Major irregularities that cost hundreds of thousands of dollars have been highlighted in the operations of the Water Authority of Fiji.
The irregularities, which are understood to go back many years, were uncovered after the current board commissioned renowned audit company KPMG to conduct a special internal audit for the Procurement of Materials and Spares on October 6, 2017.
A report of the three-month long audit was submitted to the Board of Directors in February 2018.
The report has since been forwarded to the Fiji Independent Commission Against Corruption (FICAC). The board brought the report to FICAC’s knowledge in February this
A copy of the report given to the board and obtained by the Fiji Sun detailed how proper procurement processes had not been followed at various levels within the Water Authority of Fiji.
Failure to adhere to procedures cost the WAF hundreds of thousands of dollars, it said.
What the audit found:
WAF purchasing policy for purchases of up to $20,000 requires three quotations be submitted after which the best vendor is selected.
Any purchase above $20,000 has to go through a tender process.
The report highlighted that to avoid the tender process some purchase orders were split up into separate orders to evade scrutiny.
This meant that whenever this happened for such purchase orders a tender was not called.
The audit also found that this was done for the same vendors, giving rise to suspicion of alleged collusion.
WAF has a list of preferred suppliers, but the report highlighted that vendors who were not on the list were used to procure materials from as well.
The report stated: “Based on our samples tested, we noted a significant portion of procurement activities bypassed the preferred suppliers and tender process. For instance, we noted 25 POs (purchasing orders) in which the tender process was bypassed through the splitting of POs. This reduced the value of the items being procured to below the $20,000 monetary threshold. The procurement of these 25 samples was undertaken through a quotation process.”
Out of the 25 purchasing orders, five were issued to non-preferred suppliers.
“Based on our inquiries, we noted that this is a common practice at WAF,” the audit report said.
“In addition, the stores and engineers who initiate procurement are aware of this and at times would request the procurement team to split to POs.
“This gives rise to a high risk of bias and unfair practices and potentially financial losses to WAF. In addition, this is a blatant disregard of WAF policies.”
In addition, the report noted that 119 purchasing orders, which were required to be procured from preferred suppliers, were awarded to non-preferred suppliers.
Sending and receiving quotations:
The report further highlighted that the processes and controls on the sending and receiving of quotations were ineffective.
Out of the 75 samples, the KPMG audit team noted that 23 purchasing orders totalling $209,490 were issued without any quotation being acquired.
On 14 occasions, the report found, only one quotation was provided totalling $117,413 and nine times two quotes were received, for which $92,007 was paid out.
The audit report noted that there was a risk that WAF was being overcharged because there was no or limited comparison quotes available.
It further noted that this practice increased the risk of potential collusion with suppliers.
Shortened quotation period granted to suppliers:
WAF policies state that tenders and quotation period were from three to 10 days. The audit noted that there were several instances where the quotation period was advertised for three days or less.
This, the report said, inferred that there was an urgent need for materials or parts. But, there was a significant lapse of time from the date the quotation period closed to the purchasing order date and the date the material was delivered.
The audit team found 24 purchasing orders for which quotation period of three days or less was given to suppliers. But it took up to 38 days to raise the order and then up to 233 days to receive the materials or spares.
“There is a high possibility that the short quotation period is being used to favour a particular supplier and/or eliminate other potential suppliers,” the report said.
It further noted that while some companies were refused the job because they could not meet the timeframe for delivery of materials, other companies were allowed to deliver their materials outside the given timeframe.
Lack of independent review:
There was a significant breakdown in the segregation of duties. The staff member who evaluated and approved the comparison matrix was the same person who initiated the procurement of materials, the report found.
Use of Brand name:
The report highlighted another way in which WAF staff eliminated companies from giving their quotation or tenders for WAF supplies.
The audit noted that there the quotation request form made reference to the “brand” for the materials and spares being purchased as a specific requirement.
“This is unusual practice because the request for quotation should only include a detaileds description or specification of the items to be purchased to allow a fair and transparent quotation process, the audit team’s report said.
“We noted 11 quotation request forms in which WAF specified the brand required for the materials and spares. This automatically eliminates suppliers who have products with similar specifications and quality, but do not have the required brand.
“Additionally, this also raises the risk of potential collusion with suppliers and financial losses to WAF.
“This issue raises a serious concern that the WAF officers may be skewing the specification in the request for quotation form to favour a particular supplier.”
Lack of scrutiny of procurement activities:
“There is a behavioural pattern of not following established procedures and processes which could elevate the risk of anomalies and irregular occurring,” the report said. “Furthermore, WAF does not have an experienced technical person in the procurement team who can independently scrutinise and challenge the request for materials and spares from the business
The audit also found that tenders were closed before time, which was done to favour a particular supplier.
The report also found matters which the team felt needed further investigation.
$304,457 worth of valves, clamps, rubber joiner expansions and joints was bought from a company which was not on the WAF preferred supplier list. And for this company, the purchasing orders were split so that for each purchasing order the total was less than $20,000, meaning that a tender process was bypassed;
The procurement officer sent emails reminding this particular company to send their quotation. WAF was not able to produce evidence that the officer treated all companies equally and sent emails to all companies reminding them to send in their quotations;
Majority of the Internal Requisition Orders to do with this company was initiated and approved by the same engineer – the WAF Regional Bulk Engineer;
A second company’s dealings with WAF was also highlighted in the audit report. This company was also paid by splitting purchasing orders and once again the tender process was bypassed. From October 2016 to September 2017, WAF procured $97,768 worth of materials from the company. WAF Supervisor Mechanical has been identified to be the person doing most dealings with this company;
One company gave a quotation of $18,291 while another gave a quotation of $15,800. The company which gave the higher quote was given the order on the basis that it would be able to deliver within two to three weeks. However, as the Purchasing Order was issued on January 18, 2017, which was almost six weeks after the tender was called, WAF could have saved approximately $2500 by buying it from the company which quoted the cheaper price. In both cases, the Supervisor Mechanical was the person who initiated the procurement;
WAF wanted to buy 5000 units of ½ inch brass nipple hexagon (15mm). The preferred supplier had 2000 units in stock. It quoted a price of $2.25 per unit. Instead of buying from this company, the same thing was bought from two different companies at a much higher cost. One company sold WAF 2700 pieces at $7.20 per unit while the second company sold WAF 2250 units at $8 per unit. The audit said WAF would have saved $9000 if it bought the item from the preferred supplier;
Because WAF does not have people with the right expertise, one company was able to sell $9200 worth of eight inch flanges, which was welded and painted black to disguise the welding. According to Australian and New Zealand Standards on Qualification of Welders for fusion, welding of steel requires testing and the welder must be a qualified welder. The welding was done by the local company in their Lautoka workshop, which is not certified to carry out such welding. The Regional Bulk Engineer approved the units to be used in the Naseyani Project;
WAF staff had gone to the extent of creating a fake spare part to eliminate companies which did not have the parts in stock. The audit found that the part did not exist and companies which did not provide a quotation for that particular part were not given the job; and
The Supervisor Waste Water demanded that cones which WAF use to mark their work in progress should have the WAF logo visible. So such cones were bought at a higher price for work sites in Lautoka, but for Suva cones with WAF logo embossed at the bottom on the cone were bought.
The audit team met a supplier who had raised concerns with the WAF Board.
The meeting found:
“Some WAF staff are working as a private consultant in respect of various projects sub-contracted by WAF to third party consultants. In addition, there is a possibility that WAF staff are using materials and spares from WAF stores when they are working as a private consultant and that there are suppliers supplying imitation materials under the disguise of a genuine brand affected the image and reputation of the authorised distributor.”
The WAF Board which commissioned KPMG to do the audit includes:
Chair – Bhavesh Patel, Umarji Musa, Vijay Maharaj, Kamal Gounder, PL Munasinghe, Hemant Kumar.