Nu 54M lost to fraud, corruption and embezzlement: RAA

Absence of proper mechanism to ensure integrity of the officials identified as a contributing factor 

Audit: The Royal Audit Authority (RAA) has reflected unresolved irregularities amounting to Nu 523.7 million (M) last year, a decrease by 17 percent compared with 2014.

Despite rigorous follow up actions by the RAA, almost Nu 54M was lost to fraud, corruption and embezzlement, last year, the authority has found.

While the draft audit report has significant issues involving more than Nu 1.68 billion (B), irregularities amounting to Nu 1.15B representing 68 percent were either resolved fully or substantially based on the action taken and responses received from the agencies.

The dzongkhags reported the highest amount of irregularities of Nu 136.6M followed by the Ministry of Information and Communications (MoIC) with Nu 119M and autonomous bodies with Nu 70.9M.

Under the non-budgetary agencies, the Food Corporation of Bhutan Ltd (FCBL) has the largest amount of reported irregularities at Nu 27M followed by the Dungsam Cement Corporation Ltd (DCCL) with Nu 22M.

Category wise, the highest amount of irregularities of more than Nu 231M is reported as shortfalls, lapses and deficiencies. Violation of rules and law booked more than Nu 154M and Nu 83.9M was attributed to mismanagement.

An amount of Nu 53.96M is reported lost to fraud, corruption and embezzlement.

The RAA however recovered Nu 105M last year, which is a decrease of 9 percent compared to 2014. The audit recoveries made, according to the annual audit report, was mainly due to rigorous follow up done by the RAA at various stages.

Of the Nu 53.96M reported as fraud, corruption and embezzlement, 61 percent of the irregularities pertained to corporations mostly accounting fraudulent practice in procurement.

For instance, the DCCL had irregularities amounting to Nu 22.6M pertaining to company funds embezzled by the head of finance and the late assistant finance officer through withdrawal of self cheques.

In another instance, the FCBL had irregularities amounting Nu 9M on account of misappropriation of cash and shortage of stock items.

FCBL’s Samdrupjongkhar branch had shortages of cash, stocks and unconfirmed sales. The RAA noted that the shortages were primarily due to non-deposit of collections from daily sales and misuse of various food items amounting to Nu 3.6M. The  Phuentsholing FCBL also had shortages of 30MT of Mansuri rice worth Nu 0.53M. Misappropriation and shortage of cash and stock worth Nu 7.2M was also found from the Nganglam depot.

The office assistant acting as accounts assistant of the Jigme Dorji Wangchuck National Referral Hospital, Thimphu had embezzled government revenue of Nu 5.6M by misrepresenting the collections as deposits in the revenue accounting system.

The Election Commission of Bhutan (ECB) also had a case of embezzlement of Nu 5.23M incurred as postal charges for ordinary letters from 2010-2015. It was noted that the payments were made fraudulently.

MoIC had irregularities of Nu 4.5M as fictitious payments were made. The accountant of the ministry also misused Nu 2.33M from various disbursements made without supporting documents, appropriate approvals, indiscriminate booking of expenditures.

The financial coordinator of the SAARC Development Fund (SDF) Project, under the MoIC had also misused Nu 1.30M through fictitious payments, irregular withdrawals, non-remittances and irregular adjustments of cash. The case was forwarded to the Anti-Corruption Commission.

The Dagana dzongkhag administration had made excess payment of Nu 3.26M to the contractor involved in construction of a multipurpose hall at Gesarling middle secondary school due to acceptance of inflated rates in the final bill and non-deduction of openings for the construction. The case was forwarded to the Anti-Corruption Commission.

Home ministry also lost Nu 1.7M to fraud, corruption and embezzlement.

The deputy chief accounts officer of the Department of Culture had misused a sum of Nu 1M out of the budget of Nu 30M sanctioned for the construction of the Hindu Temple at Thimphu. The amount was recovered and the case is sub judice.

The Natural Resources Development Corporation Ltd, Zhemgang had irregularities amounting to more than Nu 1M on account of misappropriation of sales revenue by unit managers.

Sangbay gewog administration in Haa reflected irregularities amounting to Nu 0.38M on account of fabrication of bills and fictitious payments. The principal of Nebji Lobdra under the gewog administration had raised fabricated bills worth Nu 0.190 million for gold plating of statues without actually executing the work. The case was forwarded to the Anti- Corruption Commission.

In another case the gewog administration had made payment of Nu 0.197M for the purchase of post-harvest equipment without actually receiving the equipment.

Likewise, the Bhutan Postal Corporation Ltd, Trashigang, had a case of misuse of cash amounting to Nu 0.72M. The amount was misused by the then postmaster. Bhutan Post, terminated the postmaster without benefits and forwarded the case to the Royal Court of Justice, Trashigang.

The gewog administration of Naja Gewog under Paro dzongkhag had irregularities amounting to Nu 0.059M on account of misuse of rural taxes by then gewog administrative officer. The case was also forwarded to the Anti-Corruption Commission.

RAA in its report stated that the main causes for irregularities reflected as fraud, corruption and embezzlement is because of lack of prudence and due diligence, poor supervision, monitoring and internal control and lack of probity.

As such, the principles of financial management as stipulated in the Financial Management Manual of the Financial Rules and Regulations 2001, amongst others, requires public officials entrusted with responsibilities of managing public resources to exercise prudence in the same manner that a person of ordinary prudence would exercise when undertaking their own personal financial affairs.

For any loss of government money or property, the official in custody of the money or property shall be responsible if reasonable steps or actions were not taken to prevent the loss.

“Most of the cases reported under fraud, corruption and embezzlement were apparently fueled by failure to uphold the basic principles of financial management by officials entrusted with the responsibilities of managing public resources,” the report stated.

The report also stated that fraud, corruption and embezzlement cases were rampant in some of the organisations which apparently stem from lack of supervisory control from the top and middle level management, lack of segregation of duties, and in some instances due to collusive practices involving even the supervisors.

The laxity on the part of management to implement an effective internal control system, as per the report, has apparently paved the way for collusions, misuse and misappropriation of funds, manipulations and unlawful payments at the cost of the government.

The absence of a proper mechanism to ensure integrity of the officials during recruitment and transfers of incumbents indulged in fraudulent and unethical practices to other agencies are also some of the major contributing factors.

Tshering Dorji

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