Auditor General gives urgent call to strengthen government grants regime after ESP audit reveals major fraud risk, weak administration and poor transparency

BY JOHN HOUANIHAU

Auditor General David Dennis has called on government to improve its legal and regulatory system for payment of grants.

Mr Dennis made the call following an audit by his office into the covid-19 economic stimulus package (ESP) revealed “major fraud risk, poor to non-existent administrative controls and almost zero transparency in the disbursement of $309 million in government funds”.

In calling for an “urgent strengthening of the legal and regulatory regime for the administration of government grants”, AG Dennis said:

“The ESP lacked underlying legislative or procedure guidance for issuing grants on the scale involved for the ESP.

“This coupled with the allocation of insufficient resources needed to adequately receive, process, pay and document the thousands of applications, led to weak internal controls.”

This weakness in administrative controls, combined with missing documentation led to a very serious lack of transparency as to how ESP funds were dispersed and ultimately used, a statement from the Auditor General yesterday said.

“In most cases here was little or no documentation so it was not always possible to determine whose hands the funds ended up in or how they were actually used,” Dennis said.

“In many cases documentation to support the validity of actions and transactions were not available. This area remains a concern across Government which requires urgent attention.”

The abuse of the Government Imprest account was particularly concerning and raised a high risk of fraud with many payments being signed for by Government officials on behalf of beneficiaries without documented authorisation, including payments totalling over $6 million being signed for by one officer.

The ESP was rolled out by the Government during the recent pandemic, and was intended to inject funding into the domestic economy to stimulate economic activity, the OAG statement said.

The scope of the Office of the Auditor General (OAG)’s audit did not include assessing the impact of the ESP but focused on how the funds were administered.

AG Dennis said it was important to acknowledge the extraordinary circumstances created by COVID19 which heightened the inherent risk for expediting procurements and delivery of payments and services at the expense of following established procedures.

The Minister of Finance was briefed on the findings and recommendations of the ESP audit report following its tabling with the National Parliament Office. The OAG has also extended an invitation to the Chairman of the Public Accounts Committee, the Leader of Opposition and the Leader of Independents for a briefing on ESP Audit findings, the OAG statement said.

The audit – the last by the OAG into Government COVID-19 expenditure – was conducted at the request of the Government following their commitment to the International Monetary Fund for all COVID-19 spending to be audited. OAG intends to follow up on commitments made in future audits of the Ministry.

The OAG is one of the key accountability institutions established under the Solomon Islands Constitution which requires the Auditor General to audit and report on the public accounts of Solomon Islands, including all Ministries, offices, special funds, courts and authorities of the Government, and of the government of Honiara City and of all provincial governments.

The full ESP Audit Report can be downloaded at: ESP Audit Report 2024.pdf (oag.gov.sb).

BY NED GAGAHE

The Office of the Auditor General’s (OAG) audit into the Economic Stimulus Package (ESP), highlighted significant issues in the allocation of $60 million in grants to the productive and resources sector.

The funds were distributed through the Ministry of Finance and Treasury (MoFT) payment system, aimed at providing essential support to local businesses.

The audit uncovered, a total of 1,515 payments were made to 165 businesses, but the nature of these payments remains unclear.

The report revealed that while some funds were directly allocated, others were used to procure equipment for businesses.

The audit uncovered that several retail businesses received multiple smaller payments, for beneficiaries, while some received larger sums classified as grants.

The OAG raised concerns over the procurement process, revealing that applicants selected their own suppliers without any formal competitive bidding.

Although the MoFT stated that a general bid waiver had been approved by the Central Tender Board, the audit suggests that this waiver did not comply with established procurement regulations.

Field visits conducted by the OAG indicated that while some supplies provided through the ESP positively impacted local businesses—such as equipment for fishing ventures and materials for tourist accommodation—there were notable discrepancies.

In one instance, an applicant requested an outboard motor and freezer but only received a generator, which, while useful, was not what they needed for their fishing business.

Another applicant received building supplies intended for debt repayment instead.

The audit highlights a lack of follow-up by officials regarding the delivery of supplies. In cases where grants were insufficient for applicants to complete their projects, some did not collect their supplies, resulting in windfall profits for vendors.

BY JOHN HOUANIHAU

Assurance of managing conflicts of interest under the COVID-19 Economic Stimulus Package (ESP) applications is not true, the ESP 2020-2021 audit report has found.

The ESP Oversight Committee claimed that under the reference policy, the conflict of interest or potential conflicts of interest has been properly managed where all recommendations were made.

However, according to finding number two of the report, government officials did not properly identify or manage conflicts of interest or potential conflicts of interest arising during the administration of the ESP.

“In this, the example that I alluded to, where we spoke about one government officer signing for 251 interest account checks worth approximately $6.8 million,’’ said Auditor General David Dennis.

“That same officer was also involved in encouraging and preparing applications for individuals. The committee, however, wish to confirm that under the reference policy, the conflict of interest or potential conflicts of interest have been properly managed through the establishment of an Oversight Committee where all recommendations were made,’’ said Dennis.

“But it’s important to see that there is a linkage here. On to our next finding, again still about grant administration. What we found was that some grant criteria were established, but there was often no documented assessment against the criteria,’’ he said.

He said that Documentation supporting grants was often unavailable and some successful applications do not appear to meet the designated criteria.

“What we also saw when we were reviewing the documentation is that there was a big difference between the quality of the applications that were received. Some submitted a comprehensive business case with data and graphs detailing the history of the business, others just submitted what is little more than a request to fund a business idea,’’ Dennis explains.

He said that the Information provided in the application addressing the stated criteria did not seem to be a determinant of whether the funding would be provided or how much would be provided.

“There was no documentation available to indicate what was considered in assessing the application. In some cases, some people applied for $80,000 and received $5,000. In other cases, they applied for a smaller amount and got a bigger amount,’’ said Dennis.

“So, it wasn’t clear to us how this was decided, and I think the concern that we also had is that the documentation supporting this was often not available,’’ he said.

BY LORETTA B. MANELE

The National Statistics Office and the Office of the Auditor General (OAG) budget allocations need an increase.

This was raised by CBSI Governor, Dr Luke Forau during the launching programme of CAPSA (Building Capacity in Statistics and Audit) Project at the Mendana Hotel last week.

The project includes the Household Income and Expenditure Survey (HIES) 2024-2025 and the National Economic Establishment Census (NEEC) 2024.

Forau said the World Bank funded project is a very important project for the government and for the country as a whole.

He added that it is an interesting combination of the two agencies and this is the approach going forward for other projects.

Forau however pointed out that both agencies have been under resourced.

He stressed that NSO has never been able to fully address its mandate while OAG on the other hand is a very critical institution that needs to be fully resourced.

“In general, they need to have their budget allocations increased”

He stressed that the project is very important for the country.

“We’ve been coming up with policies but we are not sure if it is based on data, some yes but some maybe qualitative”

Forau said statistics is like the brain of the government when it comes to formulating any policy and intervention in regards to the delivery of services to our people.

He said we really need data to make quality interventions in our country.

Forau voiced that having good data is needed in order for the country to make some interventions especially regarding graduating from our LDC (Least Developed Country) status.

He said if we don’t make interventions now, we can end up graduating only to find out later that we should have not graduated because of finding out later information like people in the rural areas have not improved in their living standards as compared to those in urban areas.

“Data is very important for us to have so we can make proper and accurate interventions”

Trade Union council doubles down on demand to hold to account people responsible for ESP disaster uncovered by OAG audit

BY NED GAGAHE

Politicians and public officials linked to the failed economic stimulus package (ESP) should be held accountable and face the full force of the law.

The Solomon Islands Council of Trade Unions (SICTU) demands this, adding that there should be a thorough investigation into the findings disclosed by the Office of the Auditor General (OAG).

In a statement SICTU described the OAG findings as “alarming findings of corruption and mismanagement within the government’s ESP programme”.

SICTU said the audit report has implicated several high-ranking politicians and public officers in the misuse of funds allocated for the ESP, raising serious concerns about the integrity of the program and the accountability of those responsible.

“As such, SICTU is now calling on the Chairman of the Leadership Code Commission (LCC), the Chairman of Solomon Islands Independence Commission Against Corruption (SIICAC), and the Commissioner of Police to launch a thorough investigation into the actions of these implicated individuals. It is imperative that those responsible for the mismanagement of public funds are held accountable for their actions and face the full force of the law.”

SICTU said OAG has completed its mandated tasked resulted in the audit report presented to government and public last week.

SICTU also reminds the Commissioner of Police of the terms of the Memorandum of Understanding (MoU) he signed on behalf of (RSIPF) with the Auditor General committing the two institutions to high level of cooperation.

“The ESP program was designed to provide much-needed economic relief to the citizens in our community, especially during the height of corvid pandemic period.

“However, the findings of the audit report paint a troubling picture of misuse, embezzlement, and fraud within the programme.

“Such actions not only betray the trust of the public but also undermine the government’s efforts to support those in need.

“Therefore, we urge the relevant authorities to take swift and decisive action to ensure that justice is served and that those responsible are brought to book.

“The Chairman of LCC, SIICAC, and the Commissioner of Police must work together to conduct a transparent and impartial investigation into the allegations raised in the ESP audit report.

“No one should be above the law, especially those entrusted with the responsibility of serving the public.”

SICTU said it is crucial that the integrity of our governance institutions is upheld and that public can have faith in the accountability mechanisms in place.

“We call on the authorities to demonstrate their commitment to fighting corruption and malfeasance by investigating these serious allegations thoroughly and ensuring that those found guilty are held accountable.

SICTU said its affiliated trade unions stand united in our demand for justice and accountability.

The council of trade union said the people now witness what they deserve to know when audit report of the ESP fund of more than $300 million released with culprits identified and the truth about the misuse of public funds and is demanding to see those responsible face the consequences of their actions.

“We trust that the Chairman of LCC, SIICAC, and the Commissioner of Police will take swift action to investigate the implicated politicians and public officers for prosecutions. Such action will restore faith in the integrity of our government institutions,” SICTU said.