Audit Finds Illegal Advance Payment in Innamadhoo Wall Project
An audit report has revealed that an advance payment exceeding the 15% limit mandated by financial regulations was issued to Al-Amin Investment for the construction of a perimeter wall at the R. Innamadhoo waste management center. Following the termination of the contract due to poor workmanship and failure to meet deadlines, the Audit Office noted a loss of over MVR 180,000 to the state, as the council failed to secure a performance guarantee or withhold retention money. Consequently, the project has now been awarded to another contractor at an additional cost.
President Dr. Mohamed Muizzu meets with the R. Innamadhoo Island Council. | Presidents office
The Auditor General’s Office has highlighted significant irregularities in the awarding and execution of the contract to construct a boundary wall for the waste management center in R. Innamadhoo.
According to the 2023 Compliance Audit Report for the R. Innamadhoo Council, the project was initially awarded to Al-Amin Investment on April 6, 2023, for MVR 720,684, with a 90-day completion period. However, due to failure to meet the deadline and substandard workmanship, the contract was terminated on October 22, 2023. The project was subsequently re-awarded to another company for MVR 695,000.
The report noted that the council failed to comply with several provisions of the State Finance Regulations during the project's execution under Al-Amin Investment. Specifically, it highlighted that advance payments were issued in violation of these regulations.
The Audit Office pointed out that according to Section 10.61 (b) of the State Finance Regulations, if a contractor requests an advance payment exceeding 15% of the contract value, it can only be granted with written approval from the Minister. Furthermore, Section 10.61 (d) stipulates that advance payments for works or services (excluding consultancy) must only be released upon the submission of an advance payment guarantee equivalent to the amount being paid.
Contrary to these regulations, the council released an advance payment exceeding 15% to Al-Amin Investment without obtaining the required authorization from the Ministry of Finance. Additionally, the payment was made without securing an advance payment guarantee.
The audit revealed that MVR 150,000, representing 20.81% of the total contract value of MVR 720,684, was paid as an advance. Under the regulations, the maximum allowable advance payment without ministerial approval would have been MVR 108,103. Consequently, the council overpaid MVR 41,897 in advance.
The Audit Office noted that according to information provided by the council, the funds were released following the delivery of 50% of the required materials to the site, the provision of electricity, and the commencement of site clearing. However, since no physical construction of the wall had been completed at the time of payment, the Audit Office classified this as an advance payment rather than a progress payment.
Furthermore, the report stated that the council failed to obtain a performance guarantee, leaving the state without protection against losses when the contractor abandoned the project. There was also no verification that payments were made according to the actual progress of the work as per the agreement. The contractor eventually abandoned the site with a significant portion of the work unfinished.
The audit also highlighted that the project proceeded without the deduction of retention money. As a result of the contractor's failure to complete the work as agreed, the state incurred an additional expenditure of MVR 184,316.
