commitment towards responding to our recommendations and to the early warning system we have implemented through the status of records review, is a source of great frustration as it has an adverse effect on the efforts we make and seems to have limited impact.”
The Auditor-General also warned about the impact of deteriorating accountability, stating that “the accountability failures in local government result in municipalities not achieving their objectives, which in turn has a negative impact on the lives of citizens.” For example, the report stated that “a key concern is the lack of attention paid to water and sanitation infrastructure – the condition of water and/or sanitation infrastructure was not assessed by 32% of the municipalities responsible for water and sanitation; and almost half did not have policies for maintenance.”
Turning to its assessment of municipalities in specific regions, the Auditor-General highlighted how “a total breakdown in controls and poor leadership response towards improving accountability, capacity and stability in municipalities were the main causes of further regressions in the Free State” where “nine municipalities regressed and no improvements were noted in the province” and where “the deterioration of the local government environment was also evident in the vulnerable financial position of 100% of the municipalities, the increase in irregular expenditure as a result of widespread indifference towards procuring goods and services within the legislated rules, and significant deficiencies in infrastructure projects.”
The Auditor-General also found that “KwaZulu-Natal continued on its downward spiral, which started in 2015–16, with 14 municipalities regressing in the current year” and where “the leadership did not decisively deal with the weaknesses and risks we warned them about and again did not pay attention to internal controls.” In that area, the report found that “the levels of tension, intimidation and threats as well as pushbacks and hostility towards our audit teams, coupled with surges in service delivery protests, made auditing in this province complex and challenging.” The report concluded that “a blatant disregard for legislation and a lack of consequences for the high irregular expenditure continued to erode accountability, public trust and governance.”
The report noted a series of causes for the deteriorating accountability, including the fact that “vacancies and instability in key positions slowed down systematic and disciplined improvements,” that “key officials lacked appropriate skills and competencies for financial reporting and negatively affected financial planning, record keeping and reporting,” and that “reporting on the performance of municipalities was not taken seriously.” The report also stated that “poor monitoring and review processes by senior management allowed errors and non-compliance to go undetected, that leadership’s inaction, or inconsistent action, created a culture of no consequences and that leadership ignored the Auditor-Generals repeated recommendations and warnings of risks for which they needed to prepare seriously, and that action plans were inadequate or not implemented.”
At many municipalities, the report also found a blatant disregard for record-keeping controls or compliance with key legislation, stating that “political infighting at council level and interference in the administration weakened oversight and did not enable the effecting of consequences.” The Auditor-General concluded by stating that “the leadership sets the tone at the top at municipalities,” that “if the municipality’s leaders are unethical, have a disregard for governance, compliance and control, and are not committed to transparency and accountability, it will filter through to the lower levels of the municipality,” and that “inevitably, a culture of poor discipline, impunity and non-delivery will develop, leading to the collapse of the municipality.”
In its March 2018 annual audit review, Eswatini’s Auditor General raised concerns over control weaknesses in the government’s payroll and procurement systems. For example, the Auditor General found an unauthorized diversion of funds in the construction of movable offices by the Ministry of Natural Resources and Energy. As the report noted, “funds used for the construction of a movable office were diverted from the National Water Point Mapping Project without following the laid down re-allocation procedures,” which was a violation of the Parliament Appropriation Act. Furthermore, the report found that “the Ministry did not involve the Ministry of Public Works and Transport, yet it is this Ministry’s responsibility to construct, maintain and administer Government buildings/projects and neither sought approval from the Public Budget Committee.”
The report also found that the controlling officer “did not adhere to the public procurement procedures established in the Procurement Act of 2011 in relation to procedures for procurement planning, tendering, requests for proposals, and requests for quotations.” As the Auditor General stated, the controlling officer “justified the expenditure by explaining that the state of the old offices was life threatening to the government officers who occupied the offices and that the Water Relief Fund Account was used to transfer savings from the Micro-projects account in order to fast-track the construction of the offices.” The Auditor General raises concerns that “the authority to reallocate these public funds to another project was not sought and obtained.”
The Auditor General also found many irregularities concerning hospitality-related expenditures. For example, the Auditor General found anomalies and insufficiently supported expenditure transactions “in respect of hospitality payments relating to workshops funded through the Water Relief Fund” since the “dates, quantities, and amounts on the various supporting documents were not matching, which was a clear indication that standard procurement procedures were not followed.” The report concluded that this was a violation of Financial and Accounting Instruction that requires accountable officers “to always avail all information required for audit purposes” and, as a result, the Auditor General “was not able to confirm the authenticity of those payments, and whether [they] were received by deserving beneficiaries,” which raised “suspicion of a fraudulent cover up as the voucher later provided in the response was not authentic, since it did go through Treasury Checking processes.” Furthermore, the Auditor General found that “evidence that the workshop indeed took place on the approved dates was also not provided.” This example was one of many raised by the Auditor General regarding unsubstantiated expenditures in relation to event-related hospitality expenses.
In its report for the fiscal year ending June 2018, the Mauritius National Audit Office raised concerns of delays related to the Grand Bay sewerage project wherein “the procurement of the services of a Consultant required longer time than initially foreseen” and that the project “was further delayed as a result of the need to reduce the scope of the works,” as well as “lengthy procedures for land acquisition and the review and approval of the bidding documents for the works” by the funding agency.
The audit also found delays in renovation works at the government’s Belmont House in which “rent was still being paid for unoccupied office space” where it remained unknown when the government could move to its new office accommodation since “the requested renovation works have still not started.” The report also raised concerns over rehabilitation works at the Cascade Pigeon Dam where the “main objectives of the project were to increase the production of potable water, reduce water leakage and improve water distribution in the northern region of Rodrigues,” noting that “three procurement exercises were unsuccessful as the bids were substantially above the estimated cost and negotiation with bidders did not materialise.” This resulted in the government’s decision to procure the works using in-house labour.
The report also raised concerns over delays in road projects, in which “delays in completion of six projects ranged from 35 to 300 days” and, for eight other projects, the “contractual completion period had been exceeded with delays ranging from 87 to 424 days.” The report stated that “the delays were mainly attributed to the non-mobilisation of adequate resources on sites, delay in relocation of owners and demolition/reconstruction of buildings situated on sites identified for road projects.” In response to these findings, the National Audit Office recommended that the government set up a mechanism to ensure proper administration and supervision of projects, which should include “close monitoring of projects to ensure compliance with financial and procurement procedures as well as contractual requirements” and the “submission of comprehensive updated status reports for follow-up and regular monitoring meetings.” The report also called for a better enforcement of contractual obligations for the non-performance of agreements and the obtaining of legal advice “for remedial measures.”
The report also raised concerns over the construction of a watchtower for the Fisheries Protection Services to provide round-the-clock surveillance and control over fishing activities and to mitigate illegal activities at sea, in which a series of requirements relating to qualified personnel, site supervision, record-keeping, engineering approvals for building materials, insurance coverage and performance security were not complied with. The report recommended the implementation of better project management and site supervision practices.
In its December 2018 report on The Public Accounts of Ghana Ministries, Departments and Other Agencies, Ghana’s Auditor-General raised concerns of multiple procurement irregularities, particularly in relation to a lack of controls over the sole sourcing of government contracts. For example, the report noted that seven institutions under the Ministry of Health failed to obtain at least the required minimum quotations from different sources during the audit period and raised similar concerns regarding contracts awarded by the government’s Rent Control Department. The report also raised concerns over the failure to publish notices of contract awards.
The Auditor-General also noted concerns over irregularities in relation to the acquisition of books for educational purposes that resulted in “wasteful expenditure” and called for the “strengthening of supervision and monitoring” of related procurement activities to better ensure compliance with applicable procurement statutes. Further, the report found a failure to benefit from product warranties in the purchase of education-related tablets by the University of Ghana, since the tablets were purchased but not deployed during the warranty period.
In its June 2018 report, Malawi’s Auditor General raised concerns over multiple procurement irregularities that pointed to travel-related fraudulent transactions and corresponding weaknesses in internal governance, including:
…procurement made without evidence of sourcing at least three quotations, subsistence allowances paid without being substantiated by activity reports, general materials not accounted for, payment vouchers bearing wrong cheques numbers, non-current assets not in fixed assets register, procurements made outside procurement plans…[as well as] payments made without required approvals.
The report also noted “revenue from foreign mission not accounted for, revenue collected but not banked, general materials not delivered, failure to recover loans, advances and external allowance not accounted for” and “fraudulent payments collected for personal use.” The report also documented “payments made without certificate of completion” as well as “payment of external travel allowances on a fully funded trip” and “payments made for un-delivered items.” The Auditor General concluded that there was “spending without due regard to economy, efficiency and effectiveness,” including “external travel allowances paid for a trip not undertaken.”
In its December 2019 annual report, the Auditor General of Sierra Leone found a series of procurement irregularities that it attributed to a lack of commitment by government officials. As the Auditor General stated, “we also observed several significant lapses in the procurement of goods, works and services which amounted to Le257.1 billion” and that “this might have been due to lack of commitment” on the part of the government “to ensure compliance with rules and legislation governing the procurement process” and that “this practice does not ensure transparency in the procurement process.”
The report found “that procurement activities valued at Le19.9 billion were not open, competitive and transparent,” which also “could be attributed to the lack of commitment on the part of management to ensure compliance with rules and legislation governing procurement processes,” which meant that government “may not have achieved maximum value for public expenditure.” For example, the report found that “transactions relating to goods, works and services, amounting to Le93.3 billion were not supported by adequate documentation” as well as “several procurement irregularities to the tune of Le4.1 billion which might have been due to lack of commitment on the part of Chief Administrators to ensure compliance with rules and legislation governing the procurement process.”
The Auditor General raised concerns over unresolved Ministry of Defence procurement irregularities at a Kambia barracks project, which included the failure to prepare a required procurement plan, establish the required evaluation committee, or notify unsuccessful bidders of the results and reasons behind the contract. The report noted concerns over substandard facilities at the military base, for which other related procurement projects were delayed and remained outstanding.
The report also found contract-splitting practices used to avoid open tendering, as well as unresolved issues relating to the “procurement activities that flouted the procurement rules” for the acquisitions of two Toyota Sequoias for which the government “did not prepare a written description of their needs, and any special requirements as to their quality, quantity, terms and time of delivery.” The report also found the award of a renovation contract for which no evaluation records were maintained and for which “the contractor was paid an advance of 50% of the contract value, which is in violation of the procurement laws” that limited advanced payment to 30% of the contract price.
In its April 2019 report entitled Performance Audit Report on the Institutional Framework for Fighting Corruption by The Anti-Corruption Commission (ACC) Case Study: Central Medical Stores, the Auditor General of Sierra Leone noted that the Anti-Corruption Commission “has made immense progress over the years in its bid to substantially reduce corruption and bribery in all forms.” However, the Auditor General warned that “Sierra Leone continues to face major corruption challenges that reflect on the governance structure.”
More specifically, the report raised concerns of the “Central Medical Stores (CMS) of the Ministry of Health and Sanitation (MoHS) which has faced so many challenges in its operations, including the management and distribution of drugs and medical supplies over the years.” As the report concluded “the condition of the CMS and its subsidiary stores within Freetown was far from being pleasant,” since “the storage space in each of the stores could not accommodate the regular receipt of drugs and medical supplies” and that, as a result, some “drugs were packed on the corridors whilst others were clustered due to the limited space, which could lead to pilferage.”
The Auditor General also found that “piles of expired drugs occupied the space that was meant for drugs yet to be disposed” and that “the stores lacked shelves, lighting, air conditioning facilities, and serviced fire extinguishers” and that most of the facilities lacked equipment including pallets and forklifts. The report concluded that control weaknesses “created room for corruption” due to “inefficiencies in the receipt and distribution of drugs and medical supplies” and the “lack of proper monitoring and supervision” of the stores, along with “poor coordination,” led to “weak internal controls in the management of drugs and medical supplies.”
The Auditor General recommended that the government review its current laws both in scope and in content and ensure that its laws are effective and conform to generally accepted international standards for achieving success in curbing corruption. The Auditor General also recommended that the government start enforcing relevant laws against public officers who fail to declare their assets, since “the enforcement of penalties is an important tool to ensure compliance with the requirements of the declaration regime and if not implemented, public officials may not feel compelled to complete and submit their declaration forms within the set timeframe.”
As these examples illustrate, governments across Africa continue to be under the increasingly watchful eye of public audit offices. This should serve as a catalyst for further bolstering procurement governance practices in future years.
