Indications of misappropriation and embezzlement found in the accounts of both Dungsam Cement and Pemagatshel dzongkhag

ACC/RAA: Finding indication of possible misappropriation and embezzlement amounting to the tune of Nu 13M (million) at the Dungsam Cement corporation limited (DCCL), the Royal Audit Authority (RAA) will continue to audit the country’s largest cement plant.

This follows two letters from the Anti Corruption Commission to carry out an audit of both Dungsam Cement project and the dzongkhag administration in Pemagatshel.  The letter was sent after RAA shared the preliminary audit observations with the ACC, indicating possible elements of misappropriation and embezzlement.

“Since it’s a straightforward embezzlement case, we asked the RAA to continue auditing process,” an ACC official said. “Given a shortage of human resource, the ACC is not in a position to carry out another investigation.”

ACC officials also said that, once audit findings were finalised, they would sit together and review it.

A special audit team, sent by DHI earlier this year, visited DCCL last week to verify the initial audit observations, and reportedly found that the total misappropriation amount increased from Nu 13M to more than Nu 21M during the audit exit meeting.

In its preliminary audit observations, RAA reportedly pointed out the existence of such unhealthy practices by the finance and accounts department of DCCL “indicating existence of very weak internal control system and monitoring mechanism.”

The DCCL management reported to its parent company, DHI, in January this year, after the management on January 5 registered a compliant against the head of finance and accounts department with Nganglam police on the embezzlement of Nu 8.1M since 2012.

Police detained the suspect on January 15 and released him on bail on February 2.  DHI then sent an audit team to DCCL.  DCCL officials were not available for comments.

Meanwhile, RAA is also reportedly verifying its preliminary audit observations in Pemagatshel, in connection with the construction of access road to Denchi township, retaining wall and black toppings amounting to more than Nu 118M.

Sources said RAA was conducting an audit to establish and ascertain whether three additional works awarded to U Wangchuk Construction were one contract package or separate packages, as it was not specified in the initial contract agreement.

The dzongkhag level tender committee (DLTC) awarded the contract work for the development of access road for Denchi township and widening of existing road measuring 1.2 kilometres worth of Nu 24.25M in September 2011.

In June 2013, the committee awarded the first additional contract work, the construction of a retaining wall along the existing road amounting to Nu 39.74M, to the same contractor.

By then U Wangchuk’s contract license was already revoked by the Mongar district court in April 2013 for fraudulent and deceptive practice, bribery and compromising quality of construction of the basic health unit (BHU) in Narang, which collapsed during the 2009 earthquake.

The dzongkhag administration also reportedly released Nu 33.69M in March 2014 for the retaining wall and other construction work and another Nu 21.07M for black topping the access road in July.

The RAA found that the additional work worth of Nu 95M was not in line with standard bidding documents.  Kuensel learnt that DLTC had violated standard bidding documents clause 38.1 and the contract management was poor.

The clause states that, if the final quantity of the work done differs from the quantity in the bill of quantities for the particular item by more than 20 percent, provided the cost of variation beyond 20 percent limit exceeds one percent of the initial contract value, the employer shall adjust the quoted rate up or down to allow for the change.  Only when both conditions are met then the quoted rates shall be changed.

Pemagatshel dzongdag said that he was not in a position to comment over the telephone.

Auditors also refused to comment, saying that they are still compiling audit observations.

ACC officials said that the dzongkhag authorities could have stopped awarding additional work to the contractor after the firm’s contract license was revoked in 2013.  They also said that government agencies and authorities were not following due diligence.

Rinzin Wangchuk