SUPER SEA, LTD COMPANY NO. 42,186 AMANDA CURLING PRESIDENT/DIRECTOR SHANTELL ARMBRISTER SECRETARY M. RENEE TAYLOR ASS’T SECRETARY JOHNSON ENTERPRISES, LTD NO. 30,523 YVETTE SEALY PRESIDENT KAREN BETHELL SECRETARY ALBERT J. MILLER DIRECTOR WESTSIDE EQUIPMENT, LTD NO. 55035 EUGENE SMITH PRESIDENT BOB SMITH SECRETARY M&R ROAD BUILDING & CONSTRUCTION NO.51,079 LAWRENCE McKINNEY PRESIDENT STEVEN ROSE VICE-PRESIDENT TRUE BLUE HEAVY DUTY TRUCKING DEREK THEOPHILUS MACKEYea fo & ce Gs & of G3 Go Ge oe E SS c sori) AUDIT REPORT ON IDB LOAN CONTRACT NO.1I70/OC BH SOLID WASTE MANAGEMENT PROGRAMMEi eS Se & SS eS & Relerence No. OFFICE OF THE AUDITOR-GENERAL P.O. Box N-9027 DAGIC IIB Nassau, The Bahamas Permanent Seeretary Ministry of The Environment Nassau, Bahamas October 8, 2009 IDB LOAN CONTRACT NO.1170/0C BH SOLID WASTE MANAGEMENT PROGRAMME INTRODUCTION We have conducted an audit examination on the IDB Loan Contract NO. 1170/OC BH Solid Waste Management Programme signed by the Government of the Bahamas (GOB) on October 29, 1999. The total cost of the project was estimated at US $33.5 million of which the IDB would provide US $23.5 million and the GOB $10 million. “The purpose of the programme was to support the GOB in the improvement of Solid Waste Management Services for New Providence and the Family Islands. This project consisted of the following components: (a) Construction of disposal facilities at Central Bleuthera, South Bleuthera, North Eleuthera, Mangrove Cay Andros, Central Andros, Kemp’s Bay Andros, Long Island, Deanwood Cat Island, North Cat Island, Inagua, Cedar Harbour and Little Harbour Abaco; (b) Hazardous waste disposal; (©) Institutional support of the executing agency and studies; and (@ Anenvironmental health education awareness programme. ‘The Department of Environmental Health services (DEHS) was the Executing Agency and a Project Executing Unit (PEU) was created within the Department.Cc Al OBJECTIVES, U ‘The objectives of the audit were to determine whether: fn u (a) Accounting records were being kept in accordance with the IDB Loan requirements Chapter VII Article 7.01 of the General Conditions; and (b) To determine whether the GOB received value for money (VFM). SCoPE {| Our examination included a general review of the accounting procedures and such tests of the u accounting records and other supporting evidence as we considered necessary in the circumstances. METHODOLDGY To achieve our audit objectives, we interviewed appropriate personnel, reviewed relevant records, performed analytical procedures and other audit tests that we deemed necessary given i the circumstances. Ul FINDINGS AND RECOMMENDATIONS a We have set out below the main points arising from our audit and the connected ul recommendations. Consequently, our work did not involve a detailed review of all aspects of the system and cannot be regarded as a comprehensive statement of all wealmesses that exist, of of all improvements that might be made. 1.0.0 NON COMPLIANCE co LLL The requirement of Section 4.05 of the Special Conditions of the IDB Loan Contract wis that" The Executing Agency shall select and contract directly the services of consultants, professionals or experts that may be necessary to fulfil the pertinent provisions of this Contract, in conformity with the procedures set forth in Annex C Section 1.01 of Annex C defined a consulting firm as “any legally constituted association, composed primarily of professional personal, forthe purpose of offering consulting services, technical advice, expert opinions and professional services of various U wind ct—- lL Le a = be L Be be 2.0.0 During our interview we learnt that an independent engineering firm was not contracted for the projects in question. However, we did have cite of a contract in favour of The Engineering Group Ltd. (completely documented and signed 26 July 2006) in the amount of $56,000.00 to provide the required services for six (6) months. We were told that this contract was never executed; reason being, The Engineering Group was not aware that the contract had been awarded to them. (The PEU Manager informed us that it was the Governments decision not to hire an engineering firm, We did not see any documentation to substantiate this claim.) Since an engineering firm was not hired as required to supervise the projects all internal control measures were broken down because the Project Executing Manager's responsibilities were increased to include the supervision and inspection of the projects and the approving of payment certificates for payment, Segregation of duties was non- existent which left the activities regarding the project open to scrutiny. In an effort to enhance transparency efficiency and accountability, we recommend that an explanation be given for the breaching of Section 4.05 of the IDB Loan Contract. Chapter VII Article 7.01 of the General Conditions states that “The Borrower or the Executing Agency, as the case may be, shall maintain an appropriate system of internal accounting and administrative controls. The accounting system shall be organized so as to provide the necessary documentation to permit the verification of transactions and feclitate the timely preparation of financial statements and reports”. During this exercise ‘we were unable to verify some payments made due to the lack of documentation (ic. payment vouchers, some payment certificates and some contract documents). In an effort fo enhance transparency, efficiency and accountability and to provide ‘an audit trail, it is recommended that all accounting documents be properly safeguarded and produced for audit inspection upon request. It is further aeccnmended that an explanation be given for the lack of adequate documentation. WEAKNESSES “The lack of proper supervision/technical expertise, too many projects being executed at the same time and inadequate staffing were cited by the two consultants engaged to review the projects in question as some of the main reasons for poor performance Py contractors. ‘The procedures in place to affect Change Orders (i. approval of additional work outside ‘of what is stated in the Bill of Quantities (BOQ)) were not always followed and as a casult in two instances, (Cat Island and Kemp’s Bay Andros) payments for additional work was made without proper authorization. We recommend that the procedures in place to affect Change Orders be adhered too.3.0.0 RESULTS OF EXTERNAL REVIEWS 3.1.1 Two engineering firms were engaged recently to cond station projects in question. The result of their reviews, review of accounting documents presented revealed the following: iuct reviews on the landfill/transfer our interview with them and our 312 ‘THE ENGINEERING GROUP LTD. ‘Table 1. Summary of Construction Contracts ESTIMATED Estimatep — | OVER PAYMENTS ‘VALUE OF TO. pareor | conrracr | pam TopaTe | WORK CONTRACTORS rroscrsrre | contractor | conrsacr | amour} amsnq7aie | COMRETED | BASED, ‘ono Millerton, Long | True Blue Island - Heavy Duty # Landfill Trucking _| 11-Jul-06 | 594,000.00 | 216,240.00 | _69,600.00_} 146,640.00 ‘South’ Eleuthera - West Side Landfill Equipment _| 31-Mar-06 | 635,640.00 | 120,564.00_| _ 33,000.00 87,564.00 Central Eleuthera ~ West Side Landfill Equipment | 4-Dec-06 _| 541,242.00 | 104,124.20 | _ 38,500.00 65,624.20 Love Hill Central Andros | Super Sea Landfill Marine Lid. | 12-May-06 | 475,200.00 |_367,695.52_| 177,393.60 190,301.92. South Andros ‘Mangrove Cay | West Side Landfill Equipment | 31-Mar-06 _| 547,635.00 | 238,763.50 | _ 60,500.00 178,263.50 ‘North Eleuthera 5 5 : = = : TOTAL 795,717.00 | 1,047,387.22_| 378,995.60 668,593.62, Extracted From The Engineering Group’s Report Nb. No financial information on North Eleuthera. # Payment certit System/CA System) show a payment as being for this contractor prepared by $74,040.00 —a difference of $27,000.00 amount). 3.1.3 We leamt from this engineering comp: were the two (2) sites wit clearing was done at the other sites. Mangrove Cay 3.1.4 We were advised that the basis on which p: clear. The BOQs which should have been us not used, thus the overpayments. the project acco (847,040.00 is considered to be the correct ficates and vendor payment inquiry (SSA GI $47,040.00, Jobal Financial Management whereas a summary of payments yuntant showed that payment as being vany that of the sites audited Central Andros and ith the most substantial work done. Only land ayments were made to contractors was not ed as a guideline for making payments wereC 3.15 3.1.6 3.2.0 ‘Table 2. Summary of Construction Contracts We recommend that the basis on which payments were made to contractors be provided for audit scrutiny. ‘As arresult of the noted deficiencies this firm calculated an estimated accumulated ‘overpayment to the above contractors in the amount of $668,393.62, (Our scrutiny of records presented show an estimated accumulated overpayment of $641,393.62 {$668,393.62 — $27,000.00 - indicated at pg 4 footnote # 3.1.2}). ENVIRONMENTAL CONCERNS ‘The firm noted that the present dumpsite in North Eleuthera is unsecured and accessible to unregulated use by the public. The site appears to be disorganized and untidy and its ‘unregulated access is resulting in indiscriminate dumping by the publi ‘The firm also noted that the dumpsite in North Eleuthera does not appear to be set-up according to any known design and consequently is not being utilized in an efficient tnannet. Further, during the wet summer months, this site could experience a proliferation Of pests and rodents thus posing serious health and safety problems tothe surrounding Communities. In the past, excessive garbage was bumt which helped to mitigate the problem of pests on the site. However, burning ofthe garbage is hazardous to the local Community and is environmentally unfriendly. It was felt that this site should be re esigned as a modem regional sanitary landfill and brought in line with the other dumpsites planned for the island of Eleuthera. Tt was further noted that leakages in the ground from garbage not properly disposed of cin contaminate the water table and cause illnesses to the local community that depend on well water. SHEPARD U MANAGEMENT ENGINEERING FIRM ESTIMATED. ESTMATED | paywentsto | ESTIAMTED DATE VALUE OF | Contractors | AMOUNT oF conrrac WORK ‘DASED ON OWED TO rwoicr | CONTRACTOR conrracr | AMOUNT] PAID TO DATE comPLerED 0g CONTRACTOR sh 5 North Cat Island — Landfill Johnson Enterprises | 27-Oct-06 _| 553,512.00 | 424,429.80 _| _132,857.50 291,572.30 Kemp's Bay, South “Andros ~ Landfill M&R Ce Nruction | 27-0er.06 | 435,185.03 | 391,666.53_| 203,088.03 _| 188,578.50 Taagua— | Caribbean Landfill Asphalt 27-00-06 _ | 592,704.00 _| 249,154.92 72,750.00 _ | 176,404.92E ee Table 2 Cont'd esniyareD ESTMATED | payahttsto. LAN Date Nauuvor | £Sttwctons | "AMOUNT ‘or | contact ‘wor pasavon’ | OWED'TO rmoxcr | coxmacron | costar | “ant | ratgnere | conmetay | Tm” | commescron Tile Harbour Abaco ~ ‘Transfer | Super Sea station | Marine teviy.os | ‘8168000 | 389,023.60 | 382,020.00 42,616.40 Cade Harbour Abaco~ ‘Transfer station | Super Sea Marine aatay0s | _sxa0n00 | _380352.00 | 426,780.00 46,428.00 Deans wood cat Island ~ Transfer | Super Sea Stati Marine s-Nov.os | 63781200 |_254,173.00_| 193,931.00 _| 60,542.00 TOTAL aaa | 2,089-099.85 [1411 426.55 [707,097.52 | 69,004.40 Extracted From Shepherd U Management's Report 321 3.2.2 Of the six projects noted above this firm noted that Cedar Harbour, Abaco transfer stations) were satis that both transfer stations were relatively near to the landfill site. {two (2) of them (Little Harbour and sfactorily completed. It was also noted It was noted that technical specifications (design plans) were inadequate and land surveys were not properly done. As a result of inadequate drawings/maps the Inagua landfill site was being constructed on Morton Salt property. This firm noted that Donald Thompson and Associates was paid in full for survey work in Inagua but the plans were not produced. This accounted for the site bej## started on Morton Salt property. 3.2.3 According to the report submitted by Shepherd U Management the following was noted: (a) With the exception of Little Harbour and Cedar Harbour, Abaco transfer stations the GOB did not receive value for money (VFM) for the funds expended on the Family Island Projects the subject of this report. This finding is based on comparing the value of work previously certified for payment to the contractors with value of work found completed during site visits conducted during February and March of 2009.ee (b) The PEU did not function as envisioned in the loan agreement, The unit was ‘understaffed and was not headed by a qualified engineer. Eo (c) Even though DEHS through its Ministry signed a contract with The Engineering Group, a Bahamian engineering firm, for administration of the ui construction contracts the firm was never issued with a mobilization payment nor issued with instructions to proceed with their work. The failure of the PEU 1 to follow through on the contract with the Engineering Group as required by the loan agreement was most likely the major contributing factor to poor oversight of the confirmation of designs for the individual landfills, the | construction tendering process, and the actual construction work. (a) Tenders for the North Cat Island project were received from the following [ | contractors: il (1) Super Sea Marine Ltd $452,077.50 | (2) Johnson’s Holding Enterprises $618,750.00 : (3) Bethell’s ‘Trucking $680,750.00 It was further noted that the PEU negotiated and awarded a contract to Johnson’s Holding Enterprises in the amount of $553,512.00. This price was $101,435.00 higher than Super Sea Marine Ltd. price. 3.2.4 Asaresult of the noted deficiencies this firm calculated an estimated accumulated ‘overpayment to the above contractors in the amount of $717,097.52. | u 3.3.1. The overall estimated accumulated overpayment to contractors for the projects in question is $1,358,491.14 ($641,393.62 + $717,097.52). a 3.3.2 Tt was noted that of the eleven (11) projects seven (7) were awarded to two (2) ti contractors. ~ It is recommended that an explanation be provided for payments made in excess of work completed. Further, it is recommended that the overpayment calculated by the above engineering firms in the amount of $1,358,491.14 be recovered or the work E for which payment was made be completed without undue delay. i ce 4.0.0 INSTITUTIONAL STRENGTHENING ll 4.1.1. Section 2.11 of the IDB loan agreement made provision for staff training and technical ‘assistance in design and assessment of refuse collection routing; supervision of sanitary ' landfills; engineering designs and contract documents preparation; inspection and i enforcement of licenses and permits; and environmental monitoring; (ti) training of inspectors, professionals and managers in technical and operational aspects of solid waste 1 management”. The funding for this training was to be taken from the loan funds.E oo ‘A contract awarded to SABL (Bahamas) Ld in the amount of $589,310.00 to facilitate training needs was signed February 7, 2006. We were provided with a schedule of payments made to the company which is set out in Table 3 below. We noted that between ih February 15, 2006 and April 4, 2007 (approximately 14 months) $537,327.50 was paid ! out. However, we were unable to verify the legitimacy of the payments because the accounting documents were requested but not provided. Further, a schedule of training i ‘was presented to the audit team; however, the information/documentation needed was — ul included. i) [I ‘The Accountant with responsibility for the loan informed us that she benefited from the programme by attaining a Bachelor's of Science Degree with concentration in Professional Management. However, based on the types of training listed in paragraph fil one (1) above this degree appears to be outside of the scope. The payment documents for ul this disbursement were not seen, and as a result, we were unable to determine the cost. {ll wu ‘Table 3. Institutional Strengthening for DEHS: Contractor: SABL (Bahamas) Ltd. Contract Amount: $589,310.00 EGE IOET “Sor wIE eS We recommend that adequate documentation including accounting documents, | approval for attending training workshops, etc. be provided to show what training ui vas done and who was trained for the money paid to SABL (Bahamas) Ltd. In the absence of this, we recommend that the funds expended be recovered without delay. mt W If funds expended on the Bachelor’s Degree was not properly authorized, we recommend that the loan funding be reimbursed without delay.