National Audit Office discovers numerous claims anomalies by Mota Engil on road projects

* Blantyre-Zomba arrears claimed by contractor indicate as not paid but payment vouchers show was paid

* Audit team conducted physical verification of projects to ascertain their existence

* And also whether value for money was achieved on these projects

* The verification exercise confirmed existence of some projects but some were in a dilapidated state

By Duncan Mlanjira

A report that National Audit Office conducted to verify authenticity of road projects payment arrears by Mota Engil as accumulated by Government of Malawi, has revealed numerous anomalies.

In its report, dated January 27, 2021, National Audit Office says it carried out the exercise at the request from the Secretary to the Treasury, Chauncy Simwaka — who had initially asked for verification of a specific arrears of MK77,219,970,106 said to have been accumulated by Government of Malawi as at June 2020.

And during the exercise, several anomalies were discovered such as the claim of MK276,054,036.21 for Blantyre-Zomba end point Maselema/Matawale that was indicated on Roads Fund Authority (RFA) as arrears schedule not paid while examination of payment vouchers showed that the Interim Payment Certificate (IPC) was paid.

The report says there is a difference between amount certified after audit verification and amount accepted by RFA totaling MK-115,970,905.24 due to, amongst others, differences in calculating NCIC levy and withholding on a number of road projects as indicated on table 1.

The report further says RFA underpaid the contractor on some certificates for Njakwa-Livingstonia-Chitimba road project, and there are also calculation differences of NCIs levy on some certificates of the same project.

The certificate for Rumph/Nyika/Chitipa road project amounting to MK206,698,195 was not included on RFA arrears schedule yet in the files, it was included as accepted IPC.

There are calculation differences of NCIC and withholding tax on certificate for Old airport-Kasiya-Santhe road. RFA indicated that part payment was made, however payment details were not available for the auditors to confirm the payment.

There is also EUR 6,044,251.543 that could not be certified that include Chikwawa-Bangula project. RFA statement of accepted IPC schedule was not updated to reflect the reconciled amount of interest such that the recalculated interest in the statement of accepted schedule are more than the amount in the reconciliation by EUR1,836,987.00.

There is a difference for Lilongwe-Nsipe project, which is as a result of certificate number 21A which was indicated as paid in RFA schedule yet audit analysis of the statement of reconciliation shows that it was not paid.

“Again on IPC number 22D of Old Airport-Kasiya-Santhe road, Mota claims payment for precoating. However, according to audit verification this term was not part of the contract agreement — therefore the amount EUR192,229.21 on this certificate could not be certified.”

The report further says the amount certified after audit verification is almost 50% less than the amount claimed by the contractor. This is basically due to interest amount which has been removed on the basis that it will be analysed in detail separately in order to confirm whether the calculations were properly and rightly done, and consequently confirm the authenticity of the claim by the contractor.

“Therefore, a separate certificate will be issued on the same on interest arrears.

verification

The report says it’s audit team conducted physical verification of projects carried out by Mota Engil inorder to ascertain their existence and whether value for money was achieved on these projects.

“The verification exercise confirmed existence of some projects but some projects were in a dilapidated state.

On Rumphi-Nyika-Chitipa Road, the initial contract amount for this project (which commenced in 24th August, 2018 and was supposed to be completed by February/March 2020) was MK5,117,205,064.51.

“However, total amount claimed by the contractor (on works performed) so far is MK2,358,284,569.75 (representing 46% of contract price). Amount alredy paid so far — according to documents provided by RFA and examined by auditors — is MK1,708,943,812.05 while the amount certified on this certificate is MK256,188,247.07.

“This means amounts already paid plus amount certified on this certificate represent 38% of total contract price yet physical verification by the auditors disclosed that project work had stalled and there was no indication that the project was in progress.”

The initial contract amount for Njakwa-Livingstonia-Chitimba road project — which started in November 2016 and was supposed to be completed by July/August 2020 — was MK39,815,658,687.27.

The total amount claimed by the contractor on this project so far is MK27,560,373,057.96, representing 69% of contract price.

Total amount paid so far — according to verified documents by auditors  — is MK18,071,118,812.46 and the amounted certified on this certificate is MK6,386,764845.46.

“Taking into account amount already paid and amount certified on this certificate, it means 61% of contract price has already been committed and only 39% of contract price remains to be paid.

“Yet the work remaining to be done is not even half and also part of the road which has been done has alredy developed faults right at the middle of the road and in a dilapidated state.

The initial contract amount for Nkhotakota-Dwangwa project — which commenced on 1 April 2019 and was supposed to be completed by October 2020 — was MK21,169,950,274.58. The total amount claimed by the contractor so far is MK2,194,159,062.29.

However, amount already paid so far is MK1,671,688,274.96 and the amount certified on this certificate is MK533,206,627.20.

“This means that total amount paid and certified on this certificate represents 10% of contract price. Physical verification disclosed that no work was being performed yet the contract period has alredy expired.