Millions of dollars of public money were spent over many years in the government's housing program without any evidence of due process relating to how contracts were awarded, according to an independent audit of the former Ministry of Housing and National Insurance, obtained exclusively by The Nassau Guardian.
The lax control environment in the ministry constituted a risk of patronage, collusion between ministry staff and contractors, abuse of funds and fraud, according to the Value for Money audit conducted by Crown Agents.
The audit, contracted by the Office of the Auditor General not long after the Free National Movement took office in 2007, was completed in June of 2008. A VFM audit focuses on efficiency, effectiveness and economy of use of public resources. It was conducted by interviews, observations, and examinations of documents. The emphasis was on systems controls and risks in the use of funds.
It followed a police investigation into corruption allegations at the ministry in 2007, and highlights serious concerns about a range of issues related to the housing program, from financial and general management to contracting and human resources.
The report raises serious concerns about the general and financial management of the housing program, among them are issues related to contracting, for both infrastructure and house building, and an apparent lack of transparency surrounding it.
The report points to a lack of proper procurement within the housing program, limited contractual documentation and its impact on quality, and insufficient funding to achieve the required level of quality set out in the Housing Act.
"Despite trying to track down files at the Department of Housing and the ministry, these were not forthcoming," said the report. "Contract payment files are kept but no files or other documentation indicating how the contract awards were arrived at, were available."
Crown Agents said that at first they thought that the files may have been mislaid or removed, but it became apparent that the lack of documentation was more likely because the selection and award process was so lacking in proper process and transparency that, in effect, there was no procurement activity to record.
There was also a prevailing assumption that the contracting, at least for the infrastructure and house building contracts, had been exempted from the normal government tender board rules.
APPOINTMENT OF CONTRACTORS
According to the report, there was no formal criteria for the selection of contracts, and Crown Agents were unable to determine how contractors were appointed, "with Department (of Housing) staff indicating that they would be instructed by the ministry on which company to contract".
The report indicates that in theory a minimum quality standard applied when it came to house building -- license fee, qualifications and references -- but the system was not working in practice and the department was not operating a formal feedback once houses were completed to ensure future awards were based on some measure of merit.
As an example, Crown Agents pointed to a project in Pride Estates/Fire Trail Gardens, which had been flagged as distressed property by the then acting chief housing officer in May 2008.
A $79,860 contract was awarded in February 2006. The project was riddled with problems; however, inspection reports did not indicate concern but noted that approval had been given for an extra course of foundation blocks ($900), and "spring water in the foundation trench on high tide".
Not all the inspection reports were satisfactorily completed either. Foundation and plumbing check-boxes were not all marked, the belt beam inspection report was incomplete and did not show the date or the Ministry of Public Works inspector's name; and the roof inspection report was incomplete, suggesting the roof was unfinished.
Still, payments continued to the contractor, including an advance against stage five for payment directly to suppliers of building materials. The contract was eventually terminated almost a year after it had started. By that time the contractor had been paid $61,672 or 77 percent of the contract, said the report.
During the audit it was discovered that the contractor had never been on the approved list, Department of Housing technical workers did not want to use the contractor's services because of technical capacity, and there were quality problems as well as delays, despite inspection certificates being signed off for four stages. Another contractor had to be hired to complete the work.
The property remained unoccupied and uninhabitable at the time of the Crown Agents site visit in June 2008.
As it related to the procurement of infrastructure contracts, Crown Agents noted the data within the Department of Housing was limited but said that according to the information available to them, a limited range of contractors had been used, "whereas the Contractors Association estimated there were many more contractors that could have been considered if a more competitive environment was sought".
Similar contractor names were awarded various contracts but there was no certainty that they were the same contractor. In one case two companies with very similar names were awarded a total of 30 utility contracts, according to the report. The process for the procurement of additional requirements for housing development, i.e. fencing, landscaping was described by Crown Agents as "ad hoc".
And the quality of the houses constructed under the housing program was compromised due to the unrealistic cost of $60 per square ft., resulting in corner cutting and use of inferior material. Crown Agents said that at the time a cost a $80 per square ft. would have been more "realistic".
"There is a lack of transparency in the contractor selection process, therefore leaving it open to risks of patronage and collusion," said the report.
"Similarly, house-building contract awards, whilst not let on a competitive basis, lack transparency in the selection of builders, giving risks to patronage and/or collusion, as well as quality."
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