A road construction
* 20.7 million euro and US$1.2 million claimed on interest and donor funded projects
* Out of MK52 billion claimed by Mota Engil, Roads Fund accepted MK24.3 billion as valid as at 30 November 2020
* MK27.5 billion was disputed by Roads Fund, representing 52%
By Duncan Mlanjira
From the verification exercise that National Audit Office conducted to verify road projects arrears totalling MK77.2 billion accumulated by Government of Malawi, it was discovered that Mota Engil was also claiming payments on donor funded projects.
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 asked verify a specific arrears of MK77,219,970,106 said to have been accumulated by Government of Malawi as at June 2020.
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The objective of the verification exercise was to ascertain the authenticity of arrears accumulated amounting to MK24,336,141,324.44 as at 30th November 1, 2020 before a settlement plan was to be developed and implemented, says the report in the preamble
“It was agreed by the auditee that the scope should be extended to November in order to be current since some arrears were paid for from the date of the letter to the time of verifying the arrears.
“The audit verification exercise was conducted based on the agreed upon procedures to validate the invoiced amounts against amounts paid inorder to ascertain and confirm the state of arrears as accumulated by Government.
“The verification covered transactions up to December, 2020 [and] involved, among other things, review of contract agreements, Interim Payment Certificates (IPCs), Payment Vouchers and other relevant supporting documents.
“Interviews were also conducted with relevant officials at RFA in order to get clarification and understanding on computation of the arrears and interest.”
On the other hand, adds the report, recalculations were done on amounts pertaining to measured works and in reviewing the documentation and confirming the arrears, physical verification of the road projects was conducted in order to ascertain existence of the projects and extent of works carried out by the contractor.
In its findings, the National Audit Office says arrears claimed by the contractor of MK48,951,026,065.28 while analysis of records provided by Motor Engil showed that total amount of arrears claimed by the contractor as at November 2020 totaled MK52,944,276,675.89.
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“In addition to this amount, the contractor claimed EUR20,713,205.95 and US$1,268,381.54 on interest and donor funded projects.
“However, an examination of statement provided by the contractor against RFA project schedules and records revealed that the contractor’s claimed arrears included MK3,993,250,610.61 related to projects which are not supposed to be paid by Government through Ministry of Finance because there are either donor funded or have disputes or certificates not received by RFA.
“This, therefore, follows that on Government projects to be paid through Ministry of Finance the total amount of arrears to be claimed by the contractor should be MK48,951,026,065.28 and EUR13,678,846.34.”
The report indicates that total arrears accepted by Roads Fund Authority (RFA) were MK24,336,141,324.44 and after review of contract agreements, IPCs and related documents provided by RFA revealed that out of MK52,944,276,675.89 claimed by the contractor on projects funded by Government through Ministry of Finance, Roads Fund accepted MK24,336,141,324.44 as valid claims as at 30 November 2020.
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The remaining MK27,559,006,450 was disputed by RFA, representing 52% and according to RFA management, these IPCs were disputed because they represented:
(i) MK18 .8 billion (representing 68% of disputed amount) interest on late payment which was charged by the contractor either in foreign currency rather than local currency, or using different interest rate than what was agreed in the contract agreement.
(ii) MK1.56 billion measured works which according to RFA were not satisfactorily performed and completed representing 5.6%.
(iii) MK1.67 price escalation representing 6% and
(iv) MK5.4 billion claims, on idle time, machinery etc. representing 19.6%.
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“Apart from MK27,559,006,450 disputed amount, there was an amount related to arrears claimed by contractor on projects whose IPCs were (according to RFA) not received by RFA for payment. As at June 2020, IPCs not received totalled MK6,375, 517, 689.
“On the other hand, out of EUR20,713,205.95 and USD1,268,381.54 claimed by the contractor, RFA accepted EUR 3,857,790.00 and no arrears in USD.”
After cross-examination and analysis of records provided by both the contractor and RFA on arrears certified after audit verification of MK24,452,112,229.68 and EUR1,740,424.44 — which included arrears schedules, Interim Payment certificates, and payment vouchers — reveals that as at 30 November 2020, Government accumulated MK22,345,855,039.08 and EUR1,740,424.44 arrears on road projects conducted by Mota Engil.
In his report, acting Auditor General T. Makiwa says based on the review and analysis of provided documentation, and physical verification conducted, “I, therefore, certify that the claims for arrears totaling MK24,452,112,229.68 and EUR1,740,424.44 are valid and eligible”.
