The auditor general's report into the Ministry of Tourism's Bahamas Travel Health Visa program reveals that government officials violated the law and ignored certain best practices, and private service providers commenced their services with only verbal contracts in place.
In the case of Kanoo, which executed payments to all vendors monthly, based on instructions received from the Ministry of Tourism, there was never any contract officially executed, according to the report tabled in the House of Assembly yesterday.
Auditor General Terrance Bastian concluded that contracts for the travel health visa initiative were not executed in accordance with the Financial Regulations 1975, Section 21(58) which states, “All awards of contracts for suppliers, works and services required by the government in excess of two hundred and fifty thousand dollars shall be made by Cabinet.”
No competitive bidding was pursued, and “the said services commenced initially with only a verbal agreement”. The report added, “The signed contractural agreements were executed several weeks/months later.”
Management at the Ministry of Tourism acknowledged the lack of competitive bidding and the failure to execute contracts prior to the launch of the visa, “however, management strongly believed that there was simply insufficient time to development a request for proposal (RFP), receive bids and negotiate contracts in the designated timeframe”.
The auditor general also observed, “Initial documentation (contracts) received for audit inspection were in some cases not completely executed; but management subsequently did submit fully executed contracts. No document (contract) was officially executed with Kanoo.”
The auditor general stated that the opening of a bank account with Kanoo at the Bank of The Bahamas (BOB) is in violation of the Financial Administration and Audit Act, 2010, Section 24, which states, “No person shall open an account with respect to public moneys with any bank without the written approval of the minister (of finance) and no bank shall permit an overdraft on any such account unless such overdraft has been authorized in writing by the minister.”
The auditor general was informed that five days before the country was scheduled to reopen in November 2020, the health travel visa program lacked a payment gateway. Kanoo was brought in to provide this service.
Kanoo partnered with BOB credit card facility. The Ministry of Tourism opened a bank account with BOB.
The health travel visa online platform was implemented in November 2020.
The Ministry of Tourism engaged CG Atlantic Insurance to provide travel insurance for visitors.
It engaged Ports International to provide rapid antigen tests for day five testing.
It engaged Alpha Tango to manage the 120-plus approved testing labs and the day five tests.
It engaged CaribPay (Bahamas) Ltd. (Kanoo) to execute payments to all vendors monthly.
And BOB facilitated credit card payments.
The auditor general found that the Department of Transformation and Digitization (DTaD) was initially engaged and started the software development process in July 2020, but, due to logistical considerations (especially DTaD’s shortage of programmers available at the time), and the pressure placed on the Ministry of Tourism to get the platform up and running, the ministry engaged Think Simple to complete the engagement.
“We were informed that Think Simple and Alpha Tango Media were introduced by the former minister of tourism and aviation,” the auditor general’s report stated.
“We were further informed that the private service providers were able to do everything needed. There were no written contracts, only verbal contracts.
“…We iterate that there were no documented agreement[s] in place for the services to be provided on the behalf of the government of The Bahamas. Negotiations of contracts did not begin until February/March 2021. We were informed that it was at this time that recommendations were made to the lawyer, in-house legal counsel.”
The auditor general also said management of the Ministry of Tourism admitted that at least one contract they signed with vendors was not subjected to the tendering/bidding process.
“Accordingly, we obtained documentary evidence from management stating that the contract with the insurance provided by CG Atlantic did not go through the bidding process by complying with the Financial Regulations,” the auditor general said.
“No competitive bidding was pursued, and the said services commenced with only a verbal agreement. Management said their decisions were based in the interest of time limitations.”
However, the auditor general recommended that material commitments such as this one should still go through the procurement process and be approved by the Cabinet.
The auditor general noted that COVID-19 necessitated some realities that are not reflected in the financial regulations.
“The Ministry of Tourism failed to comply with the regulator requirements for the procurement of goods and services,” the auditor general stated.
“Seeking competitive bids is a mechanism intended to provide some assurances as to the reasonableness of costs of goods and services.
“Considering the cost of the travel insurance to CG Atlantic of $16,782,875 (net of value-added tax), representing 48.7 percent of total revenue, it would have been prudent to test the marketplace by seeking at least one other quote despite the pressing time limitations.”
Revenues and
expenditures
Based on the income statement data provided by the Ministry of Tourism, 906,171 users applied for the travel health visa — 704,868 visitors and 201,303 residents.
The ministry reported gross revenues of $34,442,104 (net of value-added tax), and total expenses of $23,657,900, and net amounts of $10,784,204 transferred to the Consolidated Fund for the 10-month period of November 2020 to August 2021.
“Management acknowledges that net revenues were not transferred to the Consolidated Fund on a timely basis,” the auditor general stated.
“Reconciliations and transfers of funds to the Consolidated Fund were not done on a timely basis. In the absence of performing reconciliation functions in a timely manner, errors, fraud, and/or irregularities could possibly go undetected.”
The auditor general said, “The minister of tourism and other Ministry of Tourism officials sent communication including (authorizing) Kanoo to make monthly payments to the vendors from the ministry’s account with Kanoo at Bank of The Bahamas, an activity that is inconsistent (contrary) with established practice of paying government’s vendors.
“We believe payments made to the government’s Bahamas Travel Health Visa vendors should be executed by the Public Treasury, which has an established system in place to deal with government revenue and expenditure.”
The auditor general’s report also contains a breakdown of total payments made to the entities engaged from November 2020 to August 2021.
Bank of The Bahamas: $1,537,053.80 (6.2 percent of total costs/expenses).
Kanoo: $456,992.83 (1.8 percent of total costs/expenses).
CG Atlantic Insurance: $16,782,875 (67.5 percent of total costs/expenses).
Ports International: $2,872,087.25 (11.6 percent of total costs/expenses).
Testing labs $1,734,292.86 (7 percent of total costs/expenses).
Think Simple: $851,683.50 (3.4 percent of total costs/expenses).
Alpha Tango: $524,979.71 (2.1 percent of total costs/expenses).
Miscellaneous: $97,781.93 (0.4 percent of total costs/expenses).
The auditor general said that the accounting records are producing some differences/discrepancies of up to $62,471 in understatement of revenues which the Ministry of Tourism’s management deems as immaterial, “but the reciprocal of this essentially can represent up to 2,000 visitors which may indicate a need to examine the cause of this and improve operational service”.
The auditor general found that Port International was overpaid $43,947.68 for COVID tests and recommended that this over expenditure be recovered and deposited to the Consolidated Fund Account as revenue.
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