-AG audit report on Economic Stimulus Package shows major fraud risks
-3 govt officials signed off on many payments, one of them cleared 251 cheques totalling $6.8million
-Over 2,000 grant payments, only 200 applications could be found for review by OAG
BY NED GAGAHE & IRWIN ANGIKI
Government’s $309 million Economic Stimulus Package in 2020 to revitalise the economy during the pandemic was a payment disaster, an audit has found.
The Auditor General’s office (OAG) yesterday released its audit report of the economic stimulus package (ESP) covering a one-year period from 2020-2021.
At a pre-launch pressor with media, Auditor General David Dennis said the audit found the implementation of the ESP was challenged – lack of laws, rules and administrative resources, high risk of fraud from risky imprest account practices, lack of guidance, transparency and documentation, conflict of interest, and inefficient use of public funds.
Some examples of the many discrepancies include:
One government official was found to have signed off on 251 cheques totalling $6.8 million purportedly on behalf of recipients. The was no document to prove this officer was authorised by the recipients to do so.
This same officer was involved in encouraging and preparing applications for individuals, the report said.
Three government officers (including the one above) were found to have signed off on a ‘vast number’ of payments on behalf of recipients, with no documents to say whether these three officers were authorised to.
An ESP recipient was given an $80,000 cheque and told to cash it and return to the government office, where the officer took $20,000.
More than 2,000 grant payments were made, but only 200 applications could be found for review by OAG, raising the question as to where and what happened to the rest.
There was no standard application form, and applications ranged from 30-page comprehensive proposals to a single page.
One letter simply stated ‘I am writing to request the above funding ($1 million) to assist in enhancing the transportation needs of my constituency. Grateful please to facilitate the disbursement as soon as it is practicable.’ This was a cash grant to a MP with no requirements attached.
One constituency got $1million for transport purposes and $200,000 was paid out as ‘canteen assistance’.
Of the 24 payments for infrastructure which totalled $14 million, all were for government MPs only – none for any Opposition MP.
Government helped themselves to the bulk of $55 million for constituency offices for productive and resources sector or infrastructure. Opposition MP constituencies generally received less.
Double dipping by some recipients who took from the constituency ESP funds and the main ESP grant process, due to the use of constituency development offices to distribute funds.
One constituency development office purchased a capital equipment for $1.75 million based on only a single quote using ESP funds.
Some preferred suppliers received windfall profits when paid directly by ESP but the recipients did not collect their materials. No government follow-up.
Some recipients received far less than they had applied for, while others got far more than they had requested.
Case study shows requests varying from $2,719 to $3,860 and each were approved $15,000. Another applied for $5 million but received only $5,000. No documents to explain these approvals.
“We did not see any authorisation documents from beneficiaries authorising the officer to collect the money on behalf of the beneficiaries,” Dennis said.
Cash grants totalling $33 million were paid to farmers and local produce handling businesses, the report said. $7 million was paid to tourism businesses.
The report said applications were not always filed with payment forms or payment documentation, so it was not possible for the OAG to confirm that all payments were made in response to valid applications.
“The payment process breached expected internal control procedures in that officers personally signed for many payments for beneficiaries but provided no evidence that they had handed the payment on to the designated person. This was the case with almost a third of the payments made through the Imprest Account.
“This was a significant breakdown of internal control – allowing government officers to sign for payments for beneficiaries who may not even be aware they are due to receive payment or how much they are to receive was a major fraud risk.
“Funding through the Imprest Account was important for applicants to meet their household needs, but applicants told us they were frustrated by decisions to approve less than the amount applied for which was often unexplained. Reduced funding also caused problems, for example, applicants could not complete projects or had to delay them until they could find further funding,” the report said.
Auditor General Dennis revealed that a total of 16,000 applications were received for the ESP programme.
“We also found that the resources needed to adequately receive, process, take, and document the thousands of applications was grossly underestimated, resulting in weak internal controls. What that means is that when this was designed, the legal framework was lacking. There wasn’t a set of regulations for grants, for example,” Dennis said.
In anticipation of the negative economic fallout of the COVID 19 pandemic, the Solomon Islands Government implemented the $309million ESP programme to support and enable businesses and households to continue to produce, trade, employ people, spend and boost aggregate demand in the economy.
The ESP was approved by Cabinet and published on May 6, 2020.
Applications for the support were accepted starting May 26, 2020 with payments made throughout 2020 and 2021.
