Notwithstanding the revenue generated, trade fairs are an expenditure-intensive affair for the Bhutan Chamber and Commerce and Industry (BCCI).
Although, almost 45 percent of the BCCI’s revenue comes from the rental income of events and trade fairs, the Royal Audit Authority (RAA) spotted negligence in exercising due diligence. This was pointed out in the RAA’s recent performance audit report.
BCCI had conducted 25 trade fairs from 2013 to 2017 and invited international participants through consultants. The RAA’s findings revealed that BCCI generated a revenue of Nu 1.34 million in five years from trade fairs, by renting out of exhibition space and organising events.
However, the RAA’s review of rental income vis-à-vis list of participants revealed that, some of the participants did not pay rent to the tune of Nu 1.9M, which was recognised as receivable in the accounting records of the BCCI.
A Program Implementation Paper (PIP) was signed between BCCI and local consultants. The PIP agreement makes consultants responsible for settling payments incase of any problem with collection from the participants. The agreement also states that 50 percent of the total fees shall be paid to BCCI on submission of the list and the remaining 50 percent was payable five days before the fair starts.
The RAA found that PIP agreements were not implemented. BCCI accepted the international participant Alpha Associates without even receiving the 50 percent advance. The PIP did not include penalty clauses for late payment. The management had not considered the terms of PIP seriously in terms of their legal strength and future implications.
It was also noted that work was repeatedly awarded to Alpha Associates despite failure to pay stall fees. The consultant could not pay Nu 620,840 since 2013 but its services were again availed in 2017.
Revenue of Nu 116M was generated in five years (2013-2015) from other events and trade fair. Until 2015, construction of stalls for the events was awarded to Norling Events, as it was the only professional event management company that could deliver such services.
The RAA found that, during the 2nd International Agri-flori Expo in 2015, Norling Events could not complete construction of 80 of the 260 stalls. By the mid of 2015, Druk Events also came into business and the remaining construction works were completed by Druk Events.
The audit findings stated that a letter exchange between Druk Events and BCCI transpired. The letter proposed that Druk Events would take up all the events and fairs in 2016 in exchange for Nu 468,300 receivable by Druk Events for 2nd International Agri-Flori Expo conducted in 2015 from BCCI. In response, the event committee under the chairmanship of the Secretary General decided to award the works to Druk Events without following due processes.
All works for 2016 and 2017 were awarded to Druk Events without tendering.
Further, instead of negotiating on reduction of rates, BCCI had paid increased rates for stalls constructed for 13th SAARC trade fair from Nu 8,000 to Nu 10,000 per stall.
The RAA also found that the BCCI’s focal person of the events imposed 10 percent penalties for delay in construction of Bhutan Education Fair stalls amounting to Nu 730,160, on April 9 2017. However, BCCI management reduced the penalty to 5 percent.
BCCI, the audit report stated, had also availed catering services during the trade fairs, which were directly awarded to some hotels and restaurants. It was observed that food and lodging worth Nu 2.449 million were procured without following proper tendering process. In all the instances the value of the contract was more than Nu 200,000.
On verification of the payment vouchers, the RAA found that bill rates were relatively higher and that there were no records of negotiations undertaken.
For instance, during the tendrel ceremony of the President and two Vice-Presidents, lunch was directly catered from Sampheling Catering Unit for 550 people at Nu 1,000 per head. BCCI had to pay Nu 550,000 for lunch and Nu 110,000 for Service Charge and tax.