Two years after 2011 commissioning…Audit finds $69M NIS Corriverton branch worth $38M

May 07, 2016 News

---

-Tender Board bypassed when contract awarded
It was commissioned at a staggering cost of $69M in 2011. But two years later, a 2013 report valued the newly finished branch of the National Insurance Scheme (NIS) at Corriverton, Berbice property at $38M–a shocking $31M less.

The construction of that branch was one of several instances that highlighted how things were handled under the previous NIS Board of Directors, the entity that is charged with administering social insurance for thousands of Guyanese.
A forensic audit report released this week by the Ministry of Finance on NIS, covering the period December 2011 to May 31, 2015, red-flagged several instances of direct interference by the Office of the President, into the affairs of the entity.
Many times, it seems, the decisions by Cabinet were handed down and the board accepted them without question.
Chairing the NIS Board of Directors for years until his party, the PPP/C, lost the early general elections in May last year, was Dr. Roger Luncheon. That official was also the Cabinet Secretary.
The Corriverton branch had made the news in a very bad way for the previous administration after documents relating to the construction revealed what appeared to be high costs for the building.
It was an embarrassment for NIS which is also facing tough financial times as it expenses are outstripping income.
According to the report, prepared by auditor HLB R. Seebarran & Co., the branch was reconstructed in 2010/2011 and commissioned in 2011 at a whopping cost of $69.9M.
The report said that NIS Board appointed a sub-committee called the Tender Evaluation Committee headed by a Director and including three independent parties- among them Samuel Goolsarran from the Consultative Association of Guyanese Industries.
A Consulting Engineer who was appointed provided an estimate of $50.6M to construct the building.
Tender Board bypassed

Auditors found that an advertisement was then published in the press in April 2010.  It is here that things got strange. The NIS board decided to take it upon itself not to have the contract handled by the National Board for Procurement and Tender Administration.
Rather, the bids were handled by the Tender Evaluation Committee. The reasons given were because of delays in the procurement at the National Tender Board.
However, only two bids came in – Fyffe Building & Contracting Works $52.5M -3.7% above estimate and one from G. Bovell Construction Service for $112.8M or 222.6% above the estimate.
The report said that Fyffe Building & Contracting Works was awarded the contract. The project was overseen by the Consulting Engineer and Building Maintenance Officer of NIS who played an integral part throughout the construction.
This was evident by the many reports he had submitted.
At a sub-committee meeting held on November 22, 2010, the Chairman of the Board, Dr. Luncheon, was informed that a variation of $8.1M was required for electrical works and a generator which took the total cost to $60.6M.
According to the report, there were several issues during the construction as the contractor had difficulties meeting the deadline.
At a sub-committee meeting held on March 18, 2011, the Assistant General Manager informed the Board that a financial arrangement was worked out to have the scheme procure various items on behalf of the contractor.
Things did not improve and on May 20, 2011, the Chairman took several decisions including terminating the contractor’s services.
However, it appeared that the NIS Board then made an about turn, reversing that termination 10 days later.
It was explained that the Office of the President decided to keep the contractor as the project was in a desperate situation and was at its final stage.
It was also decided that an additional expenditure of $10M would be incurred and that the procurement of goods will be done by NIS.
The project was commissioned in 2011.
Valuation?
According to the forensic audit report, in 2013, a valuation of the property pegged the value of the Corriverton property at $37.9M compared to the cost of $69.9M, an impairment of $32M.
According to the forensic audit report, there was evidence that suggest unhappiness by the Board over the valuation of the Corriverton branch.
As a matter of fact, records included that NIS Finance Controller stopped External Auditors from working on the 2012 Audited Financial Statements.
However, the Board was later assured that the value of the property was accurate.
The Board then decided to leave the embarrassing valuation report from audited financial statements for 2012 and 2013.
The forensic auditor made it clear, in his conclusions, that the construction of this office was fraught with problems from the beginning.
“It appears that the engineer’s estimate did not include major cost components like the generator and additional electrical works to facilitate the generator. In addition, it seems that the construction was poorly supervised and had to be extended way beyond the estimated deadline to allow for the finish of construction.”
The auditor also highlighted the Board’s questionable decision to terminate the contractor’s services but subsequently changed their minds because of interference by the Office of the President.

---

---