Development Fund for Iraq and Successor Account
Memorandum of Matters Arising During the Audit (Prior Year Findings and Follow-Up) Visited Ministries Report 31 December 2015
Table of contents
Page Number Symbols Legend A Summary of Findings B Observation Ministry of Telecommunication 1 Ministry of Agriculture 13 Ministry of Youth and Sport 21 Ministry of Foreign Affairs 28 Ministry of Education 36 Ministry of Industry and Minerals 40 Endowments of the Christian and Other Religions Divan 45 Ministry of Construction and Housing 49 Ministry of Municipalities and Public Works 58 Endowment of Shiite 64 The Independent High Election Commission 68 Ministry of Higher Education 73 Ministry of Labor and Social Work 86 Ministry of Health 91 Ministry of Culture 100 Ministry of Transportation 111 Ministry of Interior 129 Ministry of Environment 131 Ministry of Oil 135 Ministry of Defense 145 Ministry of Electricity 150 Ministry of Justice 161 Ministry of Migration and Displacement 170 Ministry of Trade 177 Ministry of Water resources 184 Mayoralty of Baghdad 196 Sunni Endowment 208
Symbols Legend
The report includes the following finding rankings: 229 Symbol Descriptions ديوان الوقف السين
Finding relates to critical weakness issues which impacts the achievement High Risk of main objectives, financial results or professional reputation. We recommend that immediate corrective actions should be taken. Finding relates to Moderate risk issues which may result in weakened internal control system and/or operational activities efficiency. Such Moderate Risk issues must be disclosed. We recommend that corrective actions should be taken in the short run. Finding relates to identified issues during our review which may not affect the internal control system and/or operational activities efficiency. Low Risk However, such Observation deserve attention by management. We recommend that corrective actions should be taken within a reasonable timeline.
-A-
Summary of Findings
No. Entity Finding Risk degree Ministry of Telecommunication - Approval of financial records and closing 2 Ministry Headquarter statements Moderate Risk Ministry of Telecommunication - Approval of financial records and closing Iraqi Telecommunication and Post 4 statements Moderate Risk Company Ministry of Telecommunication - 5 Iraqi Telecommunication and Post Letters of credit High Risk Company Ministry of Telecommunication - 6 Iraqi Telecommunication and Post Lagging in implementation High Risk Company Ministry of Telecommunication - 9 State Company for Internet Breach of contract terms Moderate Risk Services Ministry of Telecommunication - 10 State Company for Internet Additional periods High Risk Services Ministry of Telecommunication - 11 State Company for Internet Inaccurate projects feasibility studies High Risk Services Ministry of Agriculture - Ministry Approval of financial records and closing 14 Headquarter statements Moderate Risk Ministry of Agriculture - Ministry Weak internal control and audit tasks 15 Headquarter Moderate Risk Ministry of Agriculture - Ministry Lagging in construction 16 Headquarter High Risk Ministry of Agriculture - Ministry Exchange documents numbered manually 18 Headquarter High Risk Ministry of Agriculture - State Letters of credit 20 Company for Agricultural Supplies High Risk 22 Ministry of Youth and Sports Financial Statements High Risk 23 Ministry of Youth and Sports Suspended advances from previous years High Risk 24 Ministry of Youth and Sports Low ratios of strategic projects completion High Risk 26 Ministry of Youth and Sports Breach of contract terms High Risk 27 Ministry of Youth and Sports Delay in completion and work obstructions High Risk 29 Ministry of Foreign Affairs Overseas contracts High Risk 30 Ministry of Foreign Affairs Contracts and supporting data High Risk Duties and responsibilities of internal control Ministry of Foreign Affairs 31 and audit section Moderate Risk Government contracts section duties and Ministry of Foreign Affairs 32 responsibilities High Risk 33 Ministry of Foreign Affairs Closing accounts – Overseas missions High Risk Construction contract for the club of the Ministry of Foreign Affairs 34 Ministry of Foreign Affairs Low Risk 35 Ministry of Foreign Affairs Absence of approved organizational structure Moderate Risk 37 Ministry of Education Low projects completion rates High Risk
-B-
Summary of Findings
38 Ministry of Education Establishing printing press Moderate Risk 39 Ministry of Education Postpaid contracts High Risk Ministry of Finance loan for development of Ministry of Industry and Minerals 41 industrial companies High Risk Contracts of preparation, update and 42 Ministry of Industry and Minerals assessment of work plans of the state High Risk companies affiliate to the Ministry 43 Ministry of Industry and Minerals Low completions percentages High Risk Tasks and duties of Governmental Contracts Ministry of Industry and Minerals 44 Department High Risk Endowments of the Christian Low completion rates 46 Religion and Other Religions Moderate Risk Endowments of the Christian Absence of standard centralized reports 47 Religion and Other Religions Moderate Risk Endowments of the Christian Unpaid due expenses 48 Religion and Other Religions Low Risk Residential complex construction contract in Ministry of Construction and Karbala – Al Jazeera 1/Department of 50 Housing High Risk Housing Ministry of Construction and Obstacles and conflicts 51 Housing High Risk Ministry of Construction and Delay in project completion 52 Housing High Risk Ministry of Construction and Efficiency of contracted company 53 Housing High Risk Ministry of Construction and Additional extension periods for the 55 Housing companies High Risk Ministry of Construction and Percentage of technical completion 57 Housing Moderate Risk Ministry of Municipalities and Obstacles and conflicts 59 Public Works High Risk Ministry of Municipalities and Low projects completion rates 60 Public Works High Risk Ministry of Municipalities and Additional grace periods for the companies 61 Public Works High Risk Ministry of Municipalities and Official holidays/Religious events 62 Public Works High Risk Ministry of Municipalities and Outstanding advances 63 Public Works Moderate Risk 65 Endowment of Shiite Low ratio of technical completion High Risk 66 Endowment of Shiite Delay in trust implementation works High Risk 67 Endowment of Shiite Low completions percentages Moderate Risk The Independent High Election Financial Statements 69 Commission High Risk The Independent High Election Bank Reconciliation 70 Commission High Risk The Independent High Election Records balances 71 Commission High Risk The Independent High Election Advances and Deposits 72 Commission Moderate Risk
-B-
Summary of Findings
Ministry of Higher Education & Duties and responsibilities of internal control 74 Scientific Research and audit section High Risk Ministry of Higher Education & Low projects completion rates 75 Scientific Research High Risk Ministry of Higher Education & Contract for construction of halls for basic 76 Scientific Research sciences/dentistry/Baya complex High Risk Ministry of Higher Education & Educational hospital construction contract 77 Scientific Research (600 beds) / University of Karbala High Risk Ministry of Higher Education & Establishing the Iraqi Commission for 78 Scientific Research Information and Computers project Moderate Risk Ministry of Higher Education No organizational structure or formal job 80 (Science & Technology) description Moderate Risk Ministry of Higher Education Low projects completion rates 81 (Science & Technology) High Risk Ministry of Higher Education Non-readiness of work sites 82 (Science & Technology) High Risk Ministry of Higher Education Ministry’s staffing structure 83 (Science & Technology) Moderate Risk Ministry of Higher Education Financial data 84 (Science & Technology) Moderate Risk Ministry of Higher Education Verification against Ministry of Finance 85 (Science & Technology) records Moderate Risk Labor section and vocational training building Ministry of Labor and Social Work 87 construction in Babel High Risk Supply contract for 9 welding workshops Ministry of Labor and Social Work 88 supply High Risk 89 Ministry of Labor and Social Work Beneficiaries data updating High Risk Supply contract for refrigerators, air- Ministry of Labor and Social Work 90 conditioners and water coolers High Risk Approval of financial records and closing Ministry of Health – Ministry HQ 92 statements Moderate Risk
93 Ministry of Health – Ministry HQ Coordination obstacles and weaknesses High Risk Ministry of Health State Company for Marketing Breach of contract terms and non-utilization 95 High Risk Drugs and Medical Appliances of the whole supplied quantity (Kimadia) Ministry of Health Delay in preparation State Company for Marketing 96 Drugs and Medical Appliances High Risk (Kimadia) Ministry of Health Materials which have failed inspection and State Company for Marketing 97 Drugs and Medical Appliances delay in sending materials and inspection High Risk (Kimadia) procedures Ministry of Health Inaccurate procedures for inspection and State Company for Marketing 98 Drugs and Medical Appliances verification of received materials High Risk (Kimadia) Ministry of Health Inaccurate feasibility studies for supply 99 State Company for Marketing High Risk contracts and non-verification of usage
-B-
Summary of Findings
Drugs and Medical Appliances efficiency (Kimadia) “Baghdad, the Capital of Arab Culture” Ministry of Culture 101 Project High Risk Settlement of receivable amounts by Iran's Ministry of Culture 103 Hajj and Pilgrimage Organization Moderate Risk 104 Ministry of Culture Unpaid accrued debts to Al Rasheed hotel High Risk 105 Ministry of Culture Realized deficit in self-finance departments High Risk 106 Ministry of Culture Official documents for dismissed politicians High Risk 107 Ministry of Culture Non-readiness of work sites High Risk Project for rehabilitation of Baghdad tourist Ministry of Culture 108 island – Phase 3 High Risk Opera house and cultural complex Ministry of Culture 109 construction project High Risk 110 Ministry of Culture Weak internal control and audit tasks Moderate Risk Ministry of Transportation - Lack of documents for loans, deposits and 112 Ministry HQ debtors High Risk Ministry of Transportation Supply, installation and operation of 6 115 General Establishment of Civil flyovers in Baghdad international airport / High Risk Aviation Babel terminal Ministry of Transportation Basra international airport generators supply General Establishment of Civil 117 contract High Risk Aviation Ministry of Transportation Basra international airport generators General Establishment of Civil 118 rehabilitation contract High Risk Aviation Ministry of Transportation 119 General Establishment of Civil Low completions percentages Moderate Risk Aviation Ministry of Transportation - Lack of financial completion rates reports and General Company for Iraqi 121 expenses amount on contracts basis High Risk Railways Ministry of Transportation - 122 General Company for Iraqi Direct awarding method High Risk Railways Ministry of Transportation - 123 General Company for Iraqi Lack of control over direct awarding works High Risk Railways Ministry of Transportation - 124 General Company for Iraqi Low percentage of contracts completion High Risk Railways Ministry of Transportation - 125 General Company for Iraqi Additional periods for some contracts High Risk Railways Ministry of Transportation - Iraqi Boeing aircrafts and CS300 Canadian 127 Airways aircrafts contracts High Risk Ministry of Transportation - Iraqi Low completions percentages 128 Airways High Risk
-B-
Summary of Findings
Unavailable priorities for loans and suspended Ministry of Interior 130 deposits High Risk
Lease contracts for ministry’s affiliate Ministry of Environment 132 buildings High Risk
133 Ministry of Environment Projects financed by international entities High Risk 134 Ministry of Environment Contracts files archiving High Risk Ministry of Oil - State Company Obstacles and conflicts 136 for Oil Projects High Risk Ministry of Oil - State Company Shuaiba oil depot design and materials supply 137 for Oil Projects High Risk Ministry of Oil - State Company Low completions percentages 138 for Oil Projects High Risk Ministry of Oil - Oil Pipelines Acts of vandalism 140 Company High Risk Ministry of Oil - Midland Refineries Cooling towers project (CW) 142 Company High Risk Ministry of Oil - Midland Refineries Customs clearance 143 Company High Risk Ministry of Oil - Midland Refineries Gasoline refinery complex project (CCR) 144 Company High Risk Outstanding amounts during banking Ministry of Defense 146 validation High Risk Construction of headquarters building Ministry of Defense 147 Division 10 in Al Maymouna/Kut governorate High Risk
148 Ministry of Defense Percentages of Completion High Risk Electric power delinquents/ Ministry of Ministry of Electricity 151 Electricity HQ High Risk Wasted power/ Al-Russafa distribution Ministry of Electricity 152 directorate High Risk Financial statements of the companies 153 Ministry of Electricity /General Directorate for Electricity High Risk Distribution – Karkh Site handover to contracted companies / Ministry of Electricity 154 power transmission projects directorate High Risk Ammara power plant gas– contract 155 Ministry of Electricity 66/general directorate for gas power High Risk generation projects Contract for implementation of water outlet work for Baji gas power plant project/contract Ministry of Electricity 156 2 – no. 30/General Directorate for gas power High Risk generation projects Contract for implementation of Al Nassriya 157 Ministry of Electricity power plant gas – contract 28/general High Risk directorate for gas power generation projects
158 Ministry of Electricity Letters of Credit Advances Account High Risk
159 Ministry of Electricity The organizational Structure of the Ministry Moderate Risk
-B-
Summary of Findings
160 Ministry of Electricity The Estimated Cost Moderate Risk
Ministry of Justice Building – Al-Salhiya Ministry of Justice 162 restoration contract (33) High Risk
163 Ministry of Justice Justice complex project – Al Diwaniyah High Risk
164 Ministry of Justice Direct invitations High Risk
Justice complex – Basra construction contract Ministry of Justice 165 (26) High Risk Non-matching finances between Ministry of Ministry of Justice 166 Finance and Ministry of Justice High Risk
167 Ministry of Justice Database for the Ministry Directorates Moderate Risk
Low Completion Rates of Investment Plan Ministry of Justice 168 Projects Moderate Risk 169 Ministry of Justice Contracts of the Ministry Directorates High Risk Ministry of Migration and Construction contract of a residential complex 181 Displacement in Basra High Risk Ministry of Migration and Contract for supplying machinery and 172 Displacement equipment at the Ministry headquarters High Risk Ministry of Migration and Outstanding amounts by the bank 173 Displacement High Risk Ministry of Migration and Delay in contract termination procedures 174 Displacement High Risk Ministry of Migration and Lack of project feasibility study 175 Displacement High Risk Ministry of Migration and Low Percentage Of Completion for the 176 Displacement Investment Plan Projects Moderate Risk Ministry of Trade - State Company Files aren’t saved in a safe place 178 for Foodstuff Trading High Risk Ministry of Trade - State Company 179 for Foodstuff Trading Direct Purchase Moderate Risk Ministry of Trade - Iraqi Grain Dealing with incompetent companies 181 Board High Risk Ministry of Trade - Iraqi Grain Non-verification of contracted companies 182 Board Moderate Risk Ministry of Trade - Iraqi Grain Files aren’t saved in a safe place 183 Board High Risk Ministry of Water Resources - Delay in project completion High Risk 185 Ministry HQ Ministry of Water Resources - Obstacles and conflicts High Risk 187 Ministry HQ Ministry of Water Resources - Sector 3-A network construction contract General Authority for Irrigation High Risk 189 west Gharaf in Wasit governorate (49/2008) Projects and Reclamation Ministry of Water Resources - Mahrout lands reclamation contract High Risk 190 General Authority for Irrigation (56/2010)
-B-
Summary of Findings
Projects and Reclamation Ministry of Water Resources - Supply (30) floating pump stations along with General Authority for the mechanical supplements and reserve High Risk 192 Operation of Irrigation and materials – contract (256) Drainage Projects Ministry of Water Resources - Nazem Abu Sakheir/Alnajaf contract no. 194 General Authority for Dams and High Risk Reservoirs 13/2011 implementation Ministry of Water Resources - Development of Shihabi dam for tourism in 195 General Authority for Dams and High Risk Reservoirs Wasit governorate – contract 9/of 2013 197 Mayoralty of Baghdad Exchange rates used in letters of credit High Risk Mayoralty of Baghdad Preparation, installation, operation and 198 maintenance of screw pumps for AlRostomiya High Risk project – T3 Mayoralty of Baghdad Issuance of cheques without sufficient 199 financial coverage High Risk 200 Mayoralty of Baghdad Closing dormant accounts High Risk 201 Mayoralty of Baghdad Al-Russafa grand water project High Risk Mayoralty of Baghdad Contract for the implementation of the joint 202 sanitation network / service 774-772 High Risk 203 Mayoralty of Baghdad Basic designs High Risk 204 Mayoralty of Baghdad Lack of Work Sites Readiness High Risk Mayoralty of Baghdad Contract of rehabilitation and maintenance of 205 filter sewage Karkh / Albuaaitha project High Risk 206 Mayoralty of Baghdad Advances and Deposits High Risk 207 Mayoralty of Baghdad Job description High Risk 209 Sunni Endowment Contracts and supporting data High Risk 210 Sunni Endowment Advances and Deposits Moderate Risk 211 Sunni Endowment Endowment organizational structure Moderate Risk Sunni Endowment Function and tasks of governmental contracts 212 department Moderate Risk
-B-
Ministry of Telecommunications Ministry Headquarter
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Findings
1. Approval of financial records and closing statements Moderate Risk
Observation: Based on our review of the ministry’s financial section, we noted the following:
1. The unified record of the operating budget has not approved by the Ministry of Finance since 2008 due to an amount IQD 54 billion with relevance to the salaries of the companies affiliate to the Ministry which have been disputed since 2008. This amount represents the accounting reconciliation entry no. 8817 of the petty cash section on 9 June 2009 which was supposed to be reflected in the closing accounts of the Ministry for the year 2008; however, documents were lost due to the explosion of the Ministry of Finance in 2009. This prevented the recording of the accounting reconciliation entry in the records of the Ministry of Finance which resulted in records mismatch of both entities. 2. The Ministry’s organizational structure is not approved by the Ministry of Planning. 3. Closing statements of the operating budget have not been approved by the Federal Bureau of Supreme Audit for the year 2014. 4. Ministry’s staffing structure has not been approved by the Ministry of Finance.
Recommendation:
- We recommend that the Ministry should follow up with the Ministry of Finance to resolve the dispute on the unification record and approve it. - We recommend that the Ministry should follow up with the Ministry of Planning for approval of the organizational structure. - We recommend that the Ministry should follow up with the Federal Bureau of Supreme Audit for the approval of the closing statements of the operating budget. - We recommend that the Ministry should follow up with the Ministry of Finance for the approval of the Ministry’s staff as per the federal budget implementation instructions for the year 2013 (section 3-1-IV) and the staff law no. 25 for the year 1960 (article 8).
Management Response:
Follow-up We noted that this point still valid during 2015
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Ministry of Telecommunications Iraqi Telecommunications and Post Company
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Findings
1. Approval of financial records and closing statements Moderate Risk
Observation: During our review, we have noted the following: 1. Company’s closing accounts for the year 2014 were not prepared and sent to the Federal Bureau of Supreme Audit for audit and approval for the audit period ending in August 2015. 2. Unification record of the investment budget for the year 2014 was not approved by the Ministry of Finance for the audit period ending in August 2015. 3. No supporting finance letter (comfort letter) for investment projects was sent by the Ministry of Finance for the audit period ending in August 2015.
Recommendation:
- We recommend that the company shall adhere to the federal budget implementation instructions for the year 2013 (section 1-V). - We recommend that the company should follow up with the Ministry of Finance for approval of unification record. - We recommend that the company should follow up with the Ministry of Finance for issuance of supporting finance letter by the Ministry of Finance as per the case in 31 December 2014 for verification between the recorded data in the Iraqi Telecommunications and Post Company records and the data recorded in Ministry of Finance records.
Management Response:
Follow-up We noted that this point still valid during 2015
4 |
Findings
2. Letters of credit High Risk
Observation: During our review, we noted that some letters of credit opened in the Trade Bank of Iraq have expired despite having residual balances with relevance to a number of in progress and completed contracts as indicated in the letters of credit monitoring list which was sent by the Trade Bank of Iraq to the Iraqi Telecommunications and Post Company ref. (LCs/15310) dated 10 March 2015 including details of letters of credit until 10 March 2015. For example: LC Issue Date Beneficiary LC Amount Residual LC Implementation Balance Date 17 November Huawei $36.500.000 $4.968.637 17 March 2015 2013 Technology 6 April 2014 Alcatel-Lucent $21.304.678 $9.326.828 30 January 2015 12 August Prin-tech $970.000 $29.100 12 July 2014 2013
Recommendations: We recommend that the Iraqi Telecommunication and Post Company should do the following: - Extend the validity of expired letters of credit for in progress contracts to guarantee the rights of the company for the remaining works. - Close letters of credit for completed works and transfer the remaining amounts in the letters of credit balances to the company treasury for utilization in other company needs.
Management Response:
Follow-up We noted that this point still valid during 2015
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Findings
3. Lagging in implementation High Risk
Observation: During our review, we noted that some companies are lagging in completing assigned projects in line with the projects progress schedule although the Ministry has sent them warning letters to urge such companies to expedite projects completion; however, this has not been adhered to. Accordingly, delay in projects completion leads to delayed development. Furthermore, such lagging results in deferring other State development projects.
The below table includes the details of delayed contracts and percentage of completion until the end of audit period in August 2015:
Date of Planned Impleme Completion Contract Company Contract value Commencement Completion ntation % of works Date Period Supply, installation and Al Ezz IQD 15 13 April 65% 270 operating space General 4.808.517.538 December 2015 days telecommunication Company 2013 systems Construct Diyala Bridge Al Habwa IQD 663.020.000 20 June 20 90% 240 telecommunication and Company 2011 February days post complex 2012 Reconstruction project Nab’ae Al IQD 11 20 May 18% 780 of Baiyaa Salam 14.904.778.500 November 2015 days telecommunication and General 2012 post building Contracting Limited Company Supply and installation General IQD 12 11 15% 90 project of different Company 3.566.564.647 September December days capacity generators for 2013 2014 Inspection and Engineering Rehabilitati on Reconstruction project Al IQD 16 May 9 38% 30 of Bab Al-Moatham Mohandes 9.350.489.500 2011 Septembe month telecommunication and Limited r 2015 s post complex Company for Constructio n Contracting Expansion and Technical IQD 11October 11 14% 6 development project of Partners 14.772.024.000 2012 November month national data Limited 2013 s communication network Company for Contracting and
6 |
Findings
Telecommu nications Kadhimiya satellite Technical $ 3.495.600 6 June 6 June 35% 12 ground station Partners 2007 2008 month Company s for Telecommu nications Technology Supply, installation of ZTE $ 1.388.000 11February 17August 45% 5 transmission stations Corporation 2013 2013 month and receipt of BTS and s reserve materials for 3G system Technical support for Atom $ 2.322.270 17 17 70% 120 microwave project Engineering December December days (Japanese grant) for Limited 2013 2015 north and south tracks Company for General Contracting Construction of Karama IQD 974.660.000 1 April 18 68% 180 administration building General 2013 December days of Al-Russafa Company 2014 telecommunication and post directorate ASON+DWDM Huawei $ 36.500.000 25 25 June 49% 7 expansion for all Technology November 2014 month governorates and Limited 2013 s border posts except for Company Kurdstan Province Contract no. 10/2012 – Huawei $ 9.606.493 30January 13 May 46% 151 Access Network Technology 2013 2015 days Project, Baghdad Limited Company
Recommendation: We recommend that repressive procedures must be taken against the lagging companies, e.g. withdrawal of works, blacklisting companies and other procedures which result from breach of contract articles as per the contracts implementation instructions (chapter 9-10) of the government contracts implementation instructions no. 2 for the year 2014.
Management Response:
Follow-up We noted that this point still valid during 2015
7 |
Ministry of Telecommunication General Company for International Network services
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Findings
1. Breach of contract terms Moderate Risk
Observation: During our review, we noted that the contract implementing company did not adhere to the terms of contract with the General Company for International Network services, i.e. article I/2 of the contract (the second party undertakes to supply the first party with 50mb/s internet capacity for a year in return for $30.000 through Kuwait portal). Although the implementing company was informed on 13/10/2010 with the readiness to activate the service through Kuwait portal in addition to sending warning letters to urge the company to complete its obligations in addition to holding several meetings between the State Company for Internet Services and the implementing company to ensure that the implementing company undertakes its obligations, no action was taken on the company’s side. The following table includes the contract details up to the end of audit period in August 2015:
Contract Company Contract Completion Implementation value % Period Contract (1/2007) for Computer $ 1.548.000 90% One Year supply of satellite Data bandwidth and internet Networks services Company
Recommendation: We recommend that the government contracts implementation instructions no. 1 for the year 2008 – which are cancelled in articles 17-18 of the referred to instructions, must be adhered to.
Management Response:
Follow-up We noted that this point still valid during 2015
9 |
Findings
2. Additional Periods High Risk
Observation: During our review, we noted that the General Company for International Network services has issued 8 contract addendums for extending the implementation of some contract articles which have exceeded the original contract timeline which included: 3 months for materials supply, 3 months for installation and operation. However, the timeline has been changed to include: 16 months for installation and operation and 6 months for supply of materials based on extending the contract periods according to the contract addendums. The reasons which led to awarding the implementing company additional periods to the original implementation period (6 months) for supply, installation and operation; include the non-readiness of the work sites and data PBXs in addition to the technical unavailability of necessary bandwidth for electronic chips, incomplete construction and operation of new PBXs. Inaccurate study of contracts implementation requirements including the various contracts aspects and technical and physical preparation of work sites which leads to delay in implementation of works. In turn, this leads to delay in the process of development and progress of implementing General Company for International Network services contracts. The following table includes the contract details up to the end of audit period in August 2015:
Contract Company Contract Commencement Completion value Date % Contract (16/2010) for Ericsson $ 3.300.000 9 October2011 62% supply, installation, Company operation and maintenance of built-in electronic chips (audio + data) for NGN PBXs
Recommendation: We recommend that the General Company for International Network services should provide all projects implementation requirements before contracting procedures in order to ensure smooth project implementation according to the planned implementation timelines as per the contracts made with implementing companies.
Management Response :
Follow-up We noted that this point still valid during 2015
10 |
Findings
3. Inaccurate projects feasibility studies High Risk
Observation: During our review of the project for supply, installation, operation and expansion of e- government using WIMAX technology in Baghdad and other governorates, we noted that the General Company for International Network services signed a contract with Huawei company on 22 December 2008 for the implementation of Phase 1 of the project over 6 months. However, Phase 1 was completed on 9 June 2013. Such delay is due to the sites non- readiness in addition to the numerous physical obstacles on the work sites and the delay in acquiring necessary approvals for commencement of works on sites as well as the technical obstacles and lack of resources on the Internet Company. However, the Company has signed a contract on 31 December 2009 with the same aforementioned company to implement Phase 2 and Phase 3 on 28 December 2010. These were signed even before the completion of Phase 1 and despite the numerous physical and technical obstacles which coincide with the implementation of Phase 1. Furthermore, the following project phases (phases 2 and 3) did not start as scheduled although the contracts were signed with the aforementioned implementing company until the audit period.
The following are the reasons why project phases 2 and 3 did not start: - Non-readiness of work sites and infrastructure of operators in Baghdad and other governorates. - Latest developments/advances in the field telecommunications which witnessed the shift from WIMAX to LTD technology which requires acquiring new licenses for the frequencies from the Communication and Media Commission and a complete change to the contracted equipment specifications.
The following table includes the contract details up to the audit period in August 2015:
Contract Company Contract Contract Project Period Project value Date Status Contact (12/2008) Huawei $ 22 6 months Contract for WBB network Technology 1.999.138 December completed on expansion using 2008 9 June2013 WIMAX technology in the city of Baghdad (Phase 1) Contact (11/2009) Huawei $ 31 58 man working Work did not for WBB network Technology 4.349.645 December days start until the expansion using 2009 start of the WIMAX technology in audit period the city of Baghdad and other governorates (Phase 2) Contract (15/2010) Huawei $ 28 270 days Work did not supply, installation Technology 5.555.831 December start until the and operation of e- 2010 start of the government audit period
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Findings expansion project using WIMAX technology in Baghdad and other governorates (Phase 3)
Recommendation: We recommend that the General Company for International Network services should maintain the following:
- Accuracy in studying the latest developments in the field of telecommunications in addition to the required specifications for implementing projects while taking into account the rapid developments in the field of telecommunications and information technology and develop suitable specifications for use over years to avoid wasting public funds due to contracts to supply technical equipment and specifications which did not last for more than two years. - Finalize all pending contracts, prepare all sites and provide work requirements whether physical or technical ones before signing new contracts to implement the following projects phases.
Management Response:
Follow-up We noted that this point still valid during 2015
12 |
Ministry of Agriculture Ministry Headquarter
13 |
Findings
1. Approval of financial records and closing statements Moderate Risk
Observation: During our review of the Ministry of Agriculture position, we have noted the following: 1. Closing accounts of the Ministry for the year 2014 were not prepared and sent to the Federal Bureau of Supreme Audit for audit and approval until the start of the audit period in September 2015. 2. Unification record for the year 2014 was not approved by the Ministry of Finance until the start of the audit period in September 2015. 3. No supporting finance letter (comfort letter) for the operating and investment budgets were sent by the Ministry of Finance until the start of the audit period ending in September 2015. 4. The Ministry’s organizational structure was not approved by the Ministry of Planning until the start of the audit period in September 2015.
Recommendation:
- We recommend that the Ministry should adhere to the federal budget implementation instructions for the year 2013 (section 3-1-V). - We recommend that the Ministry should follow up with the Ministry of Finance regarding the approval of the unification record. - We recommend that the Ministry should follow up with the Ministry of Finance to support the funding allocations as of 31 December 2014 for verification between the recorded data in the Ministry’s records and the recorded data in Ministry of Finance records. - We recommend that the Ministry should follow up with the Ministry of Planning for the approval of the organizational structure.
Management Response:
Follow-up
We noted that this point still valid during 2015
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Findings
2. Weak internal control and audit tasks Moderate Risk
Observation: During our review of the Ministry of Agriculture, we have noted that the internal control and audit section at the Ministry does not issue quarterly reports or a unified annual report which include the Observation with relevance to the Ministry’s activities and its affiliated formations. The section only provides opinion with regards to the documented Observation by the Federal Bureau of Supreme Audit or provide opinion in response to the queries raised by the Ministry’s departments or other formations regarding routine work procedures in addition to expenses auditing.
Recommendation: We recommend that the role of internal control and audit section must be maximized since it represents an important element to the governance system and risk management. A necessary system and procedures of internal control and response to specific risks must be designed and implemented which helps achieve the objectives of the Ministry by identifying duties and responsibilities for each department within the Ministry. Accordingly, this shall enhance cooperation among these departments. Officials in charge of the governance system in the Ministry must have sufficient skills and capabilities which result in enhancing their capacity to perform internal control responsibilities. Linking the internal objectives with each employee’s goals and duties performance will eventually ensure achievement of the internal control objectives.
Management Response:
Follow-up We noted that this point still valid during 2015
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Findings
3. Lagging in construction High Risk
Observation: During our review of Ministry of Agriculture activities, we noted that some companies are lagging behind despite the fact that the Ministry has sent warning letters in addition to urging such companies to expedite projects completion. However, there was no response. It is worth mentioning that we were not submitted all Department’s reports prepared by the resident engineer for each project on the actual completion percentages and the granted additional periods. Projects completion ratios and current projects durations were listed in the contract details table until August 2015, as per the letter which we received from the Department of Planning and Monitoring, Engineering Section, ref. 232, dated 4 July 2015. The following table includes the lagging contract details and completion:
Contract Company Contract value Implementation Commencement Date Planned Completion Actual Period and Date and Additional Completion Additional Periods % Periods Construct Al Al Mandal IQD 490.455.000 210days 2March 2014 28September 15% Taliaa Limited 2014 Agricultural Company for Branch – Babel General Governorate Contracting Construct Ministry of IQD 27.922.733.250 1081days 12January2013 29December 28% Modern Village Industry and 2015 – Al Najaf Minerals-State Governorate – Company for Network Design and Industrial Construction Construct Ministry of IQD 31.875.800.250 1265days 12January2013 26July2016 31% Modern Village Industry and - Al-Qadisiyah Minerals-State Governorate – Company for Al Bader Design and Industrial Construction Construct Najran General IQD 24.424.415.000 831days 8September2011 27December 77% modern village Contracting 2013 works – Al Company Anbar Governorate Construct Al Kharbit IQD 19.575.602.050 1009days 2January2012 4October2014 40% Modern Village Company and – Maysan Al Aita Limited Governorate Company for General Contracting Construct Al Itisaq IQD 1.218.455.000 250days 19July2012 30June2013 97% strategic Limited warehouses – Company for Kirkuk General Governorate Contracting Construct Ard Iwan IQD 18.691.983.385 795days 22July2012 24November 28% Modern Village Company and 2014
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Findings
– Wasit Hussein Assaf Governorate Limited Company for General Contracting Construct Ministry of IQD 27.922.733.250 985days 22January2013 24September 40% Modern Village Industry and 2015 – Al Najaf Minerals-State Governorate – Company for Al Rahimia Industrial Design and Construction
Recommendation: We recommend that repressive procedures must be taken against the lagging companies, e.g. withdrawal of works, blacklisting companies and other procedures which result from breach of contract articles as per the contracts implementation instructions (chapter 9-10) of the government contracts implementation instructions no. 2 for the year 2014. We also recommend that the Ministry must prepare necessary tables which illustrate completed work compared to planned schedules for each project over the different project phases. Such tables shall be agreed in advance with the implementing company before commencement of works.. Progress of work shall be regularly monitored to ensure companies adherence to the agreed phases as well as identifying the reasons for delay.
Management Response:
Follow-up We noted that this point still valid during 2015
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Findings
4. Exchange documents numbered manually High Risk
Observation: Through our audit, we noted that the vouchers are prepared using printed forms are numbered manually by finance department. As a result, you can then begin the exchange process and be canceled for any unidentified reason.
Recommendation: Although there are alternative methods of control used, we recommend that the existence of serial numbers printed on the vouchers. In case of cancellation of voucher, a copy of the canceled document exchange must be kept as evidence documented. This action increases the levels of certainty that no expenditures go undisclosed.
Management Response
Follow-up We noted that this point still valid during 2015
18 |
Ministry of Agriculture State Company for Agricultural Supplies
19 |
Findings
1. Letters of credit High Risk
Observation: During our review, we noted that some letters of credit opened in the Trade Bank of Iraq have expired despite having residual balances with relevance to a number of contracts which are in the process of implementation and other completed projects as indicated in the letters of credit monitoring list which was sent by the Trade Bank of Iraq to the State Company for Agricultural Supplies ref. (LCs/1/8408) dated 3 February 2015 including details of letters of credit until 31 December 2014. For example:
LC Issue Date Beneficiary LC Amount Residual LC Balance Implementatio n Date 17June2008 Pantex Holland B.V $ 52.500 $ 2.625 30December 2009 21August Masra Al-Atheer $ $ 21December 2014 21.046.31 21.046.31 2014 2 2 7February Hranmash € € 274.631 30December 2005 3.015.124 2005 2April2008 Modern Iraq Company $ $ 483.616 3May2009 5.632.500 10June2008 Al Rawabi Co. $ 630.850 $ 456.995 30June2011
3April2008 Indian Immunological LTI $ 480.000 $ 480.000 31December 2008 5April2006 Rama Agriculture Equipment $ 701.297 $ 701.297 2August2006
22October Lindsay International Sale $ $ 19December 2012 10.273.32 1.366.477 2013 3
Recommendation: We recommend that the State Company for Agricultural Supplies must perform the following: - Extend the validity of expired letters of credit for in progress contracts to guarantee the rights of the company for the remaining works.
- Close letters of credit for completed works and transfer the remaining amounts in the letters of credit balances to the company treasury for utilization in other company needs.
Management Response:
Follow-up We noted that this point still valid during 2015
20 |
Ministry of Youth and Sports
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Findings
1. Financial statements Moderate Risk
Observation: During our visit of the Ministry, we noted that the closing financial statements of 2014 are not approved by Federal Board of Supreme Audit until our audit period in October 2015 despite submitting these statements in 26 August 2015.
Recommendation: We recommend that the Ministry should follow up with Federal Board of Supreme Audit to approve the Ministry closing financial statements according to the Regulations for Implementing budget, Paragraph Fifth which requires to submit the accounts of 2014 by not later than 31 January 2015 to perform control and audit activities. Management Response
Follow-up We noted that this point still valid.
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Findings
2. Suspended Advances from previous years High Risk
Observation: During our review of Ministry of Youth and Sports records, we noted that the Ministry granted advances for its committees and entities for sport and operational activities purposes during the previous years, whereas these advances are not settled until 31 December 2014 despite the elapse of a long period of these advances payment dates.
The below Example illustrates the unsettled loans:
Advance date Beneficiary entity Advance amount - IQD 2006 – 2005 – 2003 Olympic committee loans 718.151.890 2013 Directorate of Youth and Sports - Basra 113.563.750 2007 Directorate of Youth and Sports - Al Rusafa 15.000.000 2004 Directorate of Youth and Sports - Waset 1.290.000
Recommendation: We recommend that the Ministry of Youth and Sports should follow up settlement of operational advances which are granted to its entities for a long time through developing periodic settlements between Ministry and its entities, to ensure settlement during the fiscal year. We also recommend that the Ministry should save all the supporting documents of payment and settlement.
Management Response:
Follow-up We noted that this point still valid.
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Findings
3. Low ratios of strategic projects completion High Risk
Observation: During our review of the strategic projects of the Ministry of Youth and Sports, we noted that there are many obstacles faced by project implementation and caused to low completion percentage as follows: 1. Financial Limitations: companies reject to proceed with implementation of works due to non-payment of their financial accruals of completed phases loans. The reason is that the Ministry didn’t have sufficient liquidity to pay these accruals in addition to delaying in issuing letters of credit for Ministry projects which led to delay in supplying the raw materials and the imported appliances for projects completion. 2. Security limitations: the foreign companies’ employees requested their embassies to leave Iraq after the incidents occurred in June 2014 for safety which resulted to suspend their works for several months. 3. Technical Limitations: Shortage of technical employees and the necessary equipment of the executing companies to perform work in the project location which is inconsistent with the projects volume, in addition to lagging in raw materials supply and execution in comparison with the work progress schedule. 4. Miscellaneous limitations: readiness of the project location to be free of obstructions and obstacles on the land allocated for project execution for example random housing violations as well as lack of the work location infrastructure represented in (water, electricity and roads). Due to these obstructions, The Ministry was obliged to provide additional extensions for the executing companies to avoid claiming financial compensation for damages due to suspending project execution several times. The additional periods and financial and technical completion percentage, until the audit period in October 2015, will be referred to within the projects details table as follows: Technical Financial Executing Contract amount Execution Initiation Additional Project name completion completion company IQD period date periods percentage percentage Design, implement and construct the Olympic stadium in Al Rusafa / Triarena - 3 Baghdad with capacity Spanish 114.359.277.352 600 days February 13% 12% 336 days of (30.000) audience Company 2013 and 4 star hotel with capacity (50) rooms Design, implement and construct the Olympic stadium in Al Tajyat / Beland Beh - 21 Baghdad with capacity Iranian 227.529.908.190 900 days December 27% 26% 196 days of (60.000) audience Company 2011 and 4 star hotel with capacity of (70) rooms Design, implement and construct the Olympic stadium in Samawah Bany Kada - 26 with capacity of Italian 75.000.000.000 870 days November 12% 9% 506 days (20.000) audience and Company 2012 4 star hotel with capacity of (50) rooms Develop and restore of Al Mostkabl 6 Maysan stadium with Al Saeed for 26.798.018.450 720 days February 71% 64% - capacity of (25.000) of General 2011 audiences Contracting
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Findings
Limited Company Design, implement and construct the Olympic stadium in Babil/ with Triarena - 6 capacity of (30.000) Spanish 116.112.278.992 600 days December 60% 57% 547 days audience and 4 star Company 2011 hotel with capacity of (50) rooms Design, implement and construct the Olympic stadium in Diwania/ Renaissance 26 with capacity of Middle East - 114.450.000.000 900 days December 52% 50% 166 days (30.000) audience and Company 2012 4 star hotel with capacity of (50) rooms Design and construct 4 Man star hotel in the Enterprise 20 sporting village /Basra for 65.461.370.000 600 days 55% 48% 828 days December and establish shopping contracting center (mall) Company
Recommendation: Based on its contractual obligations and as per the Regulations for Implementing Government Contracts no (2) of 2014 we recommend that the Ministry should adopt the technical and financial procedures related to projects within definite period which have significant impact on the state sport industry and its international reputation. We also recommend that the Ministry should select qualified companies in the sports industry taking into account availability of technically and consultancy qualified employees in construction of sports facilities.
Management Response:
Follow-up 1. Table 1 represents the ongoing projects. 2. Table 2 represents projects that were frozen by the General Secretariat of the Council of Ministers resolution No. 347 for the year 2015
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Findings
4. Breach of contract terms High Risk
Observation: During our review of Olympic stadium development and restoration project implemented in Maysan with capacity of (25.000) audience, we noted that the consultancy firm which was awarded the contract of supervising and tracking phases of project execution failed to comply with providing a number of consultants required on the work site which is considered as a violation of the agreed terms of the contract. This had a negative effect on executing works within the project and causing delay in approving some designs submitted by the executing company. The table below describes contract details:
Contract Project Project Contract signing actual Execution Project name consultancy amount date completion period name percentage Development and Arma - 2.260.000.000 28 July 71% restoration of Maysan Turkish Group IQD 2011 1080 Olympic stadium with days capacity of (25.000) audience
Recommendation: We recommend that repressive measures shall be adopted against the companies that violate the agreed terms of contract such as : withdrawing work, submitting a request to insert these companies in the black list and any other measures arising from violations of the terms of contract, which referred to in the Regulations for Implementing contracts Section Ninth and Tenth of Regulations for Implementing Government Contracts No 2 of 2014.
Management Response:
Follow-up We noted that this point still valid.
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Findings
5. Delay in completion and work obstructions High Risk Observation: During our review, we noted the following: 1- There are some companies are lagging in project completion according to the work progress schedules, although the Ministry sent out warning letters and urged these companies to complete project immediately but no response was noted. 2- The executing companies are provided with additional periods which exceeds the agreed execution period set forth due to many obstacles that these companies face during execution, examples of such obstacles are as follows: - Delay in soil testing procedures of the project location. - Adding additional works and change orders during execution period. - Obstacles and issues such as government and non-government bodies’ trespasses of the land allocated for the project during execution process.
The table below lists the contract details and related completion percentage until audit period in October 2015:
Planned Contract completion Company Executio Initiation Additional Completion Contract name amount date and name n period date periods percentage (IQD) additional periods Construct a women Al Fiafi for 26 3.943.450.00 720 7 October forum in Diwanyah / contraction September 377 days 62% 0 days 2014 Company 2011 Construct stadium Al Maamora using artificial grass/ real estate 2.555.775.00 210 23 June 13 March 456 days 20% GRAMINEAE in Al company 0 days 2013 2015 Shualaa - Baghdad Restore and develop Naeem Al 360 18 586 days 26 July 34% women forum in Khaleej for 1.654.546.50 days December 2014 Basra contracting 0 2011 company Construct Olympic Bareek Al 4.601.080.00 730 28 April 1 March pool in Maysan Hossam 280 days 63% 0 days 2009 2012 company
Recommendation: We recommend that the Ministry should: - Adopt repressive measures against the lagging companies such as : withdrawing work, submitting a request to add them in the black list and any other measures arising from violations of the terms of contract, which referred to in the Regulations for Implementing contracts Section Ninth and Tenth of Regulations for Implementing Government Contracts No 2 of 2014. - Coordinate with the stakeholders to expedite the normal work procedures in addition to overcoming all the obstacles, which prevent work progress as soon as possible to avoid delay. Management Response:
Follow-up We noted that this point still valid.
27 |
Ministry of Foreign Affairs
28 |
Findings
1. Overseas contracts High Risk
Observation: During our review of the sample contracts for the investment and current plan projects and the updates we received regarding the contracting procedures, we noted that the implementation of overseas projects (e.g. construction of buildings for missions and rehabilitation of the embassies complexes) are not implemented according to the government contracts implementation instructions no. 2 for the year 2014 since these projects are implemented overseas and are subject to the laws of the countries where they are implemented. This causes conflict with the Iraqi laws.
The following table illustrates examples of such incidents:
Contract Contracted Party Department
Consulting works contracts for the Wornbek Office Asia embassy building and Ambassador’s Department/Malaysia residency (Petrojaya) Tender contract for studies and designs My Group Africa preparation for the mission’s buildings Architecture Department/Rabat construction in Rabat Ambassador’s residency construction Measar Saleh Asia Department/Sanaa project in Sanaa Corporation for Trade and Contracting
Recommendation: We recommend that the Ministry of Foreign Affairs must request an exception for such types of contracts whereas special instructions must be issued for the Ministry of Foreign Affairs to cover such contracts due to their special natures. Such instructions shall be the basis for auditing such contracts.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Findings
2. Contracts and supporting data High Risk
Observation: During our review, we noted that contracts files are not stored in one specific location, but are rather distributed among different sections across the Ministry, e.g. government contracts section, engineering department and the relevant embassy. This causes difficult identification of the contracting priorities and the inability to perform necessary audit activities thereof. The following table illustrates examples of such incidents:
Contract Contracted Party Department
Supply and installation CHARLY ABDOO Europe Department/Mardid contract for main dining hall at the Ambassador’s residency Contract for rehabilitation of CARYTEC.S.L Europe Department/Mardid side fences, swimming pool and events hall at the Ambassador’s residency Anti-shatter security BOJI&JERRY GROP Asia Department/Beirut protection supply contract for the consulate building and residential apartments Supply and installation JMP Company Asia Department/Beirut contract for electric vehicle security barriers Embassy’s building security in Stinil Garda Simista – Asia Department/Jakarta Jakarta Indonesia
Recommendation: We recommend that the Ministry must develop an archiving system for contracts along with all supporting documents which are saved in one file and are organized in an accessible manner to facilitate recall of such information for review by the government contracts section.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Findings
3. Duties and responsibilities of internal control and audit High Risk section
Observation: During our visit to the Ministry of Foreign Affairs and review of the duties and responsibilities of internal control and audit section, we noted the following: 1. Absence of a comprehensive manual for internal control and financial procedures and policies for the Ministry. The ministry depends on specific instructions in the form of internal memos. 2. The internal audit and control section does not perform review and analysis of closing financial data which are prepared by the financial section to ensure the accuracy of such data and submit any major variances between the previous year and the year subject to audit.
Recommendation: We recommend that the Ministry of Foreign Affairs should perform the following: 1. Prepare and apply written internal control policies and procedures which should cover all operating and financial activities in the Ministry. 2. Review the manual on a regular basis to ensure it is updated and appropriate for provision of accounting and operating procedures to the Ministry’s staff. 3. Perform detailed control procedures to ensure suitable and consistent application of policies and procedures manual.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Findings
4. Government contracts section duties and responsibilities High Risk
Observation: During our visit to the government contracts section at the Ministry HQ, we noted that the section does not maintain complete files of the implemented projects. In addition, the section does not perform follow up of the implementing and in progress local and international projects by departments, embassies and consulates.
Recommendation: We recommend that the government contracts section - Ministry of Foreign Affairs must maintain the complete priorities of the implemented contracts and follow up in progress contracts in addition to issuing regular progress reports which identify contracts’ current state.
Management Response:
Follow-up We noted that this point still valid. The balance for 2015 was IQD 90,160,122,054
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Findings
5. Closing accounts – Overseas missions High Risk
Observation: During our review of the foreign missions closing statements on 31 December 2014, we noted that the balance of other temporary advances has reached IQD 89.903.534.097 which includes retained balances from previous years as unreconciled amounts by the Ambassadors and foreign missions employees until 31/12/2014.
Recommendation: We recommend that the Ministry of Foreign Affairs must collect such payable amounts and reconcile such advances.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Findings
6. Construction contract for the club of the Ministry of Foreign Low Risk Affairs
Observation: During our review of the contracts of the Ministry of Foreign Affairs, we noted that the construction contracts for the club of the Ministry of Foreign Affairs that is signed with a total of IQD 15,917,715,000, was delayed where the percentage of achievement up to 31 December 2013 is (45%), noting that the date of signing of the contract was in 15 March 2010 with a duration of (22) months.
Recommendation: We recommend that the Ministry of Foreign Affairs to complete the project as quickly as possible through removing the obstacles that prevent the completion of the project.
Management Response
Follow-up We noted that this point still valid during 2015.
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Findings
7. Absence of approved organizational structure Low Risk
Observation: During our review we noted that the currently used organizational structure is not approved by cabinet, while the Ministry developed new departments like (Governmental contracts) department.
Recommendation: We recommend the Ministry to obtain the cabinet approval for the currently used organizational structure.
Management Response
Follow-up We noted that this point still valid during 2015.
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Ministry of Education
36 |
Findings
1. Low projects completion rates High Risk
Observation: During our review of the Ministry’s contract no. 1 for demolishing and reconstruction of dilapidated schools, we noted low contracts completion ratios during our visit on 31 August 2015 whereas necessary actions were not taken as per the government contracts implementation instructions no. 1 (article 14.I) and (article 16.II) for the year 2008 in addition to the government contracts implementation instructions no. 2 (article 10.IV) for the year 2014. The following table illustrates such instances:
Contract Implementing Completion % until Contract signing date Number Company 31 June 2016
39/direct Anwar Sawari 8 September 2011 38.08% invitation/2011 Contracting Company 85/direct State Company for 18 December 2011 40.10% invitation/2011 Industrial Design and Construction 84/direct Al Mansoor State 12 December 2011 37.07% invitation/2011 Company 36/direct Al Somood State 11 November 2011 44.94% invitation/2011 Company
Recommendation: We recommend that the government contracts implementation instructions no. 2 (article 10.IV) for the year 2014 must be adhered to in addition to taking necessary actions to increase the completion ratios.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Findings
2. Establishing printing press Moderate Risk
Observation: During our visit to the Ministry of Education, we noted that the Ministry has awarded the contracts for printing and supply of books and other schools supplies to a number of public and private sector companies for supply either locally or from overseas. This may lead to delay in supplies within the scheduled timelines.
Recommendation: We recommend that the Ministry of Education must select a new printing house for the State Company for Educational Supplies Production to meet the printing and supply demands within the scheduled timelines.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Findings
3. Postpaid contracts High Risk
Observation: During our review of the sample contracts of the Ministry of Education, we noted that the Ministry awarded a number of contracts to suppliers based on deferred payment terms and cost estimates which are prepared by the Ministry based on the approval of the Iraqi Council of Ministers – Economic Affairs Committee, as per letter ref. S.L90 dated 12 February 2014.
Recommendation: We recommend that the Iraqi Council of Ministers and the Ministry of Education must set necessary instructions which govern the implementation of contracts awarded by deferred payment for the best prices.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Ministry of Industry and Minerals
40 |
Findings
1. Ministry of Finance loan for development of industrial High Risk companies
Observation: During our visit to Ministry of Industry and Minerals, we noted that the Ministry received IQD 75 billion from Ministry of Finance during 2005 for development purposes and improvement of the affiliated companies. During our review of the documents of contracts samples, we noted the following: 1. Absence of updated feasibility study of the loan received from Ministry of Finance and absence of updated structure for loan repayment. 2. Granting loans for some Ministry of Industry authorities which contradicts with the main loan nature such as granting a loan with amount of IQD 990 million for the administrative and financial department. 3. Some of Ministry companies concluded contracts with non-competent companies, such as contract of distilled water maintenance of the Ministry headquarter concluded with State company for Vegetable Oil Industry. 4. Most of the beneficiary companies delayed in repaying the loan amounts to the Ministry of Industry for previous years from 2005 and above. For example: State company for sugar industry loan with amount of IQD 250.000.000 from 2005. 5. Shortage of documents of the loan granted to companies, such as absence of loans and feasibility study follow up applications which leads to failure while defining the loan period, repayment period and the imposed interest value.
Recommendation: We recommend that the Ministry should:
1- Follow up loans with lagging companies and set a new mechanism to repay the due accruals. 2- Abide by the loan nature and the purpose of developing and improving the Ministry’s companies, 3- Complete and update all old loans files within updated follow up applications to be aware of the loan usages and their benefits. 4- Develop an updated study concerning the main loan received from Ministry of Finance in addition to preparing a new structure to ensure loan repayment to Ministry of Finance.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Findings
2. Contracts of preparation, update and assessment of work High Risk plans of the state companies affiliate to the Ministry
Observation: During our review of the contract appendices documents No. (9, 10, 11) signed with the State Company for Systems, State Company for designs and project execution, State Company for industrial designs and construction we noted the following: 1. The Ministry contracted with the executing companies although they are not competent firms in the field of administrative consultancy and developing work plan. 2. Absence of updated feasibility study of the project. 3. Delay in executing the contract due to beneficiary companies delay in submitting the initial draft that includes the design and update. 4. The Planning Department didn’t approve the whole contract despite contract termination.
Recommendation
1- The Ministry should comply with Regulations for Implementing Government Contracts No. (2) of 2014 2- The Ministry should follow up the concluded contracts with the executing companies and track the beneficiary companies.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Findings
3. Low completions percentages High Risk
Observation: During our review of ministry contracts percentages of completion, we noted that the percentages of the completion for some projects are low until 31 December of the year 2013, such as:
Project name Actual Planned
The Public Company for` Electrical %25 %85 manufacturing rehabilitations White sugar production service %12 %100 rehabilitation for Misan Sugar factory Industrial complex/ industrial %37 %90 Development Plastic factory rehabilitation and %5 %25 establishment of 2 Megawatt construction station
Recommendation: We recommend on the necessity of follow-up on the projects and increase their completion rates by removing the obstacles faced by these projects and to take decisive action against delayed companies.
Management Response
Follow-up We noted that this point still valid during 2015.
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Findings
4. -Tasks and duties of Governmental Contracts Department High Risk
Observation: During our visit to the Ministry of Industries and Minerals, we noted that the Governmental Contracts Department, under the Legal department, doesn’t keep all the contracts’ supporting documents in the department but only copy of the contract, while the supporting documents are held with the beneficiary directorate.
Recommendation: We recommend the Legal department - Governmental Contracts Department to keep all supporting documents that belongs to contracts in the department
Management Response
Follow-up
We noted that this point still valid during 2015.
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Endowments of the Christian and Other Religions Divan
45 |
Findings
1. Low completion rates Moderate Risk
Observation: During our visit to the Endowments of the Christian Religion and Other Religions Divan, we noted that the completion ratios for some projects are low as illustrated in the following table as on 31 December 2014:
Implementing Contract Contract Contract Financial Technical Contract Details Company signing date value/IQD Period Completion % Completion % Contract no. 47, Al Mangaro Coptic Church Limited Company 28/8/2012 5.297.620.000 30months 13% 35% construction for General project/ Baghdad Contracting Contract no. 76, Al Esraa Group primary school for Limited Company Syriac Orthodox for General 14/11/2012 1.399.973.000 24months 33% 55% Church Contracting construction project/Baghdad Contract no. 6, Al Serag Al rehabilitation of Moneer Company Syriac Orthodox Rady Abbas 14/4/2014 364.871.000 9months 20% 55% Church center Badan works/Baghdad Contract no. 2, Al Esraa Group construction of Limited Company hospitality house for General 16/1/2014 686.910.000 16months 14% 35% for Ancient Contracting Eastern Church/Camp Sara
Recommendation: We recommend that the endowment must perform follow up of the contracted companies to ensure adherence to the contact terms and take actions as stipulated in the contract in case of noncompliance with these terms.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Findings
2. Absence of standard centralized reports Moderate Risk
Observation: We noted that there are no unified centralized reports for the projects of the Christian endowment and other religions which reflect the financial and technical completion ratios of such contracts.
Recommendation: We recommend that the endowment must prepare unified reports for government contracts which reflect financial and technical completion ratios.
Management Response:
Follow-up We noted that this point still valid. Because they didn’t provide us database Pertaining to
contracts, including the proportion of financial achievement.
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Findings 3. Unpaid due expenses Low Risk
Observation: During our review of the records of the Christian endowment and other religions, we noted that there are outstanding expenses for previous years amounting to IQD 719.877.000 for the State Company for Electric Industries which were not repaid.
Recommendation: We recommend that the endowment must coordinate with the Ministry of Industry/State Company for Electric Industries with regards to reconciliation of such amounts.
Management Response:
Follow-up We noted that this point still valid during 2015.
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Ministry of Construction and Housing
49 |
Findings 1. Residential complex construction contract in Karbala – Al High Risk Jazeera 1/Department of Housing
Observation: During our review of the contract for the construction of a residential complex in Karbala/Al Jazeera District-1, we noted the following: 1. Contract was awarded to Blue Ocean Company on 15 October 2008 which was lagging in implementing the project as the completion percentage reached 14.6% since awarding the project. Until the Ministry withdrew the project on 18 April 2011. The Ministry did not withdraw the works directly despite the low completion rates and exceeding the contractual period. However, the Ministry gave the company several opportunities to step up the completion rates. 2. The contract was awarded to Ard Al Sadw Company on 18 September 2011 as per the Council of Ministers decree no. 268 for the year 2011, despite the company’s lagging in the completion of the other projects for the Department of Housing (construction of a residential complex in Al Najaf/Jerusalem district) and another project for the Department of Roads and Bridges in Karbala governorate was withdrawn (2nd Al Hindia bridge approaches implementation project). 3. The actual implementation rates for Ard Al Sadw Company reached 4% since the project handover until June 2015 whereas the Department of Housing is trying to reach a mutual agreement to terminate the contract with Ard Al Sadw Company. Allowing Blue Ocean Company several extension period to increase the completion rates which was followed by the withdrawal of works and award the project to another lagging company (Ard Al Sadw Company) has cost the ministry additional time and effort as well as delay in completing vital and critical projects.
Recommendation: We recommend that the Ministry should apply efficient follow up of contracted companies and not to allow for any delay in completion of awarded projects in addition to taking repressive actions with regards to lagging companies. The Ministry must not award any new contracts to lagging companies in previous projects.
Management Response:
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings 2. Obstacles and conflicts High Risk Observation: During our review for sample contracts, we noted that the departments handover the work sites including obstacles, legal and physical issues after awarding the projects to contracted companies in violation of the government contracts implementation instructions no. 1 (article 3/e,f,g,h) for the year 2008 and the government contracts implementation instructions no. 2 (article 2/f,g,h) for the year 2014 which leads to direct delay of commencement of works and implementation which leads to increased project costs and in some cases, this leads to suspending the project. The following table illustrates examples of such obstacles:
Actual Project Beneficiary Company Obstacles Completion % Contract for Housing Al Mansour Residential buildings 0% construction Department General of a Company and residential Sections complex in Company for Dhi Contracting Qar/Qashmar and Trade 1 Project for Roads and Al Zarwaa Objection of residents, change 39% construction Bridges Horizon of some stations locations due of 14 weigh Department Company for to conflicts, increased levels of stations in General ground water and deteriorated Babel, Contracting security situation Karabala, Al Najaf and Al Diwaniyah Project for Roads and Najran and Oil pipeline, residential 63% the Bridges Gannat Al buildings, electricity towers, construction Department Khaleej agricultural lands, sewage of Al Companies pipes, fisheries lakes, poultry Kardiyah for General fields and land acquisition bridge – Contracting Phase 2 Recommendation: We recommend that the Ministry must adhere to the government contracts implementation instructions. Management Response: Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings 3. Delay in project completion High Risk
Observation: During our review of the sample contracts, we noted that several contracts witnessed delay in completion rates. This resulted in non-utilization of the allocated funds during the previous years. However, such projects were added to the Ministry’s investment budget for the following years and inability of implementing new projects. The delay in completing such projects during the previous years has led to difficulties in completing such projects during 2014 and 2015 due to the deficit suffered by the federal budget. The following table includes examples of such projects:
Implementing Planned Actual Contract Project Company Beneficiary Completion Completion Start Date % % Contract for the Hadhramaut and Al Housing 6/11/2011 100% 32.3% construction of a Rajih Company Department residential complex in Mothanna/Al Garbowiyah Contract for the Dorga Industrial and Housing 26/4/2011 100% 66.28% construction of a Trade Company Department residential complex in Basrah/Al Sabkh Construction of Al Naeem Al Forat Roads and 14/4/2013 100% 50% Shahlawiyah/Al Company Bridges Abrat/Al Madan Department road Construction of Al Al Noor Al Thaqib Roads and 21/10/2008 100% 56% Kardiyah bridge – and Al Ghadaq Bridges Phase 2 Companies Department Recommendation: We recommend that the Ministry must urge the implementing companies to adhere to the contractual periods and expedite the implementation of projects. Management Response:
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings 4. Efficiency of contracted company High Risk
Observation: During our review of the sample contracts, we noted that the Ministry awarded several contracts to a single company during the same or close implementation periods. Awarding big projects during the same, close or overlapping implementation periods undermines the potential implementation capacities of the contracted companies, especially that the implementing companies experience a lot of changes during the implementation of each project (e.g. change orders due to change in designs, security issues and economic variables) whereas the implementation period exceeds the contract period. The following tables illustrate examples of such projects. A. Awarding 3 projects to Ard Al Sadw Company/Housing Department
Contract Implementation Actual Completion % Project Contract value/IQD Date Period/Months until 30 June2015
Contract for construction 53.127.900.000 26/10/2008 20 94% of a residential complex in Al Najaf/Jerusalem district
Contract for construction 47.524.537.550 20/5/2012 30 10% of a residential complex in Babel/Al Qassim
Contract for construction 52.520.000.000 19/7/2012 19 19% of a residential complex in Karbala/Al Jazeera 1 B. Awarding 2 projects to Al Zawraa Horizon Company/Roads and Bridges Department
Contract Implementation Actual Completion % Project Contract value/IQD Date Period/Months until 31 May2015
Project for construction of 14.987.000.000 31/10/2012 210 39% 14 weigh stations in Babel, Karabala, Al Najaf and Al Diwaniyah
Shatt Al-Arab road 4.930.800.000 1/1/2013 360 26% maintenance to Ataba district Recommendation: We recommend that the Ministry must select companies based on competency and to consider such companies’ capacity to implement the awarded projects. Projects must not be only awarded on the basis of the lowest financial bids. Management Response:
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Findings
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings
5. Additional Extension periods for the companies High Risk
Observation: During our review of the sample contracts, we noted that the additional extension periods for the contracted companies to implement the projects. In some cases, such periods are either equivalent or exceed the original contract period. The reasons for such additional periods include errors in designs, bills of quantities or incomplete preparation of the work site. Lack of a timescale ceiling which identifies the additional periods may cause major delays in projects implementation and completion. The following table illustrates examples of such projects:
Implementation Total Additional Implementing Period/Days Additional Periods Ratio Project Beneficiary Company Extension to Original Periods Contract Al Hala – Keesh Hammurabi Roads and 900 1178 103% road Company Bridges implementation Department Construction of Ard Al Sadw and Roads and 365 2059 564% bridges Al Khaleej Al Bridges interchanges for Kabeer Department Al Hindia bridge Companies approach slabs Construction of Al Farouq Housing 911 1226 103% a residential Company Department complex in Dhi Qar/ Al Shomookh Construction of Ard Al Ghainaa Housing 1066 1634 105% a residential Company Department complex in Wasit/ Um Halana Recommendation: We recommend that all terms, specifications, bills of quantities, drawings and any other requirements for the implementation of the project must be accurate to avoid any changes or additions during implementation.
55 |
Findings
Management Response: Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings
6. Percentage of technical completion Moderate Risk
Observation: During our review of the contracts, we have noted there is a decline in the percentage of completion contracts despite of the expiry of the contract period. Examples:
Contract name Percentage of Contractual Contract date completion date completion Station-Wazn - %31 2014/7/2 2012/7/22 Ghamas Station-Wazn - %33 2013/5/29 2012/10/22 Alhafar Maintenance of the %25 2014/1/1 2013/1/1 Shatt al Arab
Recommendation: We recommend the General Authority for Roads and Bridges to follow-up on lagging projects and work to raise the completion rate through removing all the obstacles facing these projects
Management Response
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Ministry of Municipalities and Public Works
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Findings
1. Obstacles and conflicts High Risk
Observation: During our review for sample contracts, we noted that the departments handover the work sites with obstacles, legal and physical issues after awarding the projects to contracted companies in violation of the government contracts implementation instructions no. 1 (article 3/e,f,g,h) for the year 2008 and the government contracts implementation instructions no. 2 (article 2/f,g,h) for the year 2014 which leads to delay of commencement of works and implementation leading to increased project costs and in some contracts, suspending the project. The following table illustrates examples of such obstacles:
Actual Implementing Project Beneficiary Obstacles Type Completion Company % Project for the ICG Company - General Sewage Objection of residents, 2.6% implementation Iran Directorate high voltage towers, ring of a treatment road plant of stormwater and heavy sewage/Kirkuk Project for Konog Company General Water The project land is 3.5% construction of Al - Turkey Directorate partially owned by the Mussiab water Ministry of Industry and treatment plant – Minerals Alexandria – Jurf Al Sakhr/Babel Al HO-HUP General Water Unavailability of contour 41% Zohoor/Baghdad Company – Directorate maps in Al Zohoor water plant Malaysia Municipality Department project
Recommendation: We recommend that the Ministry must adhere to the government contracts implementation instructions. Management Response:
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings
2. Low projects completion rates High Risk
Observation: During our review of the contracts, we noted the low actual completion rates compared to the planned completion rates. The following table illustrates an example of such projects:
Planned Actual Implementing Actions taken against Project Beneficiary Completion Completion Company the companies % % Project for the Al Hanan General 82% 31% Work is suspended implementation of Company and Sewage due to the security a treatment plant Ahl Alwafaa Directorate situation in Diyala of stormwater and Company City. The Ministry heavy asked the company sewage/Kirkuk not to claim any cost variance in case the suspension period exceeds 90 days. Project for Al Barah General 100% 49% Decree no. 3553 was implementation of Company Sewage issued on 13/9/2012 Al Rifai treatment Directorate to withdraw works plant from the company whereas such company shall be liable to all legal and financial consequences. Al Pratiba General 100% 68% Work in progress Nahrawan/Baghdad Company - Water water plant project India Directorate Nasiriyah /Dhi Qar Kisson General 92% 12% Work in progress water plant project Company - Water Iran Directorate Recommendation: We recommend that the Ministry must urge the implementing companies to adhere to the contractual periods and expedite the implementation of projects. Management Response:
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings
3. Additional grace period for the companies High Risk
Observation: During our review of the sample contracts, we noted that the additional extension periods for the contracted companies to implement the projects. In some cases, such periods are either equivalent or exceed the original contract period. The reasons for such additional periods include errors in designs, bills of quantities or incomplete preparation of the work site. Lack of a timescale ceiling which identifies the additional periods may cause major suspension and delays in projects implementation and completion. The following table illustrates examples of such projects:
Implementation Total Additional Period/Days Additional Periods Implementing Project Beneficiary Grace Ratio to Company Periods Original Contract Implementation and General 910 1424 156% Al Methqal supply of Al Horr Sewage Company sewage plant Directorate Sewage water Al Hanan General 1095 1490 136% treatment plant Company and Al Sewage implementation/Karbala Azza Company Directorate Al Shamia water plant General 600 1128 188% Al Hamed project Water Compay Directorate Al Najaf/Kufa unified Naour Al Maa General 840 985 117% water plant project Company and Water Nabaa Al Minaa Directorate Company
Recommendation: We recommend that all terms, specifications, bills of quantities, drawings and any other requirements for the implementation of the project must be accurate to avoid any changes or additions during implementation. Management Response:
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings
4. Official holidays/Religious events High Risk
Observation: During our review of the sample contracts, we noted that the projects implementation periods which are stipulated in the contracts are calendar days which include national holidays and religious events. Accordingly, we noted that most of the granted additional periods to implementing companies are due to suspension periods resulting from national holidays and religious events. Such suspensions are considered working days within the contractual period which are stipulated in the contracts. Hence, implementing companies must take into account such cases in bidding since the project implementation period is considered one of the competitive aspects among bidders.
Recommendation : We recommend that the ministry shall not give the implementing companies any extension resulting from suspensions due to national holidays or religious events.
Management Response:
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings
5. Outstanding advances Moderate Risk
Observation: During our audit we noted that there are outstanding advances from the year of 2009 and 2010 amounted to IQD 77,650,359,117 in contrary of the Council of Ministries’ instruction No.AM/11/R/37360 for the year 2009 which states that all the advances should be settled before the 20th of December otherwise (7%) of the advances should be paid as a penalty. The Ministry sent to the Council of Ministries to obtain approval in order to reconcile the advances while no response has been obtained yet.
Recommendation: We recommend the Ministry to settle all the outstanding advances and to adhere to the Council of Ministries’ instruction.
Management Response
Follow-up We noted that this point still valid during 2015.
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Endowment of Shiite
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Findings
1. Low ratio of technical completion High Risk
Observation: During our visit to Endowment of Shiite/Engineering Department, we noted low ratio of technical completion of some of Diwan projects despite the elapse of a long period for these projects initiation.
The table below shows a sample of the low completion contracts for the Engineering Department as in September 2015:
However, the expenditure on the above contracts weren’t provided to us as stated in the reports preparation date. Completion percentage Contract Contract Award Amount Executing Initiation Executio Contract Name as in No. Date (IQD) Company Date n period September 2015 Construct Hussainiat Al Kheer on the 19/5/201 Awaj Al 10 territory No. NA NA 558.047.000 3 30% salam months (162/1) AL Nile Jabal/ Babil Governorate Endowment Shiite FAO for 6.388.722.00 18 Directorate NA NA Enginee 3/3/2010 51% 0 months /Karbala ring Maintenance of AL Abou AL Fadl Maamor Mosque LA Abbas 6/12/201 140 NA NA 276.895.000 a for 60% sewer/ 0 days/(ع) constru Muthanna ction Governorate Construct Ali AL Hebat Shareqi Al Kabeer /78 6/7/201 1.164.365.00 28/4/201 300 AL 50% (Rad) Mosque/ 2011 1 0 1 days Forat Maysan Recommendation:: We recommend that Endowment of Shiite should monitor the lagging contracts and should also be awarded to the competent companies to complete the work quickly to ensure that the public fund is not wasted. Further, all contracts should be unified to indicate the financial and technical completion percentage. Management Response:
Follow-up We noted that this point still valid.
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Findings
2. Delay in trust implementation works High Risk
Observation: During our visit to Endowment of Shiite/Engineering Department, we noted that Diwan performs some of its work using trust implementation approach and accordingly the completion percentage of these projects still (zero%) which considered as a violation of the the Accounting Instructions/Regulations issued in 21/7/2001 in relation to works that should be performed through trust implementation, Article Eleventh which stipulates the following: 1. Ability of performing work through Trust Implementation Committee. 2. Necessity of immediate implementation as per the public interest requirements. The following table describes activities samples of Engineering department status as in September 2015: Completion Award Number Award amount Initiation Execution percentage as Project Name and referral date (IQD) date period in September to committee 2015 Develop and 3.212.005.000 landscaping of 18069 in ancient NA NA 0% 10/9/2013 graveyard/ Karbala Mosque and 205.750.000 in هـ/6429 Hussainiat Ali kora NA NA 0% 13/8/2013 taba/Dyaly Inspection of AL 111.165.000 Imam Ali Mosque 8844 in Not 5 months 0% and Hussainiah 2/10/2013 started maintenance/Babil Register of 85.730.000 maintenance and Committee 5357 in develop of Aal didn’t NA 0% 4/7/2013 Thabet/Kada Al start Maseeb/Babil Yousses Ghosen 76.425.000 12683 in endowment/ NA NA 0% 26/3/2013 Karbala However, we were not provided with expenditure of the above activities as of the report date. Recommendation: We recommend that Endowment of Shiite should comply with Regulations of works execution via Trust implementation approach no. (1) Of 2014.
Management Response:
Follow-up We noted that this point still valid.
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Findings
3. Low completions percentages Moderate Risk
Observation:
During our visit to the Endowment, we noted there are low percentages of completion of some projects despite the fact that the duration of these contracts had been ended or significantly lapsed, such as:
Contract Contract Contract Contractual Percentage details Duration Amount (IQD) date Of completion 30/6/2014 September 2015 Mustafa 2014 /1/ 6 274،870،000 180 days mosque –Abu 15% 15% Dashir 6 Rehabilitation 2014 /6/ 15 1،113،560،000 180 days of mosque of 4% 36% Imam Baqir/Karbala God’s greatest 2014 /4/ 3 224،225،000 200 days collector 23% 90% /Aldewania Husseiniat 2014 /4/ 6 314،980،000 210 days Misbah alhuda 34% 41% /Karbala
Recommendation: We recommend on completing the contracts on the specified time period through planning and follow up on these projects and taking the disciplinary actions for the delayed contractors. Also, we recommend compliance with Governmental Contracts Instructions no. (1) For the year 2008.
Management Response
Follow-up We noted that this point still valid.
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The Independent High Election Commission
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Findings
1. Financial Statements High Risk
Observation: During our audit, we noted that the Independent High Election Commission has been late in delivering the financial statements until our visit on 22/8/2016. They have not been prepared nor have been attested by the Federal Board of Supreme Audit, which is against the first chapter – (5) of the Regulations for implementing budget.
Recommendation: We recommend that it is necessary follow up with the Regulations for implementing budget, No. (7) and prepare the financials during the timeline in order to be reviewed, audited and attested by the Federal Board of Supreme Audit.
Management Response
Follow-up During our follow up, we noted that this point is still valid during 2015.
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Findings
2. Bank Reconciliation High Risk
Observation: During our review of the banking validation, we noted that there are outstanding and accumulated amounts since 2009 not settled until now.
Account no. Outstanding amount/IQD Currency
127 20,762,690 IQD
112 104,964,737 IQD
Not settling these outstanding amounts in the bank reconciliation is an evidence on how poor is the control over the bank accounts, which might lead to accumulated discrepancies between accounts of the commission and the bank.
Recommendation:
We recommend that it is necessary to fix these outstanding amounts, reconcile the accounts, and know the reasons behind these discrepancies in order to enhance the control procedures.
Management Response:
Follow-up During our follow up, we noted that this point is still valid during 2015.
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Findings
3. Records balances High Risk
Observation: During our review of the final trial balance as of December 2015, we noted that there are some account reflected in contrary to its accountancy nature because of the transmission of the opening balances during switching the system of the commission from grants into non- central, for example Other sundry deposits.
Recommendation: We recommend that it is necessary to record the required entries and implement the necessary procedures for these accounts in order to be reflected in its right nature.
Management Response:
Follow-up During our follow up, we noted that this point is still valid during 2015.
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Findings
4. Advances and Deposits Moderate Risk
Observation:
During our audit, we noted that there are deposits that belong to previous years IQD 4,468,979,910. In addition, we noted that there are accumulated advances that belong to previous years since 2008 that amounted to IQD 586,533,161, which violates the law of the council of ministers No. 37360 dated on 9/12/2009. The law states on settling the advances and the responsible party to enforce fines on the delay of settling the employees advances. The regulations stated that the fines enforced is amounted to (%7).
Recommendation: We recommend the Commission to implement the decision of the Ministries Council and work on settling the accumulated advances and deposits.
Management Response:
Follow-up During our follow up, we noted that this point is still valid during 2015.
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Ministry of Higher Education & Scientific Research
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Findings
1. Duties and responsibilities of internal control and audit section High Risk
Observation: During our review for the Ministry of Higher Education and the tasks and duties of the internal audit and control section, we have noted the following: 1. Absence of a comprehensive manual for internal control and financial procedures and policies for the Ministry. The ministry depends on specific instructions in the form of internal memos. 2. The internal audit and control section didn’t not perform review and analysis of closing financial data which are prepared by the financial section to ensure the accuracy of such data and submit any major variances between the previous year and the year subject to audit.
Recommendation: We recommend that the Ministry of Higher Education should perform the following: 1- Develop and apply written internal control policies and procedures which should cover all operating and financial activities in the Ministry. 2- Review the manual on a regular basis to ensure that is updated and appropriate to provide accounting and operating procedures manual for Ministry’s staff. 3- Perform detailed control procedures to ensure suitable and consistent application of policies and procedures manual.
Management Response:
Follow-up We noted that this point still valid during 2015
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Findings
2. Low projects completion rates High Risk
Observation: During our review for sample Ministry’s contracts, we noted a decrease in projects completion rates until our visit on 10 August 2015 whereas necessary procedures were not taken according to the government contracts implementation instructions no. 2 for the year 2014, whereas the Ministry sent suspension orders due to lack of sufficient financial allocations in 2014 and 2015. For example:
Contract Implementing Contract value Contract Contract Completion Company signing date Period/Days %
Construct Al Rawaby IQD 219.800.000.000 5July2012 720days 16% University Emirati Hospital (600 Company and beds)/ Baya Abraj Al Yaqoot Contracting Company
Construct Iraqi Valley Emirati IQD 79.800.000.000 18November 600days 17% Commission Company and 2012 for Computers Mediterranean and Company Informatics
Construct 4th Dimension IQD 245.276.500.00 16December 1125days 7% Teaching Company and 2012 Hospital (600 Al Benaa Al beds)/ Karbala Markazy Company
Construct Masaa Al IQD 199.500.000.000 16December 900days 0% Teaching Shamaael 2012 Hospital (600 Company and beds)/ Mosul Al Othman Company Recommendation: We recommend that the government contracts implementation instructions no. 2 for the year 2014 and take necessary procedures to urge the lagging project managements to expedite projects completion. Management Response: Follow-up We noted that this point still valid during 2015
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Findings
3. Contract for construction of halls for basic High Risk sciences/dentistry/Baya complex
Observation: During our review of the contract with Al Karam for construction of halls for basic sciences/dentistry/Baya complex, we have noted the following: 1. Low projects completion rates after the expire of the contract legal periods and additional extension periods granted to the company for 515 days ending on 17 July 2014 whereas the technical completion percentage until the date of our visit reached 60%. 2. Due to the lagging company and lack of seriousness in project completion, the Ministry withdrew works from the company on 26 August 2014. 3. The period 26 August 2014 until 1 July 2015 was considered as a project suspension period due to the delay in the actions taken by the Ministry. 4. The Ministry replicated the same action with the same lagging company on 25 December 2015 in violation of the government contracts implementation instructions no. 2 for the year 2014 (article 10.II.a,b,c,d). Recommendation: We recommend that the Ministry must adhere to the government contracts implementation instructions no. 2 for the year 2014 and take necessary legal actions to increase the percentage of projects completion.
Management Response:
Follow-up Record of the settlement have been prepared based on a decision of the General Secretariat of the Council Ministerial Decree (347) for the year 2015
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Findings
4. Educational hospital construction contract (600 beds) / High Risk University of Karbala
Observation: During our review of the teaching hospital construction contract (600 beds)/University of Karbala, we noted the following: 1. The Ministry signed the contract on 11 December 2012 for an amount of IQD 245.276.500.000. 2. The Ministry has provided a land lot adjacent to the university location which is not ready in terms of financial and legal aspects to implement the contract in violation of the government contracts implementation instructions no. 1 for the year 2008 (cancelled) and the government contracts implementation instructions no. 2 for the year 2014 (article 2.I.f,g). 3. The Ministry provided a new project location which is not ready in terms of technical and engineering aspects which required counting of suspension periods and inspection as well as the additional periods whereas the completion percentage reached 7% until the date of the visit on 20 September 2015. 4. Lack of contract priorities and lack of regular monitoring by the Ministry in cooperation with the University of Karbala.
Recommendation: We recommend that the Ministry must perform the following: 1- Adhere to the government contracts implementation instructions no. 2 for the year 2014. 2- Perform regular monitoring in cooperation with the university and complete the contract priorities.
Management Response:
Follow-up Record of the settlement have been prepared based on a decision of the General Secretariat of the Council Ministerial Decree (347) for the year 2015
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Findings
5. Establishing the Iraqi Commission for Information and Moderate Risk Computers project
Observation: During our follow-up to the priorities of the contract we have noted that the lack of readiness of the site in whole or in part in for work after signing the contract for a long period of time because of changing project site three times, causing delays in completion of the project as well as a change in the project designs in contrast to the regulations of government contracts execution No. 1 for the year 2008 article - 3-First: (e, f, g).
Recommendation: We recommend the ministry to comply with the regulations of government contracts execution No. 1 for the year 2008.
Management Response
Follow-up Record of the settlement have been prepared based on a decision of the General Secretariat of the Council Ministerial Decree (347) for the year 2015
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Ministry of High Education (Science & Technology)
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Findings
1. No organizational structure or formal job description Moderate Risk
Observation: Based on our review of the Ministry of Science and Technology, we have noted that the organizational structure which is prepared by the Ministry is not formally approved by the Ministry of Planning until the audit period in July 2015.
Recommendation: We recommend that the Ministry must develop and prepare an official organizational structure and job description at all levels across the Ministry, which should be approved by the Council of Ministers and the Ministry of Finance. The organizational structure and job description must have the following minimum requirements: Functional hierarchy across the Ministry. Executive responsibilities, direct assistants and approval authorities. Staff operating responsibilities and specific duties required for execution. Required administrative responsibilities with relevance to the functional performance. Any other duties deemed necessary by the Minister for execution under any conditions.
Management Response:
Follow-up We noted that this point still valid during 2015
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Findings
2. Low projects completion rates High Risk
Observation: During our review, we noted that some companies are lagging in completing the projects compared to the projects progress schedule although the Ministry has sent warning letters to urge such companies to expedite projects completion; however, there was no response.
The below table includes the details of delayed contracts and percentage of completion until the end of audit period in August 2015:
Commencement Project Project Company Completion % Contract value Date Period Construct Sada Al Tameer 23 March2014 540days %7.5 until 4 May 2.853.829.000 central Company for 2015 library Trade and building in Contracting Al-Jadriya Construct Iraqi 13April2014 700days %15 until 27 May 2.096.638.000 national Development 2015 control Group Company building in for Contracting Al-Jadriya Construct Sada Al Tameer 27May2014 540days %18.5 until 29 2.171.955.000 regions and Company for April2015 governorates Trade and building in Contracting Al-Jadriya Construct Al Moaeen Al 20May2014 500days %6 until 11 May 4.705.900.000 training Fadi Limited 2015 directorate Company for building in Contracting Al-Jadriya
Recommendation: We recommend that repressive procedures must be taken against the lagging companies, e.g. withdrawal of works, blacklisting companies and other procedures which result from breach of contract articles as per the contracts implementation instructions (chapter 9-10) of the government contracts implementation instructions no. 2 for the year 2014. Management Response:
Follow-up Record of the settlement have been prepared based on a decision of the General Secretariat of the Council Ministerial Decree (347) for the year 2015
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Findings
3. Non-readiness of work sites High Risk
Observation: During our review for the project of the construction of a ( central library building for the Ministry of Science and Technology in Al-Jadriya ), we noted that there is a dispute regarding the ownership of the land of the project between the Ministry of Science and Technology and the Ministry of Construction and Housing – Department of Construction Research. As a result, the work on the project was suspended for over a month. The following table illustrates the contract details: Project Awarded Company Contract value - Project Period IQD Construct central library Sada Al Tameer Company 2.853.829.000 540days building in Al-Jadriya for Trade
Recommendation: We recommend that the lands for project sites must be ready to start construction by the companies as per the government contracts implementation instructions no. 2 for the year 2014 (article 2.I.g).
Management Response:
Follow-up Record of the settlement have been prepared based on a decision of the General Secretariat of the Council Ministerial Decree (347) for the year 2015
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Findings
4. Ministry’s staff structure Moderate Risk
Observation: During our review, we noted that the Ministry of Science and Technology has not submitted the staff structure for the year 2014 to the Ministry of Finance for approval until the start of the audit period in July 2015 since the Ministry of Finance did not request such structure from the Ministry and its affiliate departments for approval.
Recommendation: We recommend that the Ministry must follow up with the Ministry of Finance to get its approval on the staff structure for the Ministry and its affiliate departments to ensure efficient control over current staffing which was approved by the Ministry of Finance as per the provisions of article 8 of the employee’s law no. 25 for the year 1960.
Management Response:
Follow-up We noted that this point still valid during 2015
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Findings
5. Financial data Moderate Risk
Observation: During our review, we noted that the Ministry’s closing financial statements have not been approved by the Federal Bureau of Supreme Audit until the date of the audit period in July 2015 despite being submitted for approval on 28 February 2015.
Recommendation: We recommend that the Ministry must follow up with the Federal Bureau of Supreme Audit for the approval of the Ministry’s closing financial statements – clause 5, which require the submission of accounts for the year 2014 no later than 31 January 2015 for audit and control purposes.
Management Response:
Follow-up We noted that this point still valid during 2015
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Findings
6. Verification against Ministry of Finance records Moderate Risk
Observation: During our review, we noted that the Ministry does not perform monthly verifications with the Ministry of Finance in terms of the amounts received from the Ministry of Finance for both Ministry’s investment and operating budgets.
The main objective of these verifications is to identify the Ministry’s available financial resources as per the formerly approved budget. Identifying available financial resources helps to ensure the flow of work according to investment and operating budgets.
Recommendation: We recommend that the Ministry must perform monthly verifications with the Ministry of Finance to ensure receipt of accurate amounts as per the allocations to the Ministry to ensure the availability of financial resources in a timely manner to repay the Ministry’s operating and investment liabilities and avoid any possible errors and resolve them in a timely manner. Management Response:
Follow-up We noted that this point still valid during 2015
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Ministry of Labor and Social Work
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Findings
1. Labor section and vocational training building construction in High Risk Babel
Observation: During our review of the labour section and vocational training building construction in Babel, we noted the following: 1. The contract was awarded to Jazeeerat Al Akraam Construction Contracting Company on 16 February 2010 at an amount of IQD 1.928.917.500 over an implementation period of 22 months, the company was lagging in implementing the project. The actual completion percentage was 41.5% from the project handover date until the Ministry withdrew the project from the company on 15 January 2012. 2. The decision to withdraw the project from Jazeerat Al Akarem Construction Contracting Company was cancelled on 29 July 2013 according to the decree of the Reconstruction and Services Ministerial Committee ref. (46C4/203) dated 12/6/2013 as an exception from the updated government contracts implementation instructions no. 1 for the year 2008 whereas the company was granted an additional extension of 12 months by means of an internal memo on 22/7/2013 to complete remaining works. 3. The project was withdrawn for the second time from Jazeerat Al Akarem Construction Contracting Company on 26 April 2015 because the contractor exhausted all legal procedures and granted extension without making any progress whereas the completion percentage until 1 July 2015 was 60%.
Giving Jazeerat Al Akarem Construction Contracting Company several extensions to increase the completion percentage and withdrawing followed by re-awarding the project has incurred additional effort and time to the Ministry as well as delay in completion of vital and critical projects.
Recommendation: We recommend that the Ministry should apply efficient monitoring of the contracted companies and taking up firm actions to the lagging companies since such projects are important for the public interest.
Management Response:
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings
2. Supply contract for 9 welding workshops supply High Risk
Observation: During our review of the supply contract for 9 welding workshops which was awarded to Rawaet Bilad Al Rafedeen General Contracting Company for an amount of IQD 9.050.270.850, we noted the following: 1. 50% of the supplied material are of an origin which is different from the one mentioned in the contract. 2. Shortage in supplies. 3. Submitted certificates of origin do not include the serial numbers of the supplied devices and equipment. A decision was issued to withdraw works from Rawaet Bilad Al Rafedeen General Contracting Company on 17 February 2015 whereas the Ministry did not pay any amounts to the supply company.
Recommendation: We recommend that companies must be selected based on efficiency, experience and competency to implement awarded contracts in the required manner in addition to studying the necessary specifications and other requirements to implement the contract in an accurate manner to avoid any changes during supply which is not consistent with the signed contract. We also recommend that supplied material must be carefully inspected on delivery to ensure that they are consistent with the specifications set in the signed contract.
Management Response:
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Findings
3. Beneficiaries data updating High Risk
Observation: During our review of the sample beneficiaries in the Women Care Department, we noted that the department has not updated the database since 2004 until the end of our visit on 7 August 2015. The following table illustrates examples of such incidents: Beneficiary Application Government ID no. Beneficiary Application Government ID Date Date no. Fathia Hassan 110711667304 Fardous Hadi 110504423804 4/4/2004 14/10/2008 Breisem Najeel Zainab Shaker 111935092209 Khazna Abdullah 111910309100 5/8/2008 3/1/2009 Gabr Gabr Farha Mohamed 110551832309 Sameera Gawad 111935428003 1/5/2004 1/6/2006 Yadeem Kazem Batool Qasim 113734125009 Montaha Gloub 110010418403 1/4/2005 1/6/2006 Rady Gayara Azraa Hassan 113911580508 Nedal Abdul 111911810800 2/5/2004 1/1/2004 Brak Khaliq Bdullah Najat Kareem 114136878909 Gamila Toeima 110734376210 20/11/2004 1/1/2006 Abtan Yaseer Meriam Iwan 110110495405 Safia Kareem 111910265409 12/1/2006 1/10/2006 Rostom Khalil Nisreen Dary 116536963503 Sadiyah Neamah 1140353311502 16/9/2005 1/10/2006 Ziyara Fahd Anwar Mangal 110543497002 Wazira Raheem 113557344097 23/12/2010 2/12/2012 Zegheir Hassan Iman Hashim 110310855102 Idal Rishk 114010279405 1/12/2006 28/10/2010 Hussein Shinkgar Khamisa Ahmed 110334709502 Rusl Sabah Saad 113671513019 16/12/2007 24/4/2014 Saleh Amal Sohiyoud 113510589802 Haifaa Hassan 23/4/2014 113678939098 1/12/2006 Layeh Hamoud Failure to update the beneficiaries database is considered a weakness point in the internal control system which may have financial impacts that could easily be avoided in the event of database regular updating. Recommendation: We recommend that the Ministry must update the beneficiaries database on a regular basis to ensure control and monitoring or allocated funds. Management Response: Follow-up During 2015, the ministry updates the beneficiaries in the private data records have not yet seen them due to be sent to the Ministry of Planning.
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Findings
4. Supply contract for refrigerators, air-conditioners and water High Risk coolers
Observation: During our review of the supply contract of refrigerators, air-conditioners and water coolers with Shams Al Watan Company dated 29/10/2014 with an amount of IQD 986.100.000 for supply of the aforementioned items within 90 days, we noted that the company did not supply such items during the stipulated contractual period since the initial supply was made on 26/5/2015 which is 5 months after the end of the contract period.
Recommendation: We recommend that the Ministry must urge suppliers to adhere to the contractual periods and apply efficient monitoring and follow up with the supplying companies to avoid any delay in implementing contracts.
Management Response:
Follow-up During our visit to the ministry show that the note still continuing were to stop work due to lack of liquidity and the economic situation of the country and in implementation of the decision of Council of Ministers No. 347.
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Ministry of Health Ministry Headquarter
91 |
Findings
1. Approval of financial records and closing statements. Moderate Risk
Observation: During our review of the Ministry HQ, we noted the following: 1. Ministry Final Accounts of 2014 are not prepared and sent to the Federal Board of Supreme Audit for verification and approval until audit period in October 2015. 2. Unification/consolidation record for year 2014 is not approved by The Ministry of Finance the until the audit period in October 2015.
Recommendation:
- We recommend that the Ministry should comply with the Regulations for Implementing the federal budget of 2013 , First Section – Paragraph Five. - We recommend that the Ministry should follow up with the Ministry of Finance to approve the unification/consolidation record.
Management Response:
Follow-up
We noted that this point still valid during 2015.
92 |
Findings
2. Coordination obstacles and weaknesses High Risk
Observation: During our review of the project of establishing a teaching hospital with capacity 400 bed, we noted that there are various restrictions and troubles that the project face. Accordingly, the Ministry of Health and General Secretariat for the Council of Ministries are obliged to grant additional periods as a result of such restrictions to be described in the table below. Such significant restrictions are as follows: - Weakness of logistic procedures with the supporting Ministries especially facilitating foreigner employees, materials, equipment entrance and providing infrastructure sources such as electricity , water etc.. - Delay in obtaining material examination results in addition to in accurate results due to non-readiness of laboratories to examine materials. - Non-readiness of work site and illegal obstacles in work location such as stores or random buildings. - Delay in obtaining the consultancy firm approval on the initial plans. The tables below describe contracts’ details of the project above and related achievement percentages until October 2015: Additional Planned Actual Execution Contract Contract name Company name Work date periods granted achievement achievement period amount date percentage Construct a teaching (Universal 1 July 2009 900 days 1475 days 30 November 89% 150.000.000 hospital with capacity Ajansan) / 2015 USD of 400 bed in Basra Turkish Governorate Company
Construct a teaching (Universal 1 July 2009 900 days 1475 days 30 November 89% 150.000.000 hospital with capacity Ajansan) / 2015 USD of 400 bed in Dhi Qar Turkish Governorate Company Construct a teaching (Universal 1 July 2009 900 days 1383days 30 September 94% 150.000.000 hospital with capacity Ajansan) / 2015 USD of 400 bed in Babil Turkish Governorate Company Construct a teaching (Universal 1 July 2009 900 days 1475 days 30 November 89% 150.000.000 hospital with capacity of Ajansan) / 2015 USD 400 bed in Karbala Turkish Governorate Company Establish a teaching (Universal 1 July 2009 900 days 1475 days 30 November 87% 150.000.000 hospital with capacity of Ajansan) / 2015 USD 400 bed in Maysan Turkish Governorate Company Construct a teaching German (GMS ) 2 July 2009 915 days 1367 days 30 November 88% 148.500.000 hospital with capacity of Company 2015 USD 400 bed in Najaf Governorate Recommendation: We recommend that The Ministry and stakeholders should remove all the obstacles that prevent project execution and should coordinate with the other governmental bodies with relative competency which will facilitate work in the respective locations. Management Response:
Follow-up
We noted that this point still valid.
93 |
Ministry of Health State Company for Marketing Drugs and Medical Appliances (Kimadia)
94 |
Findings
1. Breach of contract terms in addition to non-utilization of High Risk the whole supplied quantity Observation: During our review of the contract No. 4/2007/4 of preparing medicines we noted the following:
- The agreed quantities mentioned in the terms of contract are not fully supplied, as the quantity of Exidrain Elixir mentioned in the contract is 285.000 bottle while the received quantity is 15.024 bottles only. Also the quantity of Allirain Syr mentioned in the contract is 800.000 bottles while the received quantity is 19.360 bottles only until the audit period in October 2015
- There were quantities failed in the examination and were not in conformity with the required specifications of the Salorain solution 100ml with quantity of 26.520 bottle, but the provider didn’t compensate this quantity according to the terms of contract until the audit period in October 2015. - Metharain susp with quantity of 2.741 bottle is expired due to lack of marketing during the validity date.
- The table below illustrates the contract details as follows: Contract Name Company Name Contract Contract signing Execution period amount date Contract No. Al Nahrain limited 4.037.875.000 11 December 2006 12 months 4-2007-4 for medicine IQD Medicine preparation
Recommendation:
- We recommend that the Ministry should take repressive measures against the lagging companies in terms of preparation of all the agreed terms. The supplier shall be responsible for all damages resulted from his incompliance with contract terms. We also recommend that the Ministry should insert such suppliers or companies in the black list and any should be responsible for any other measures resulted from violation of the terms of contract. This is referred Section Nine and Ten of Regulations for Implementing Government Contracts No. (2) of 2014.
- We recommend that the Ministry should track the validity of the substances located in the warehouses to avoid any damages occurred and achieve the maximum use of them in addition to propagating them in the appropriate time to avoid any damages implications due to weak propagation and storage.
Management Response:
Follow-up During our follow-up shows that the ministry has filed a lawsuit on the company executing procedures has not been resolved a legal issue during 2015.
95 |
Findings
2. Delay in preparation High Risk Observation: During our review of the contract No. 98/2009/338, we noted lagging in preparation of materials in contrast to the preparation period mentioned in the contract. Although Kimadia sent warning letters and urged the supplying company to quickly prepare materials but no response noted. Delay in preparation of materials leads to delay in providing medical services to citizens and will impact the individuals needs of these materials. Taking into consideration that the shipments receipt dates are as follows: - The first shipment is in 7 October 2010. - The second shipment is in 15 August 2011. - The third shipment is in 27 December 2011. - The fourth and fifth shipment is in 8 July 2012. The sixth shipment is not prepared until the audit period in October 2015. -
The table below illustrates the contract details as follows: Informing of letter of Execution Contract Contract name Company name credit Observation period amount opening date Contract No Britannia 17 May 16 6.010.000 5 shipments are 98/2009/338 Medical LTD. 2010 months USD prepared out of 6 Preparation of until the audit period blood bags (mono in October 2015, the and quartet bags) amount of the remaining shipment is 674.924 USD
Recommendation: We recommend that the Ministry should apply deterrent measures against the lagging companies. Accordingly, the supplier shall bear the responsibility of the resulted damages due to incompliance with the contract terms in addition to putting the suppliers or companies in the black list. Other measures shall be taken as stated in the Regulations for Implementing Government Contracts No 2 of 2014 Section Nine and Ten.
Management Response:
Follow-up During our follow-up shows that the ministry has filed a lawsuit on the company executing procedures has not been resolved a legal issue during 2015.
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Findings
3. Materials which have failed inspection and delay in sending High Risk materials and inspection procedures
Observation: During our review of contract No. 98/2012/105, we noted that the contract execution period is 6 months from the date of informing the supplier of the letter of credit. The first shipment should be prepared within 3 months of informing the supplier of the letter of credit and the second shipment within 3 months of the first shipment preparation. The supplier is informed of the letter of credit in 13 December 2012. The first shipment was delivered to the warehouse in 7 March 2013, then it was sent for inspection and clinical examination in 8 may 2013. In 22 May 2013 the inspection results showed that the materials, which are sent to the Medical Appliances Import Section - the section appointed to follow up the contract and preparation procedures in 29 July 2013, are invalid. While the second shipment is prepared and sent to the warehouse in 22 May 2013, accordingly a sample is sent for inspection and clinical examination in 18 June 2013, However in 6 August 2013 the results showed that the materials are also invalid. The delay in procedures of sending the materials for examination and verification leads to delay in displaying the result of the first shipment after the preparation period and delivering the second shipment to the warehouses which also leads to delaying in informing the supplier of the examination results. Accordingly, the supplier refused to compensate the materials as the contract terms stipulate on that the compensation should paid be during the preparation period. As quickly the materials sent for examination, achieve the examination procedures and inform the supplier of the examination results will help Kimadia to claim compensation from the suppliers for the invalid materials during the preparation period and according to the terms of the concluded contract between the two parties. So, if the materials sent and verified against the first shipment immediately, the Company will be capable of asking the supplier to stop the following shipments until the invalid quantity is compensated within the preparation period. The table below illustrates the contract details as follows: Contract Name Company Name Contract Contract Enforcement amount signing date period Contract No. 98/2012/105, preparation Ghatwary Medical 1.273.434 23 September 6 months of 282922 bottles to secure the patients supply (GMS) USD 2012 stool and urines samples for examination purposes.
Recommendation: We recommend that the Ministry should immediately send, complete the examination procedures, match samples and issue the final report which contains examination and matching results to ensure that the shipment received is consistent with the agreed specifications mentioned in the contract. We also recommend that the Ministry should inform the supplier with the examination results immediately to compensate the invalid quantity within the agreed period stated in the contract. Further the supplier should be informed of not shipping the remaining shipments until issuance of examination and verification report which will save time and flexibility to change the materials specifications in case the materials proved to be invalid in the examination and verification report as per terms of contract.
Management Response: Follow-up During our follow-up shows that the ministry has filed a lawsuit on the company executing procedures has not been resolved a legal issue during 2015.
97 |
Findings
4. Inaccurate procedures for inspection and verification of High Risk received materials
Observation: During our review of contract No. 82/2007/165/2, we noted that some of the received materials are clinically invalid and not consistent with the approved international standards specifications as per the Advisory Committee of kidney disease opinion in many hospitals of artificial kidney centers, although Kimadia has examined these materials in the laboratory and the materials proved to be valid. After receiving the materials and after the laboratory examination success, Kimadia paid 80% of the contract amount and as per the contract terms. However, after proving that these materials are invalid during the clinical examinations, Kimadia filed a lawsuit against the supplier to compensate the invalid materials but the judgment is not issued until the audit period. These materials need to be accurately examined many times to ensure validity and conformity with the approved international standards specifications. Adopting various approach in examining these materials is important, they can include either laboratory examinations and clinical examinations prior distribution in the hospitals and monitor their effect until it is fully verified. The table below illustrates the contract details as follows: Execution Contract Contract Name Company Name period Amount Contract No. 82/2007/165/2 for Taishi/ Japanese 3 months 1.099.607 artificial kidney preparation. Company USD
Recommendation: We recommend that the Ministry should: -Process accurate and various testings such as laboratory and clinical examinations as they have special mixtures, prior to sending them to hospitals and monitor their effect to fully ensure it is fully verified -Paying no amounts to the supplier prior to ensuring prepared materials validity by the laboratory and clinical and other examinations to ensure Kimadia’s right and avoid any disputes with suppliers which could file lawsuits to settle such disputes.
Management Response:
Follow-up During our follow-up shows that the ministry has filed a lawsuit on the company executing procedures has not been resolved a legal issue during 2015.
98 |
Findings
5. Inaccurate feasibility studies for supply contracts and non- High Risk verification of usage efficiency Observation: During our review of contract No. (82/2004/533/1) and contract No. (82/2007/606), we noted that Kiamdia concluded a contract no (82/2004/533/1) with Baxter Company to import appliances of Peritoneal dialysis for renal disease home use in August 2005. These appliances are supplied to Kiamdia in February 2006 but they are not used due to unavailability of the solutions and medical necessities, so Kiamdia was led to conclude another contract No. 82/2007/606 in December 2009 to prepare solutions and medical necessities required to set up these appliances. In march 2010, a letter is received from the Iraqi Consulate- North and south American and Carrabin Department describes that the US Food and Drug Administration informed Iraqi Embassy that Baxter Company may export appliance to Iraq which could lead to renal failure as they have defect which may cause death or any complications after use. Accordingly Kiamdia informed the supplier of this issue and asked the supplier to withdraw these appliances to fix this defect in 17 April 2011, then the appliances were withdrawn to the company headquarter in Dubai – United Arab Emirates in 16 February 2012 and these appliances weren’t sent back to Iraq until the audit period. The delay in withdrawing and repairing the appliances leads to expiry of the contracted operational requirements with Contract No. 82/2007/606 without getting use of them. The table below illustrates the contract details as follows: Execution Contract Name Company Name Contract Amount Period Contract No.82/2004/533/1 Peritoneal Baxter AG 4 months 209.428 dialysis appliances preparation USD Contract No. 82/2007/606 preparation Dallah Medical Company 3 months 515.350 of solutions and operational USD requirements of the Peritoneal dialysis appliances
Recommendation: We recommend that Kiamdia should: -Conclude a contract which includes medical appliances preparation along with the operational requirements without dividing them into more than one contract to ensure supplying and operating them in the same time to achieve maximum benefit of the preparation contract to serve the public interest. - Examine these appliances clinically and by laboratory and ensure that they pass the examinations and test by a technical competent committee.
Management Response:
Follow-up During our follow-up shows that the ministry has filed a lawsuit on the company executing procedures has not been resolved a legal issue during 2015.
99 |
Ministry of Culture
100 |
Findings
1. Baghdad, The capital of Arab Culture Project High Risk
Observation: During our review of the Baghdad, The capital of Arab Culture Project, we noted the following: A. This project initiated in 2011 and included twenty construction and rehabilitation projects with assumed amount of 479.250.000.000 IQD. This project was planned to be completed in March 2013, while 13 projects were cancelled. Accordingly the cancelled projects allocations were transferred to the remaining nine projects taking into consideration that five of these projects were listed in the lagging projects. B. One of the projects executed within Baghdad, The capital of Arab Culture Project is Grand Festivities Square buildings restoration and the surrounded gardens with accumulated amount of 6.892.530.311 IQD, taking into consideration that the Grand Festivities Square is located in the closed international area. Cancelling projects, reallocating the related amounts and delaying in executing projects indicate absence of feasibility study priorities and lack of maximum use of these projects.
Initiation Completion Contract date percentage Executing amount/ Completion Contract name in 15 company million period/day September Dinar 2015 Construct Iraqi Rotam / 7/10/2012 169.650 540 5% opera house and Turkish culture center Company
Restoration of The contract may not reassigned Cinema, theater and AL Rasheed theater Develop the Hawazen 1/8/2013 2,000 240 100% national museum Al.Jazira for Contemporary for art in the MOC contracting headquarter Fine arts Nwadar AL 25/10/2011 3.000 240 100% Institution/ministry badya for of education contracting company Restore and (6) 20/10/2011 5.000 150 days 96% rehabilitate companies theaters and libraries (40) schools/MOE
101 |
Findings
Grand Festivals LNGNASA / 13/11/2011 8.000 180 99% Square buildings Malaysian restoration and Company the surrounded gardens Establish cultural Hawazen 1/4/2012 31.500 240 100% city for kids in Al Al.Jazira Zawraa for contracting
Recommendation:
We recommend that if MOC intends to plan any projects, they have to include actual beneficiary taking into account the financial situations and achievement capabilities.
Management Response:
Follow-up We noted that this point still valid during 2015.
102 |
Findings
2. Settlement of receivable amounts on Iran's Hajj and Pilgrimage Moderate Risk Organization
Observation: The debts accrued on the Iranian pilgrimage Organization for MOC tourism Authority are 12.254.640 USD, they include visa fees for Iranian visitors and these amounts are recorded as due accruals on this Organization and not paid until now. According to the agreement with Iranian pilgrimage Organization concluded in 2005 and enforced until 2008, Iranian visa fees weren’t paid in cash otherwise they were recorded as receivables on the Organization. Further Iran didn’t pay the due amounts to Iraq and also didn’t reply on the Iraqi claims regarding due amounts payment or to negotiate this matter. Taking into account that the last correspondences sent from the Tourism and Antiquities authority to the Ministry of foreign affairs was on 5 February 2014.
Recommendation: We recommend that MOC shall follow up with Iran to collect due amounts which will have significant impact on MOC revenues.
Management Response:
Follow-up We noted that this point still valid during 2015.
103 |
Findings
3. Unpaid accrued debts to Al Rasheed hotel High Risk
Observation: The debts due on coalition forces for Al Rasheed Hotel affiliated to MOC Tourism authority are 43.136.736 USD since 2004 however they are not paid yet. Taking into consideration that the latest correspondences sent from the secretariat general to the Ministry of Foreign Affairs, as per the Ministry of Tourism letter NO. 5700 in 11/6/2014, to be acquainted with the procedures taken in this regard was in the letter No. 29755/11/1/2/g dated 17 September 2014.
Recommendation: We recommend that MOC should follow up these amounts with the respective entities for collection purposes.
Management response:
Follow-up We noted that this point still valid during 2015.
104 |
Findings
4. Realized deficit in self-finance departments High Risk
Observation: According to the financial statements issued by MOC Self-Finance Departments indicates annual accumulated deficit that exceeds the departments capital. MOC pays the employees expenses and other operational expenses. The below tables shows the accumulated deficit as per the financial statements as in 31 December 2014 as follows:
Deficiency Deficit amount/ Department Capital/IQD percentage against IQD capital
Tourism Authority 1.200.000.000 3.148.058.237 262%
Cinema and Theater 167.723.790 18.386.081.358 10962% department Culture affairs department 15.000.000 498.085.634 3321%
General arts department 15.303.513 6.522.868.477 42623%
Recommendation We recommend the Ministry should review the financial position of these departments and identify the loss reasons despite the fact that these department are performing the normal activities and achieving revenues, especially the Tourism authority. We also recommend to highlight the activities that increase revenues to cover all expenses instead of being a burden on the federal budget.
Management Response:
Follow-up We noted that this point still valid.
105 |
Findings
5. Official documents of dismissed politicians High Risk
Observation: During our visit to MOC, we noted that the amount 3.582.494.585 IQD represents some employees’ salaries who are returned to work under the description of dismissed politicians, however MOC proved forgery of official documents submitted for re-designating these employees to their jobs.
Recommendation: We recommend that the Ministry should: – Verify and ensure validity of the official documents submitted by the applicants to work with MOC. – Follow up on the amounts due from those employees who were terminated .
Management Response:
Follow-up We noted that this point still valid.
106 |
Findings
6. Non-readiness of work sites High Risk
Observation: During our review of contracts samples, we noted that MOC signed various contracts prior to ensuring readiness of work site, which consequently led to delay in commencing and suspending work for a long time without any reason. This represents a violation of Regulations for Implementing Government Contracts No. 1 of 2008 (Article 3/E-F-G-H), and Regulations No. 2 of 2014 (Article 2/ F-G-H) such as the following:
Obstacles types Delay Project Name Company Name period/months Digital library Ice House Handles There is a building (Kamel Shaiaa 12 construction Bolag Company Hall) on the land lot. project Ancient Tall Harmal General authority for Residential buildings and sewage 13 restoration project antiquities and water leakage on the work site heritage Fili culture center National center for Allocating Ministry of Finance 33 project engineering land plot , electrical power consultancies generator (5 generators)
Recommendation: We recommend that the MOC should ensure work that the site is ready prior to initiating contracting procedures with companies as per Regulations for Implementing Government Contracts.
Management Response:
Follow-up We noted that this point still valid.
107 |
Findings
7. Project for rehabilitation of Baghdad tourist island – Phase High Risk 3
Observation: During our review Project for rehabilitation of Baghdad tourist island awarded to AL Anwar for General contracting limited Group with amount of 1.933.831.500 IQD, the project duration is one year from the date of contract signing in 20 February 2008, we noted the following
1. The executing company was lagging in executing project, MOC had to stop work and formed an expediting commission in 14 December 2011 to perform the remaining part of the project as the completion percentage reached 71%, however the committee initiated work in 12 January 2013.
2. The expediting commission appointed to track the work progress delayed in settling advance payments granted by MOC, this resulted in damage of materials located on the work site due to being left for a long time in addition to inappropriate storage of the same which cause significant loss for the project.
3. The expediting commission work is terminated on 22 December 2015 due to transferring this project to Ministry of Investment, taking into consideration that the accumulated expenses of this project until our visit in 22 October 2015 are 2.603 million IQD.
Recommendation: We recommend that the Ministry should: 1- Send contracts to high professional companies that have the technical and financial capabilities to execute projects. 2- Expedite the settlement of the advance Payments to avoid delay of the expediting commission activities and any associated damages. 3- Prepare a feasibility study to compare between the tourism facilities rehabilitation by the MOC or to be presented for investment instead of incurring additional financial loss by the Ministry.
Management Response:
Follow-up We noted that this point still valid during 2015.
108 |
Findings
8. Opera house and cultural complex construction project High Risk
Observation: During our review of opera house and culture complex construction project, we noted the following:
1. MOC is contracted with Rotam - Turkish Company for constructions, industry, trade, and external trade in 15 December 2011. The project duration was 18 months with amount of 169.650.000.000 IQD and the project was initiated in 29 December 2011, however the executing company delayed in project execution. Despite lagging from the executing company side, the execution period is extended for eighteen months dated 23 July 2013.
2. Obstacles and violations in work sites by non-government organizations (Syndicate of Journalists and artists) which resulted in delay in work initiation for 17 months.
3. A warning letter was sent to the company in 26 February 2014 due to continuous lagging and non-responding to correspondences. However MOC didn’t withdraw business from the company directly despite the low completion percentage. Finally a decision for withdrawing business from the lagging company is issued in 2 April 2014.
4. The decision for withdrawing business from Rotam Company is cancelled in 17 September 2014 and an additional period is permitted for 100 days to prove it’s goodwill to implement the contract. The completion percentage during the extension is 1%, accordingly business is withdrawn again in 28 December 2014. So the actual completion percentage of Rotam - Turkish Company is 5% of the date of project initiation until the date of withdrawing the work.
Withdrawing the work from Rotam Company, cancellation of the same and giving additional period have required time and efforts from MOC and delayed the project completion.
Recommendation: We recommend that MOC should follow up with the contracting companies effectively and not allowing these companies to delay their assigned projects. MOC shall also take repressive measures against the lagging companies and included them in the black list.
Management Response:
Follow-up Been taken to withdraw work against the company implemented measures and is now within the legal proceedings
109 |
Findings
9. Weak internal control and audit tasks Moderate Risk
Observation: During our visit to MOC internal Audit Department, we noted that the department consists of 27 employees, 11 of them don’t have specialized certificates in the field of accounting and audit required to work in this department but having the following : Bachelor degree of Sociology, preparatory /commerce section, preparatory /science section, bachelor degree of computer science, bachelor degree of language, bachelor degree of design, preparatory /industry section, literate, bachelor degree of agriculture
Recommendation: We recommend that MOC should pay more attention to this department as it is considered as a main source for directing business activities and highlight any error before occurrence and follow the corrective solutions regarding previous errors.
Management Response
Follow-up We noted that this point still valid during 2015.
110 |
Ministry of Transportation Ministry Headquarter
111 |
Findings
1. Lack of documents for loans, deposits and debtors High Risk
Observation:
During our visit to the Ministry of Transportation-Ministry HQ, we noted that the Ministry sent letter ref. 24439 dated 1 September 2014 to the Ministry of Finance/Decentralized Accounting Department, requesting the provision of entries reconciliation for the suspended loans in the Ministry’s records due to the unavailability of documents for loans, deposits and creditors. As per this letter, the reason for wasting such documents is due to the security situation and ministry’s relocation to a new site. The Ministry of Finance/Decentralized Accounting Department sent letter ref. 904 dated 14 September illustrating the listed Observation in the financial statements audit as per the entries recorded in the annual unified accounts record of the Ministry of Transportation for the year 2014 which include the following: A-Suspended balances in the advances account as per the lists below:
Balance as on 31 December Details 2014/IQD Other temporary advances 28.198.466.610 Committees advances 4.163.197.539 Letters of Credit advances 800.000.000 Delegation advances 190.552.645 Permanent advances for maintenance 69.990.000 Advances for machinery and equipment 27.455.000 Permanent advances for procurement committees 22.642.300 purposes Permanent advances for gas purchase 10.849.500 Advertising advances 7.568.875 Travel advances 4.835.400 Salary advances 1.564.000 Hajj advances 472.000 Permanent advances for petty cash 150.000
112 |
Findings
B- Suspended balances in the deposits and creditors account as per the lists below:
Balance as on 31 December Details 2014/IQD Other variable deposits 12.252.682.104 Distribution deposits 210.729.048 Rasheed Bank 25.049.335 Rafidain Bank 18.589.325 Salaries creditors and refunded payroll 9.996.794 Taxes deposits 6.297.210 Real estate bank 1.048.960
Recommendation: We recommend that the Ministry must form a committee for facts finding of loss of advances documents since due to the security situation and the relocation of the Ministry to a new location is not a proper justification to waste such entries and documents. We recommend that the advances account as well as the suspended balances for deposits and creditors accounts must be reconciled as soon as possible.
Management Response:
Follow-up We noted that this point still valid during 2015.
113 |
Findings
Ministry of Transportation General Establishment of Civil Aviation
114 |
Findings
1. Supply, installation and operation of 6 flyovers in Baghdad High Risk international airport / Babel terminal
Observation: Despite the one year delay in the project for the supply, installation and operation of 6 flyovers in Baghdad international airport / Nineveh terminal compared to the original contract period which is implemented by Adelete Company – Spain in collaboration with Belady Company for Jordan Aviation Airlines, the contract for supply, installation and operation of 6 air bridges in Baghdad international airport / Babel terminal was awarded to the same company.
The contract was signed with the abovementioned company for a value of $ 7.699.998 through changing the contract method from direct invitation to single bid. According to the letter ref. 12409 of the General Establishment of Civil Aviation dated 29 October 2013, which is addressed to the Technical Deputy Minister’s office, stating the following contract details:
1. The Minister approved sending direct tender invitations to specialized companies as per the letter of the Ministry of Transportation/Contracts and Permits Department, ref. 22428 dated 26/6/2013.
2. During the invitations stage and before the deadline for submitting financial and technical bids, the Ministry of Transportation submitted a request to the services and reconstruction committee in the Council of Ministers to send an exclusive invitation to Adelte Company – Spain in collaboration with Belady (single bid).
3. The committee issued its approval according to the letter Deputy Prime Minister for Reconstruction and Housing Affairs, ref. 12/2001 dated 21/8/2013 for the single bid to Adelte Company – Spain in collaboration with Belady.
4. The Company was contacted to submit its technical and financial bid with the same amount of the previous Nineveh bridges contract ($ 7.200.000).
5. The company refused to submit its bid for the Babel terminal for $ 7.200.000 and insisted to submit its bid for $ 8.250.000 in addition to a request to be officially awarded the tender of Karbala terminal to Adelte Company by the Ministry of Transportation.
6. Instructions were issued to proceed with the bids analysis and study and the bids analysis committee issued its recommendation on 12/9/2013 to award the bid to Thyssen company for $ 7.782.725 for 14 months implementation .
7. The awarding decision for Thyssen was not approved whereas new bids opening minutes were sent on 14/10/2013 based on the single bid for Adelte Company – Spain in collaboration with Belady of Jordan Aviation Airlines
8. The bids opening committee chairman sent letter ref. 28 dated 21/10/2013 to the General Director of the General Establishment of Civil Aviation which indicates the violation of instructions due to having two invitations and two minutes for bids
115 |
Findings
openings for the same tender whereas no response was communicated to cancel the previous invitation and approve the new invitation (single bid).
9. On 18/11/2013, the bid was awarded to Adelte Company – Spain in collaboration with Belady for $ 7.699.998. 10. The project is in the supply stage whereas delay penalties have already been applied on 27/5/2015 according to the latest updated for the contracts which was prepared by the General Establishment of Civil Aviation on 1/9/2015.
Recommendation: We recommend that the General Establishment of Civil Aviation: - Contracts awarding must be made to highly efficient specialized companies whereas no awarding must be made to the lagging companies with previous history.
Management Response:
Follow-up We noted that this point still valid The inadequacy of justifications offered by administration as well as the ratio of the actual achievement of the project above the percentage of 58% as at December 31, 2015.
116 |
Findings
2. Basra international airport generators supply contract High Risk
Observation: During our study of Basra international airport generators supply contract signed on 14/11/2011 with Ibn Alwaleed State General Company/ a formation of the Ministry of Industry and Minerals, we have noted that the contract was not completed and was still in progress until 31 December 2014 as per the latest update for in progress projects by the General Establishment of Civil Aviation. During our study, we have noted the following: 1. Contract was signed for the value of IQD 9.170.500.000 2. Project completion period is 11 months starting from the day of receiving the advance payment. 3. Advance payment was released in 2011 which is equivalent to 70%. 4. Ibn Alwaleed State General Company signed a contract on 15/1/2013 for a value of $ 6.570.076 with Unatrac Limited – UK to supply necessary generators for Basra International Airport in violation of article 19 in the contract signed between the General Establishment of Civil Aviation and Ibn Alwaleed State General Company which stipulates that “the Second Party shall not sell or waive the contract in full or in part to any third party.” 5. The report of the supervision committee for Basra International Airport which was formed to supervise the generators supply contract has identified the following Observation in its letter ref. 127 dated 8/2/2015 addressed to the airport director: - End of 11 months for the schedule of works on 12/11/2012. - Ibn Alwaleed State General Company received an extension period of 10 months starting 12/11/2012. - The additional period of 10 months ended on 12/9/2013. - The General Establishment of Civil Aviation did not take any legal actions against Ibn Alwaleed State General Company whereas if the only operating generator at the airport shuts down, the whole airport will be inoperative . - The technical completion percentage was 25% as on 8 February 2015.
Recommendation: We recommend that the General Establishment of Civil Aviation must sign contracts with international specialized companies and not resort to any mediators which may waste a lot of public money and time whereas necessary legal and contractual actions must be taken against the lagging companies in addition to investigation of such delay in taking such actions although the delay was for more than 3 years. The contract is still incomplete until now.
Management Response:
Follow-up We noted that this point still valid The inadequacy of justifications offered by administration as well as the low percentage of the actual achievement of the project above and exceeded the contractual period specified.
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Findings
3. Basra international airport generators rehabilitation contract High Risk
Observation: During our study of Basra international airport generators rehabilitation contract which was signed with Ibn Alwaleed State General Company – a formation of the Ministry of Industry and Minerals dated 10/7/2014 for 180 days for a value of IQD 1.600 billion, we have noted the following: a. The abovementioned project was awarded to Ibn Alwaleed State General Company through single bid whereas the company is lagging in implementing a similar project (Basra international airport generators supply contract). b. Letter ref. 684 was sent by the senior chief engineer to the airport director on 21 December 2014 indicating that Ibn Alwaleed State General Company did not submit the certificate of origin for the supplied materials which violates article 7 of the contract which stipulates that ( the Second Party must submit the certificate of origin for supplied material. The certificate must be notarized by the Iraqi embassy in the country of origin). c. Technical completion percentage was 5% on 27/12/2014 according to the minutes of the contracts and contracting committee, ref. 393 dated 13 January 2015.
Recommendation: We recommend that the General Establishment of Civil Aviation must sign contracts with international specialized companies and not resort to lagging companies which may waste the public money and time.
Management Response:
Follow-up We noted that this point still valid The inadequacy of justifications offered by administration as well as the low percentage of the actual achievement of the project above and exceeded the contractual period specified.
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Findings
4. - Low completions percentages Moderate risk
Observation: During our visit to General Institute for Civil Aviation, we noted a delay in parentage of completion of certain in project, such as:
Percentage of Contract period Contract date completion Contract details 2014 19-7- 2016 Basra Airport rehabilitation 11 Months 2011/11/14 25% 63%
Karbala building rehabilitation 14 Months 2012/12/9 27% 90,1%
Recommendation: We recommend on the completing the contracts on the specified time period through planning and follow up for these project and taking the disciplinary actions for the delayed contractors.
Management Response
Follow-up We noted that this point still valid For non-completion of above two decades, reaching the completion of contract processing and installation of three generators, 63% up to July 19, 2016 ratio, and total completion rate to hold building rehabilitation Karbala 90.1%.
119 |
Ministry of Transportation General Company for Iraqi Railways
120 |
Findings
1. Lack of financial completion rates reports and expenses High Risk amount on contracts basis
Observation: The letter sent by the General Company for Iraqi Railways, ref. 4310/12720 on 15 October to the global auditing firm ,EY which indicates that the percentage of the financial completion reports and the expenses are generated for the whole project including several contracts but are not individually for each contract. This has led to hindering the contracts audit process. In addition, this gives an indication that the company does not follow the financial completion rates and compare them to the technical completion across the contract.
Recommendation: We recommend that the General Company for Iraqi Railways must prepare reports at the level of the contracts indicating the technical completion rates and update data on a regular basis to ensure supervision control.
Management Response
Follow-up We noted that this point still valid because they didn’t provide us Expenses detect and financial ratios achievement level contracts :
121 |
Findings
2. Direct awarding method High Risk
Observation: During our visit to the General Company for Iraqi Railways, we noted that the company uses direct awarding method in completion of works which violates the instructions of direct implementation instructions no. 3 for the year 2011, article 8 , stipulates that (such instructions don’t not apply to the ministries which have general contracting companies), whereas the Ministry of Transportation has a general contracting company which is “State Company for Transportation Projects Implementation”.
The following table illustrates a sample for works in progress until 31 December 2014:
Contract Actual Contractin Actual Contract Contracts Details Completion Contract Value Completio g Method Start Date Period Date n % Rehabilitation of 25 Direct 4/3/201 5.000.000.0 passenger coaches 4/3/2014 1year 16.8% award 3 00 in Baghdad Supplemental works Direct 1/1/201 31/12/20 1.000.000.0 implementation for 1year 9% award 4 14 00 500 trucks Trusses and rails Direct 500.000.00 90 bolts tightening ¼/2013 ¼/2013 27% award 0 days works
We have noted that the actual completion percentages for the abovementioned works as on 31 December 2013 were low as per the report of the planning and follow up section/investment plan projects affairs branch.
Recommendation: We recommend that the Iraqi General Company for Iraqi Railways must perform the following: - Adhere to the updated direct award instructions no. 3 for the year 2011. - Follow up the lagging companies to ensure that such works are expedited for completion as scheduled.
Management Response
Follow-up We noted that this point still valid during 2015. :
122 |
Findings
3. Lack of control over direct awarding works High Risk Observation: During our visit to the General Company for Iraqi Railways, we have noted the absence of the controlling role over direct implementation works since there are no complete records for completed works by the General Company for Iraqi Railways in addition to the unavailability of the annual disbursement reports of such works which was confirmed by the Iraqi Railways Company in its letter sent to EY on 15 October 2015 which indicates that the company does not have dedicated registers for the direct awarding projects whereas payments are paid as advances utilizing the granted authorities which is in violation of the direct awarding implementation instructions no. 3 for the year 2011 (article 2-3-b,h) which stipulates the following: A. Each project or business must have special accounting registers which are regulated according to the legally approved standards. B. Complete bookkeeping must be maintained for the investment budget based on direct awarding methods which must include sub-ledgers in addition to the main ledgers. The following table illustrates a sample of the works in progress as on 31 December 2014: Contract Actual Contract Actual Contract Contract details Completion Contract Value Completio Method Start Date Period Date n % Rehabilitation of 25 Direct passenger coaches in 4/3/2013 4/3/2014 5.000.000.000 1year 16.8% award Baghdad Supplemental works Direct 31/12/201 implementation for 1/1/2014 1.000.000.000 1year 9% award 4 500 trucks Laying ballast stones Direct 15/10/201 31/12/201 800.000.000 75days 93% across railways award 3 3 Laying second layer of Direct 15/11/201 15/4/2013 600.000.000 180days 95% ballast stones award 3 Laying Direct connectors/interchang 26/1/2013 26/1/2017 500.000.000 47days 92% award ers sector Trusses and rails bolts Direct 1/4/2013 1/7/2013 500.000.000 90days 27% tightening works award Control lines works Direct 31/7/2013 27/1/2014 180days 97% 200.000.000 award Recommendation: We recommend that the General Company for Iraqi Railways must adhere to the direct awarding instructions no. 3 for the year 2011.
Management Response
Follow-up We noted that this point still valid during 2015. :
123 |
Findings
4. Low percentage of contracts completion High Risk
Observation: During our visit to the Iraqi Railway General Company we noted low percentage of contract completion by several companies while the percentage ranged between (0- 40 %) despite the end of the contracts implementation period for example:
Contract details Contract date Planned percentages Planned Percentage 31 December 2013 31 December 2014 DMU2013/37 Purchase 2013/12/15 % Zero 40% passenger trains 2012/33 Railway 2012/12/2 %6 33% establishment over Forat river
Recommendation: We recommend the necessity of pursue the contracted companies to comply with the terms contract and take action as per the signed contract in case of not complying with these terms.
Management Response
Follow-up We noted that this point still valid during 2015.
124 |
Findings
5. Additional periods for some contracts High Risk
Observation: During our visit to the Iraqi railway General Company we noted that there are several projects that have been contracted in different periods between 2001 and 2008 which were extended more than the original contractual period that the Ministry contracted with for example:
Total cost of Contract Contract sign Contract Additional contract details off date period period (IQD) Samawa 1 May 2004 277,000 7 Years 6 Years Railway Yousefye 1 September 234,000 7 Years 10 Years Railway 2001
Beeje Railway 1 May 2001 228,000 7 Years 9 Years
Ghabeshe 1 April 2002 247,000 7 Years 8 Years Railway Baghdad Beje 1 February 293,000 7 Years 8 Years Railway 2002 Hole bridge 12 November 20,000 4 Years 5 Years project 2008
Recommendation: We recommend the necessity of following up with the contracted companies to comply with the contract implementation terms.
Management Response
Follow-up We noted that this point still valid not to complete the above projects by the General
Company for Railways up to December 31, 2015.
125 |
Ministry of Transportation Iraqi Airways
126 |
Findings
1. Boeing aircrafts and CS300 Canadian aircrafts contracts High Risk
Observation: We requested a copy of the Boeing purchase contracts from Iraqi Airways in addition to the Canadian aircrafts CS300 which are still in progress among the projects for the year 2014 in addition to the documents for expenditures. However, no response was received from the company despite the supported request by the letter of the financial experts committee ref. 108 dated 21/9/2015 asking the Iraqi Airlines to facilitate the work of the team.
The following table illustrates the details of both contracts and the expenses of the investment budget projects for the year ending 31 December 2014 which was issued by Iraqi Airlines:
Accumulated Actual Expenses Expenses as on Contract Total Expenses Technical Contract during 2014 31 December Contract effective until 1/1/2014 Completion Value/$ IQD 2014 date IQD % IQD
Purchas e of 24/3/20 1.311.827. 271.378.326.34 363.951.442. 635.329.768. 29% Boeing 08 700 0 338 678 aircrafts Purchas e of 4/12/20 200.000.00 81.196.975.2 81.196.975.2 Canadia - 0٪ 13 0 00 00 n CS300 aircrafts
Recommendation: We recommend that Iraqi Airways must cooperate with external auditors and facilitate their work since they are assigned by the Iraqi government to complete their mission on time.
Management Response
Follow-up
We noted that this point still valid.
127 |
Findings
2. - Low completions percentages High Risk
Observation: During our review of a sample of Iraqi Airlines General Company contracts, we noted a delay in parentage of completion of certain aspects of the projects, which led to the overall delays in the project:
Percentage Percentage of of Contract Contra Contract Contract completion details ct amount date completion period 20 June 2016 2013 14 Training and 608 34,807,312,5 2013/1 21 developmen %1 34% Days 58 2/15 % t center for air shipping Turning the Ze air shipping 730 68,734,104,7 2013/1 Zero% ro 2,5% department Days 10 2/15 % into an air Rehabilitati ng and repairing 340 9,981,282,50 2013/1 21 %20 21% aircraft Days 0 2/13 % maintenanc e plant
Recommendation: We recommend on the completing the contracts on the specified time period through planning and follow up for these project and taking the disciplinary actions for the delayed contractors. Management Response:
Follow-up We noted that this point still valid.
128 |
Ministry of Interior
129 |
Findings
1. Unavailable priorities for loans and suspended deposits High Risk
Observation: During our visit to the Ministry of Interior, we noted that there are suspended advances and deposits in 31/12/2014 according to the letter No. 904 issued by Ministry of Finance / Department of Decentralized Accounting System in 2 March 2015. Taking into consideration that the suspended accounts are concerning the previous years as the Ministry failed to reach the related documents. The loan amounts and suspended deposits are listed as follows:
A. Suspended balances in the loan accounts: Details Amount / IQD Advances for executing activities and services 360.584.072.452 letters of credit advances 172.878.115.732 Contractors Advances 14.810.652.367 Other temporary Advances 233.550.165 Delegation Advances 147.425.829 Advertising Advances 714.000
B. Suspended balances within deposits and creditors accounts: Details Amount / IQD Other various deposits 625.324.225.798 Salaries and wages creditors 15.895.931.831 Deposits for other departments 2.031.475.323 Tax deposits 1.379.192.458 Rasheed Bank 898.324.556 Unwithdrawn bonds 392.812.601 Execution deposits 258.874.087 Other departments and entities 55.123.850 Rafidain Bank 39.749.830 Recommendation: We recommend that the Ministry should follow up and amortize the suspended advances and deposits, and form an investigation committee if the advances documents are not presented.
Management Response:
Follow-up We noted that this point still valid. and the ministry didn’t provide us the breakdown for
the advance and payable accounts as at 31 December 2015.
130 |
Ministry of Environment
131 |
Findings
1. Lease contracts for ministry’s affiliate buildings High Risk
Observation: During our visit to the Ministry, we noted that the Ministry leases premises for the operations of Ministry’s departments and directorates since the Ministry HQ does not accommodate all such departments and directorates. The following table illustrates examples of such instances:
Contract value Contract IQD/Annually
1. Minister’s office building lease contract IQD 96.000.000/Annually
2. Technical Deputy Minister office building lease IQD 54.000.000/Annually contract
3. Inspector general office building lease contract IQD 166.000.000/Annually
4. Administrative deputy minister office building IQD 30.000.000/Annually lease contract
5. Mines affairs department building lease contract IQD 220.000.000/Annually
6. Administrative and financial department IQD 284.000.000/Annually building lease contract
The lease contracts cost the Ministry a lot of money which can be saved if a building is allocated to the ministry and the departments to avoid the deficit in the Ministry’s budget.
Recommendation: We recommend that the Ministry must locate a building for all departments and avoid incurring lease amounts for such departments.
Management Response:
Follow-up We noted that this point still valid during 2015.
132 |
Findings
2. Projects financed by international entities High Risk
Observation: During our review of the sample projects implemented by the Ministry in 2014, we noted that some projects are funded by external entities whereas the funds are deposited to the Ministry’s account without opening independent bank accounts for such projects. The following table illustrates examples of such projects:
Project Funding Entity Allocated Funds
Iraqi national plan for gradual depletion of UNEP $ 942.433 materials harmful to the ozone - NPP
Institutional structure for national ozone UNEP $ 240.000 unit – ISP
Failure to use an independent bank account to finance projects may lead to use of projects funds to finance other projects. In addition, to missing entries of banking commissions and interests with relevance to the project. This weakness point of internal control does not allow proper verification of the actual fund balance as per the project records and the actual balances with the bank.
Recommendation: We recommend that the Ministry of Environment must submit requests to the Ministry of Finance to open independent bank accounts to ensure control of project funds to ensure proper management of such funds and expenditures.
Management Response:
Follow-up We noted that this point still valid during 2015.
133 |
Findings
3. Contracts files archiving High Risk
Observation: During our visit to the government contracts section at the Ministry, we noted that the archiving process for the Ministry’s contracts files from 2008 until 2013 was not performed on a systematic basis due to the limited areas for archiving. In addition, we noted that there are no electronic archives for all contract documents of the Ministry. Such archiving approach may lead to destruction and loss of some contract documents and difficulties to access the requested priority contracts by the control agencies.
Recommendation: We recommend that the Ministry must perform the following:
- Provide special areas for archiving contracts files in a proper manner to ensure that they are not subject to damage or loss.
- Develop an electronic archiving system for saving all priority contracts of the Ministry.
Management Response:
Follow-up We noted that this point still valid during 2015.
134 |
Ministry of Oil State Company for Oil Projects
135 |
Findings
1. Obstacles and conflicts High Risk
Observation: During our review for sample contracts, we noted that the South Oil Company (project beneficiary) handovers the work sites with obstacles, legal and physical issues after awarding the projects to contracted companies in violation of the government contracts implementation instructions no. 1 (article 3/e,f,g,h) for the year 2008 and the government contracts implementation instructions no. 2 (article 2/f,g,h) for the year 2014 which leads to delay of commencement of works and implementation and increased project costs and in some cases, suspension of the project. The following table illustrates examples of such obstacles:
Project Implementing Entity Obstacles Type
Nasiriyah depot Objection by residents, objection by depot construction CPP Company - China safety police, overlapping with an oil pipeline, residential buildings Karbala refinery Agricultural fields, overlapping with a gas South Korea Companies construction pipeline, residential buildings, Al Khairat Consortium – led by Hyundai water department Al-Qurnah West Objections by residents Exxon Mobil - US field Basra depot National Center for River, high voltage towers, residential areas, Construction Laboratories water pipe, sand dam, service road and Research
Recommendation: We recommend that the Ministry must adhere to the government contracts implementation instructions.
Management Response:
Follow-up We noted that this point still valid during 2015.
136 |
Findings
2. Shuaiba oil depot design and materials supply High Risk
Observation: During our review of Shuaiba oil depot construction contract, we noted that GOG Company – Jordan was contracted on 15 March 2012, which was lagging in completing the project as the completion rates were 0% since project handover until the decision to withdraw works on 20 July 2014. The State Company for Oil Projects did not directly withdraw works from the company despite such incompletion and exceeding the contract period over 5 months since opening the letter of credit and sending several warnings to the company to expedite the completion of the project. However, the company did not make any noted progress of works.
Allowing GOG Company – Jordan many opportunities to increase completion rates has incurred additional time and effort to the Sate Company for Oil Projects in addition to delay in completing vital and critical projects.
Recommendation: We recommend that the Ministry should perform efficient monitoring of the contracted companies and not to allow for any lagging in completion of awarded projects in addition to taking repressive actions with regards to the lagging companies.
Management Response:
Follow-up We noted that this point still valid.
137 |
Findings
3. Low completions percentages High Risk
Observation: During our review for ministry contracts percentages of completion, we noted that the percentages of the completion for some projects are low, such as:
Planned Actual Actual Progress percentage percentage percentage Contract Percentage of Of completion of completion completion 2014 2015 Establishing %100 58% 68 % 10% Isomerization unit in Basra refinery/ mechanical, electrical, and control work and delicate machines. Hamrain Field %100 51% 50 % -1% Development/ Establishment Liquid gas pipes/ %100 30% 32 % 2% Saladdin/ Hammam Alaleel
Recommendation: We recommend on the comply of follow-up on the projects and increase their completion rates by removing the obstacles faced by these projects and to take decisive action against delayed companies.
Management Response
Follow-up We noted that this point still valid during 2015.
138 |
Ministry of Oil Oil Pipelines Company
139 |
Findings 1. Acts of vandalism High Risk
Observation: Based on our visit to the Oil Pipelines Company, we have noted that oil pipelines were constantly subject to acts of vandalism (74 instances in 2014). The maintenance costs for such incidents in addition to wasted crude oil and oil products for the year 2014 reached $ 16.600.000 whereas for the years 2011, 2012 and 2013, the total amount was $ 60.000.000.
Recommendation: We recommend that security measures must be enhanced to protect public funds.
Management Response:
Follow-up We noted that this point still valid during 2015.
140 |
Ministry of Oil Midland Refineries Company
141 |
Findings
1. Cooling towers project (CW) High Risk
Observation:
During our review of the cooling towers project which was awarded to Armada Company on 2 July 2013 with a total amount of $ 20.092.780, we noted that Midland Refineries Company has given Armada Company additional extension periods for the following reasons:
1. An additional period was given to the company because of the amended basic drawings of river intake pumps due to the change of specifications which violates the government contracts implementation instructions no. 1 (article 3/e,f,g,h) for the year 2008 and the government contracts implementation instructions no. 2 (article 2/f,g,h) for the year 2014.
2. An additional period was given to the company because of the delay in receiving soil analysis results.
3. An additional period was given to the company because of the delay in receiving the Ministry’s approval of extending the shipping permits.
Absence of a timescale ceiling which identifies the ratios of additional periods may cause major suspension and delays to the projects completion. Total additional periods allowed to the company was 542 days which represents 148% of the total contract period (365 days).
Recommendation: We recommend that Midland Refineries Company must set a specific timescale ceiling for the additional extension periods in addition to adherence to the government contracts implementation instructions.
Management Response:
Follow-up We noted that this point still valid during 2015.
142 |
Findings
2. Customs clearance High Risk
Observation: During our review of the sample contracts, we noted a delay in receiving supplied materials by contracted companies due to customs clearance and tax exemption procedures which fall within the liabilities of Midland Refineries Company. The following table illustrates examples of such instances:
Project Implementing Company Delay Period/days
Fats blending project Armada Company 55
CCR project Al Hurra International 90 Company (IFC)
Recommendation: We recommend that Midland Refineries Company must expedite customs clearance of supplied material to avoid delays in projects completion and avoid paying additional storage fees in ports.
Management Response:
Follow-up We noted that this point still valid during 2015.
143 |
Findings
3. Gasoline refinery complex project (CCR) High Risk
Observation: During our review of gasoline refinery complex project (CCR), we noted the following: Midland Refineries Company signed a contract with Al Hurra International Company (IFC) and Hydro Carbon Supply Company – US on 2 January 2005 for completion of the project in 28 months at an amount of $ 81.382.683. However, the company was lagging in implementing the project as the actual completion percentage was 29.75% from the date of LC activation (28 November 2006) until 22 January 2015 despite the given additional extensions to the implementing company for over 58 months in addition to an increase of the contract value exceeding 27 million dollars due to the change in the market prices. On 8 July 2015, the contract was mutually terminated based on the approval of the Oil Minister.
The lagging of Al Hurra International Company in implementing the project has incurred additional time and efforts to Midland Refineries Company in addition to the failure to complete such vital and critical project over the past years which led to the difficulty of completion thereof in following years due to the deficit suffered by the federal budget.
Recommendation: We recommend that the Ministry must accurately select companies which have the sufficient capacities to implement similar projects and take repressive actions against the lagging companies and blacklist such companies to guarantee the rights of the Ministries and other beneficiaries.
Management Response:
Follow-up We noted that this point still valid.
144 |
Ministry of Defense
145 |
Findings
1. Outstanding amounts during banking validation High Risk
Observation: During our review of the banking validation, we noted that there are outstanding and accumulated amounts since 2010 not settled till now.
Account Bank name Outstanding Nature of suspended amounts no. amount/IQD
100018 Rafidain Bank 20.782.858 Deposits reflected in the bank registers but not recorded in the daily ledger
100018 Rafidain Bank 18.033.400 Receivables recorded in the register but not reflected in the bank statement
100000 Rafidain Bank 90.122.857.798 Drawn cheques
100000 Rafidain Bank 5.549.341.119 Deposits reflected in the bank registers but not recorded in the daily ledger
100000 Rafidain Bank 50.060.772.234 Deposits reflected in the bank registers but not recorded in the ledger
100000 Rafidain Bank 64.294.000 Receivables recorded in the register
We also noted that there are no transactions performed on the account no. 46068 since 2009. Non-settlement of these outstanding amounts shown in the banking validations reflect the weakness of control system over the banking accounts, which has a negative financial impacts on the Ministry.
Recommendation: We recommend that the Ministry should settle these outstanding amounts and verify the accounts’ balance to understand the reason of these variances as an additional control and monitor procedures to avoid any negative financial impacts on the Ministry.
Management Response:
Follow-up We noted that this point still valid.
146 |
Findings
2. Construct headquarters building Division 10 in Al High Risk Maymouna/Kut governorate
Observation: During our review of construction contract of headquarter building 10 in Al Maymouna, we noted the following: 1. The Ministry contracted with Al Sorouh Company on 29 December 2010 and agreed on the execution period to be 240 days with amount of 1.571.4949.000 IQD. However the company lagged in project execution and the project completion percentage reached 6% from the work initiation date. Therefore, the Ministry withdrew work from the lagging company as per the Ministerial resolution no.49587/6 in 23 October 2011. 2. Al-Bilad Islamic Bank which is liable for the performance Bond value and operational advances didn’t disburse the value of such guarantees 3. The Ministry contracted with Al Habouha on 9 September 2013 with amount of 1.738.936.000 IQD (through bid re-announcement). However the Company rejected to initiate work for more than 16 months due to presence of expired materials disposed on the site which belong to Al Sorouh Company 4. A joint committee was formed on 3 February 2015 between the Ministry and Al Habouha Company to record the current situation on the work location and the materials validity; consequently the committee proved that the materials are expired and unusable. Then the company was granted a complete suspension period from date of contracting until 27 July 2015 through letter no. 9266/5g on 27 July 2015. Recommendation: We recommend that the Ministry should effectively follow up with the contracting companies and should not allow any delay in achieving projects assigned to the executing companies and should take strict resolutions against lagging companies.
Management Response: Follow-up We noted that this point still valid.
147 |
Findings
3. Percentages of Completion High Risk
Observation:
During our review of a sample of contracts for the observed decline in the rate of completion for some contracts that were signed during the year 2012, of which implementation period was no more than 360 days, for example:
Contract Amount Project Name (IQD) Start Date Company Name Rate
Shields warehouse Golden Gate set up in Camp 7,493,051,000 2012/9/18 53% Road Basmajh Design and implementation of Ibn Majed a floating marine 10,874,000,000 2012/12/30 Zero % Company dock north of Umm Qasr The establishment of the headquarters of a 9,927,874,500 2012/2/15 Peaks Tower Zero % number (6) in the Umm Qasr Naval Base Rehabilitation of buildings for the first Military College and the 10,265,525,715 2012/12/6 Ashawes Al Iraq 10% College of Command and the Joint Chiefs of Staff
148 |
Findings
Recommendation:
We recommend to follow-up on contracts and to abide by the terms of the contract and to urge the implementing agencies to deliver on time.
Management Response
Follow-up We noted that this point is still Valid.
149 |
Ministry of Electricity
150 |
Findings
1. Electric power delinquents/ Ministry of Electricity HQ High Risk
Observation: During our visit to the Ministry of Electricity, we noted that delinquents of the national network station during 2014 are 498.642 in all directorates except the General Directorate for distribution- Al-Karkh according to the Ministry registers. These violations cause damages for the national network and power loss leading to loose the Ministry revenues that are vital for electricity production and distribution continuity.
Recommendation: We recommend that the Ministry should coordinate with the respective entities to reduce and prevent misuse of the national network to protect public fund.
Management Response:
Follow-up We noted that this point still valid.
151 |
Findings
2. Wasted power/ Al-Russafa Distribution Directorate High Risk
Observation: During our visit to Al Russafa Distribution Directorate, we noted that the wasted power percentage during 2014 reached 36% while the maximum permissible limit of the technical power waste as per the Planning Department letter no. 509/12/D in 20/2/2012 is 14%.
Recommendation: We recommend that the Ministry should reduce technical waste to get benefit of the maximum power production.
Management Response:
Follow-up We noted that this point still valid.
152 |
Findings
3. Financial statements of the companies /General High Risk Directorate for Electricity Distribution – Karkh Observation: During our review of contracts of general directorate for electricity distribution – Karkh, we noted the following: 1. The contracts are awarded to companies which their financial statements reflect accumulated deficit which is considered as a violation of the Regulations for Implementing Government Contracts no. (1) of 2008 , article 7/Tenth – C, for example establishing supply lines – Babil (kv 33) that awarded to Dar Al Khaled Company. 2. We noted that the Directorate accepted unaudited financial statements for example: contract of exchanging the electric network of Al Harethya for stations 213-211. This contract was awarded to Diar Al Ghanem for contracting Company and Abdul Raouf shabaro Company. 3. Financial solvency issued by Gulf Commercial Bank and which was submitted by Kemat Al Torath Company - for general contracting and trading that was awarded to the contract of executing air electrical network in Abou Gharibb – Al Sukur, support the balance of the company authorized manager and also approved that this Manager had continued communication with the Bank, however this didn’t reflect the financial solvency of the company as it is considered as an independent legal entity 4. During analyzing financial data submitted by the following companies we noted that: A. Kemat Al Torath Company: As for the financial statements submitted for 2010, 2011 and 2012, the auditor reserved the expenses account and cash calculations available. This means that the auditor failed to verify the amounts recognized in the accounts taking into consideration that the expenses account and cash account are considered as a significant part of the financial statements. B. Dar Al Khaled Company: 1- This company didn’t perform any activity during 2009, 2010, 2011, and 2012, this means that the company is incompetent and violates Companies registration Law Article 147-1 ( any company suspended to perform its activities for more than one year of establishment date without legitimate excuse shall be terminated .) and article 147 -2 (any company suspended to perform its activities for more than one year of establishment date without legitimate excuse shall be terminated) 2- The Bank stated in the financial solvency certificate that the company has financial adequacy while the company financial statements didn’t contain cash balance in the banks. 3- The financial statements show current accounts receivables with amount of 1.991.000.000 taking into consideration that the Company didn’t perform any activity. Recommendation: We recommend that general directorate for electricity distribution – Karkh should analyze the financial data of the companies and should not award the losing companies and should not accept unaudited financial statements. Management Response:
Follow-up We noted that this point still valid.
153 |
Findings
4. Site handover to the contracted companies / Power High Risk Transmission Projects Directorate
Observation: During our review of contracts’ samples, we noted after awarding the contracting companies, the directorate handover the work site to these companies containing obstacles and legal and financial issues which is considered as violation of the Regulations for Implementation Government Contracts no.1 of 2008 (Article 3/E-F-G-H) and the Regulations for implementing Government Contracts no. 2 of 2014 (Article 2/F-G-H). For example the following
Project name Obstacles/issues type
Yusufiyah line Southern Inhabitants objection, residential Baghdad 400 building,, agriculture lands Connection lines of Al Oubidi Inhabitants objection overlapping with station 132 oil pipeline . Connection line of Al Rusafa Inhabitants objection, agriculture water plant (second line) lands, residential building, oil pipeline
Recommendation: We recommend that the Ministry should comply with the Regulations for Implementing Government Contracts .
Management Response:
Follow-up We noted that this point still valid.
154 |
Findings
5. Ammara gas power plant– contract 66/General Directorate for High Risk gas power generation projects
Observation: During our review of contract no. 66 for Ammara gas power plant project with STX - Korean Company on 15/12/2012 with amount of 149.702.000 USD, we noted that the High Voltage cables of the project were realigned due to the conflict of High Voltage ports (132 kv) which led to be shifted to 200 meter with additional cost (5.150.000)USD which reflect inaccurate designs and table of quantities developed in violation of Regulation for Implementing Government Contracts no (1) of 2008 (Article 3/first/D).
Recommendation:
We recommend that the directorate should comply with the Regulations for Implementing Government Contracts.
Management Response:
Follow-up We noted that this point still valid.
155 |
Findings
6. Contract for implementation of water outlet work for Baji gas power plant project/contract 2 – no. 30/General High Risk Directorate for gas power generation projects
Observation: During our review of contract no. 30 for implementation of water source works system works for Baji power plant gas project with Al Radwan State Company with a mount of 5.686.000.000 IQD on 24/10/2013, we noted the following: 1. The contractor was lagging in project execution as the physical completion percentage reached 13% until 5/6/2014 taking into consideration the agreed project completion and the additional period on 18/7/2014. 2. The Economy Bank didn’t renew the performance bond based on Council of ministries letter no 417 of 2014 and letter no. 124 of 2015 regarding projects fall within the hot spots, these letters stated on considering the military operations performed in the hot spots period as a complete stop period for the executing company. The bank reliance on the council of Ministries resolution is incorrect as these resolutions didn’t state on un-extension of the letters of guarantees for these projects as they are deemed as stopped projects not cancelled.
Recommendation: We recommend that the Ministry should: 1- Follow up the lagging projects and identify the deviation against planned 2- It is necessary that the Bank that issues letters of guarantees shall renew these letters to reserve the Ministry rights.
Management Response:
Follow-up We noted that this point still valid.
156 |
Findings
7. Contract for implementation of Al Nassriya gas power plant– contract 28/General Directorate for gas power High Risk generation projects
Observation: During our review of Contract for implementation of Al Nassriya gas power plant– contract 28 signed with BGR Company with amount of 246.000.000 USD on 13/10/2013, we noted the following: 1. The Directorate signed the contract with amount exceeding the assumed cost, as the assumed cost was 200.000.000 USD, without informing Ministry of Planning which violated the Regulations for Implementing Government Contracts no (1) of 2008, (Article 4/Fourth) 2. According to the letter no. 3810 sent on 20/2/2014 by the General Directorate for gas power generation projects to BGR Company, the project initiation date was considered to be14/2/2014 while the company didn’t proceed with the actual project. Accordingly, the completion percentage was 0% until 24/11/2015 and the Directorate didn’t take any strict actions against the company.
Recommendation: We recommend that the Directorate should: 1- Comply with the Regulations for Implementing Government Contracts. 2- Follow up with the lagging companies and adopt the necessary actions against them to ensure non-delay of vital projects completion.
Management Response:
Follow-up We noted that this point still valid.
157 |
Findings
8. Letters of Credit Advances Account High Risk
Observation: During our review to the letter of credit advances account, we noted the following: There are some old advances that have not been cleared despite the companies have fully supplied the contract materials. For example: Al Riyadh Company contract for supplying Moderate voltage cables. Rubban Al Safina Company contract. There are advances appeared as credit unlike their nature, for example: An error in posting the operational advance entry related to Al-Noor Al-Thaqeb Company contract concerning to rehabilitation of Zayoona area. The General Directorate of Al-Russafa Distribution recorded the whole amount of the operational advance despite of deducting part of this advance during the supplying process which in turn resulted in appearing the balance in credit. An increase in the letter of credit amount of Jazeeret Al-Ordon contract related to rehabilitating the network of Al-A’thameyyah district, resulting from issuing change orders in the Ministry center without informing the General Directorate of Al-Russafa Distribution about the increase, which resulted in settling the advance amount by an amount greater than the contract amount.
Recommendation: We recommend the General Directorate of Al-Russafa Distribution to settle and clear the balances of the pending letters of credits and solving the advances that appear in the credit side.
Management Response
Follow-up
We noted that this point still valid.
158 |
Findings
9. The organizational Structure of the Ministry Moderate risk
Observation: During our review we noted that there is no approved organizational structure by the Cabinet stating the levels of duties and responsibilities in the Ministry.
Recommendation: We recommend the Ministry to have an approved organizational structure and job descriptions for all levels within the Ministry. This organizational structure and job description should at least include the following: Functional sequence within the Ministry. Executive responsibilities, direct assistants and approval authorities. Operational responsibilities for employees with their required tasks. Administrative responsibilities related to job performance. Any other duties the Minister requires to be performed. Types of reports to be issued and time schedule for issuing these reports.
Management Response
Follow-up
We noted that this point still valid.
159 |
Findings
10. The Estimated Cost Moderate Risk
Observation: During our review of a sample of contracts of Al Karkh Electricity Authority, we noted the absence of an updated study for the estimated cost which is not in compliance with the Government Contract Execution Regulations article number 3, however, the tenders were analyzed by the tenders’ analysis committee without knowledge of the estimated cost for the projects. For example:
Project name Contract amount Estimated cost
Electricity infrastructure 200,000,000 246,000,000 contract for Area 610
Recommendation: We recommend by the necessity to prepare an estimated cost study in a proper and accurate manner before starting the tendering procedures and to attach these studies with the minutes of the tenders’ analysis committees and to comply with compliance with the Government Contract Execution Regulations for the year 2008.
Management Response
Follow-up
We noted that this point still valid.
160 |
Ministry of Justice
161 |
Findings
1. Ministry of Justice Building – Al-Salhiya restoration High Risk contract (33)
Observation: During our review of the contract basics regarding MOJ building restoration Al Salehya, we noted the following: 1. A direct invitation is sent on 19/7/2011 to three companies (Eastern Defaf Al Nahrien for contracting Company – Ahl Al Diar engineering company – Tag Al Hoboy Company) which is considered as a violation of Regulations for Implementing Government Contracts No.1 of 2008 2. Government contracts department, planning and follow up department –-don’t obtain updated reports issued by resident engineer department; such reports shall indicate the completion percentages and work progress, obstacles and issues that face the project progress.
Recommendation: We recommend that the Ministry should: - We recommend that follow up and planning Department should track the latest updates concerning contracts and projects of the MOJ to ensure continuous work progress as appropriate. - Prepare plans and designs accurately to avoid any lagging occurred during execution.
Management Response:
Follow-up We noted that this point still valid during 2015.
162 |
Findings
2. Justice complex project – Al Diwaniyah High Risk
Observation: During our review of the contract basics (Justice Departments complex project – Al diwanya), we noted the following: 1. Business is withdrawn from the executing companies in 8/11/2012 in addition to withholding the amounts of performance letter of 5% No. (040/15064/653) with amount of (177.000.000) IQD, and letter of guarantee (operational advance payments) No. (040/15065/653) with amount of (170.000.000) IQD of Economy Bank for investment and finance, also these letters of guarantees are reserved without being confiscated taking into account that the Economy Bank became under the custody of the Central bank in 4/6/2014. Further, copies of the above mentioned letters of guarantee weren’t provided to us. 2. Copies of confirmation of the reserved letters of guarantee weren’t provided to us by Economy Bank. 3. Companies are uninterested to participate in the bidding despite announcing two times due to inaccurate assumed cost preparation.
Recommendation: We recommend MOJ with the following: 1- MOJ should comply with paragraphs (A-B-C) of item (Second) / Article (17) of Regulations for Implementing Government Contracts No.(1) of 2008 that stipulates the following: A. Confiscation of, or keeping, final guarantee bonds B. Implementing the contract through an expediting committee by a representative of the breaching party and in case of refusal then a judicial order shall be obtained from court to implement the work at his expense and taking possession and inventory of the equipment and tools for the purposes of liquidation. C. It shall be permissible for the contracting parties to assign the contract to another contractor if the first contractor breaches his contractual obligation and the breaching contractor shall bear the difference between the two bids when implementing the contract in addition to confiscation of his performance bonds 2- MOJ should follow up with Economy Bank regarding letters of guarantees reserving to ensure MOJ rights. 3- MOJ should prepare accurate potential cost and expedite to assign the project to a high professional executing company to achieve this project.
Management Response:
Follow-up We noted that this point still valid during 2015.
163 |
Findings
3. Direct invitation High Risk
Observation:
1. During our review of MOJ contracts samples, we noted that the contracting method followed is the direct invitation and mostly inviting three companies only which is considered as a violation of Regulations for Implementing Government Contracts Article 4 (Fourth) that stipulates on (This is conducted through an invitation for not less than five 5 contractors and/or companies and/or other agencies that have the technical and financial capability to implement the contracts etc.) 2. The invited companies have no similar activities as the direct invitation stipulates on that the invited companies should be specialized companies, which is considered as a violation of Regulations for Implementing Government Contracts No. of 2008 paragraph (A) of Item Four Article 4 unless there are justified reasons in one of the following cases: A. If the contract is specialized or the contracting procedures should be confidential B. If the contract aims at quick and qualified execution especially in emergencies and natural disasters. C. Bidders are uninterested to engage in the general bids announced for the second time.
For Example: Contract Contract Name Company Name Contract amount/IQD Number Contract Al Nasrya prison Stars General 89.588.036.000 No. (47) extension project contracting Contract MOJ building restoration Eastern Defaf Al Nahrien 15.255.626.000 No. (33) – Al Salehya for contracting Company
Recommendation: We recommend that MOJ should comply with Regulations for Implementing Government Contracts No. (1) of 2008.
Management Response:
Follow-up We noted that this point still valid during 2015.
164 |
Findings
4. Justice complex – Basra construction contract (26) High Risk
Observation: During our review of justice departments complex construction contract in Al Basra, we noted the following: 1. The contract is concluded on 31/12/2014 which violates Regulations of Implementing budget Article Fourth (B) of 2013, stipulates that (taking into consideration that MOJ should not make any contractual commitment after 15/12/2013..etc..) 2. Ministry of Planning is not informed of the same prior to concluding the contract to ensure the sound legal position of the contracting company. 3. Suspension of work due to incompliance of the consultancy body (Al Qadsia University) in submitting reports during the agreed period.
Recommendation: We recommend the following: 1- MOJ should comply with Regulations of Implementing budget of 2013. 2- MOJ should contract with more efficient and qualified consultancy body to avoid business lagging.
Management Response:
Follow-up We noted that this point still valid.
165 |
Findings
5. Non-matching finances between Ministry of Finance and High Risk Ministry of Justice
Observation: During our review of MOJ, we noted that MOJ didn’t verify the finance amounts, granted by the Ministry of Finance within 2014, included in MOJ records with Ministry of Finance records. Accordingly we noted variances in MOJ and MOF records as shown in the table below:
Balance in MOJ headquarter Balance in MOF records Variances records (IQD) (IQD) (IQD) 14.269.482.234 10.194.294.812 4.075.187.422
Recommendation: We recommend that records of MOF finance amounts should be verified against MOJ records on a monthly basis to avoid any discrepancies may occur and take the corrective procedures in timely manner.
Management Response:
Follow-up We noted that this point still valid.
166 |
Findings
6. Database for the Ministry Directorates Moderate Risk
Observation: During our visit to the Ministry of Justice, we noted that the Ministry does not have database for its directorates. For example: the human resources department does not have database for the employees in these directorates, but only has database for the employees of the Ministry center. Also, the Ministry does not have database for the Ministry of Finance funds and transfers to these directorates nor it has data about information on these directorate accounts in the banks. The lack of a comprehensive database for all of directorates within the Ministry may lead to difficulty in following up and supervising these directorates which in turn may lead to improper planning and organizing.
Recommendation: We recommend the Ministry to build a comprehensive database for the Ministry and its directorates, to follow-up the directorates’ activities and activate its oversight role, as well as following-up putting plans with proper implementation by those directorates.
Management Response
Follow-up We noted that this point still valid during 2015.
167 |
Findings
7. Low Completion Rates of Investment Plan Projects Moderate Risk
Observation: During our review, we noted that the completion rates of the investment plan projects are low. The following table illustrates a sample of the Ministry of Justice projects under the terms of the approved investment plan by Ministry of Planning for year 2013 and its completion rates as of 31 October 2013:
Actual Allocation Percentage of Project name (IQD in (IQD in Completion millions) millions) Service Center in the Single %0 window system for developing - 1.749
notaries Judiciary Departments complex %0 - 310 establishment in Naserya Judiciary Departments complex %0 10،000 - in Anbar
The reason for low completion rates is that there is no study based on logical basis for putting plans which in turn leads to improper distribution of resources.
Recommendation: We recommend putting plans on reasonable basis by taking into consideration the possibility to implement on the ground, and to these plans are to be put by specialized people.
Management Response
Follow-up We noted that this point still valid during 2015.
168 |
Findings
8. Contracts of the Ministry Directorates High Risk
Observation: During our review to the investment plan contracts, we noted that the Ministry does not have the disbursement supporting documents related to the Ministry directorates; nevertheless, these contracts are signed at the Ministry center, without keeping copies of disbursement supporting documents at the construction department which is responsible about the investment plan accounts.
Recommendation: We recommend the Ministry to collect the disbursement supporting documents related to contracts signed on behalf the directorates, and keep it in one safe place in the contracts department in order to save the Ministry rights and facilitate the review process and obtain the required information.
Management Response
Follow-up We noted that this point still valid during 2015.
169 |
Ministry of Migration and Displacement
170 |
Findings
1. Construction contract of a residential complex in Basra High Risk
Observation: During our review of Contract No. (839) concerning residential complex establishment in Al Basra with AL Moatasm General Company for Construction contracting - Ministry of Construction and Housing in amount of (43.559.000.000), we noted the following: 1. Bid opening committee re-announced the bid although there were 6 bids met the requirements. 2. Delay in commencing work until 19/2/2011, i.e. after 81 days of site handover date to the executing company. 3. Executing Company delayed in execution due to non -payment of advance No. (11) for 9 months with deviation percentage 32% of date of project acquisition until 30 March 2015. 4. There are several change orders which indicates inaccurate planning.
Recommendation: We recommend the following: 1- The Ministry should verify the reasons that caused the above notes and prepare a plan to avoid delay in the future. 2- The Ministry should be responsible for advance payment for the executing companies to avoid lagging progress. 3- The Ministry should ensure accurate plans to avoid bearing additional costs and interrupting works. 4- The Ministry should comply with Regulations for Implementing Government Contracts.
Management Response: Follow-up We noted that this point still valid during 2015.
171 |
Findings
2. Contract for supplying machinery and equipment at the High Risk Ministry headquarters
Observation: During our review of the Contract for supplying machinery and equipment at the Ministry headquarters with Al Karama General Company – Ministry of Industry and Minerals with amount of (1.002.645.000) IQD, we noted the following 1. The Ministry didn’t prepare feasibility study for the machines and equipment required to compare between either purchasing from the country of origin or purchasing from the local markets, as the Ministry could avoid importing charges before directing the contract to Al Karama General Company 2. A phrase of “imported especially for Ministry of Construction and Housing” wasn’t included in the contract terms to be placed on machines and equipment to prevent trading the same in the market. 3. Al Karama General Company prepared the contracted materials from the local market as per letter reference No. (4579) dated 2/7/2014 which considered as a violation of Regulations issued by Ministry of Planning 1714/23127 on 19/11/2012. The Ministry Regulations stipulates on (non-receiving any imported materials which are purchased from local markets by (Commercial Representative Office , suppliers and mediators ) as the agreed materials should be purchased directly from country of origin. 4. The Ministry received and stored all the processed materials although the Ministry didn’t receive all the documents concerning the processed materials which violates the Second Article of the contract that stipulated on (The Second Party shall submit customs clearance true copy of documents for the machines and equipment to the Ministry while preparing the imported materials) and Article tenth (The Second Party shall not pay the value of any supplied works unless they are consistent with the contract, documents and the technical specifications).
Recommendation: We recommend that the Ministry should: 1. Verify the above mentioned Observation of the contract in addition to setting the appropriate plans to avoid recurring these errors in the future contracts. 2. Comply with terms of contract and Regulations for Implementing Government Contracts No. (1) of 2008 in addition to regulations issued by the Ministry of Planning. Management Response:
Follow-up We noted that this point still valid.
172 |
Findings
3. Outstanding amounts by the bank High Risk
Observation: During our review to verify the bank balance in Rafidain Bank with account Number (11200), we noted the following: 1. There are reconciled amounts included in journal entries as entries reconciliation which are not reflected in the bank statement with amount of (12.042.6000.000) IQD since 2013 until January 2015. 2. There are amount of (828.934.349) IQD, which is not settled since 2013 until January 2015, that represents the authorization amounts in Rafidain Bank for salaries and donations payments for emigrants and displaced individuals.
Recommendation: We recommend that the Ministry should settle the unreconciled amounts, process verification periodically to ensure account settlement and non-occurrence of unreconciled amounts.
Management Response:
Follow-up We noted that this point still valid.
173 |
Findings
4. Delay in contract termination procedures High Risk
Observation: During our review of Contract No. (516) regarding construction of Al Sadr residential complex executed by Al Nabaa Company with amount of )77.765.330.780( IQD and contract annex with amount of )2.970.559.000( as the total amount is )80.735.889.780(, we noted the following: 1. The Company is lagging of contract execution as the physical completion percentage is 62% dated 16/7/2013. 2. The additional periods granted to the Company are 1180 days which means 3 times of the contracted period mentioned in the contract. 3. It is agreed on termination of contract based on mutual agreement between the executing company and the Ministry whereas the contract termination procedures are not completed until our visit date. 4. We couldn’t determine the actual amounts disbursed on the contract until our visit date.
Recommendation: We recommend that the Ministry should: 1- Verify contract termination delay and work on completing termination procedures and assign project to another company to ensure project completion. 2- Take the necessary procedures against the violating companies.
Management Response:
Follow-up We noted that this point still valid.
174 |
Findings
5. Lack of project feasibility study High Risk
Observation: During our review of Al Sadr residential complex construction contract, we noted that the Ministry contracted to execute this project prior to preparing the feasibility study which leads to work lagging, and there were various issues on the land such as presence of Oil well owned by the Ministry of Oil, dump area which doesn’t allow to execute construction works in addition to violators in (Northern part) of the land allocated for construction . All the mentioned obstacles are detected later during the executing company works (the contractor). This considered as a violation of the Regulations of Implementing Government Contracts No (1) of 2008, Article Three (First) which stipulates that (The contracting parties shall meet the following requirements before preparing tender documents): 1. Obtain approval from the respective entities regarding the location and allocate the land required for the project while executing the general contracting works. 2. Resolve the legal and material problems (if available) in the work location while performing general contracting works including the site possession procedures. 3. The work site shall be ready to commence work wholly or partially in line with the scheduled timescale
Recommendation: We recommend that the Ministry should comply with the above regulations prior to preparing the bid to avoid any work lagging.
Management Response:
Follow-up We noted that this point still valid.
175 |
Findings
6. Low Percentage Of Completion for the Investment Plan Moderate Risk Projects
Observation: During our review, we noted that the percentages of completion for the investment plan projects are low as of 31 October 2013. For example: Project name Annual allocation Actual Percentage of completion
Contract to build and implement 80.735.889.780 36.197.103.109 44% the housing complex in Sadr City ALNABA CO. Paving streets of Sadr City and the 3.474.740.000 2.488.354.200 71% torch asphalt (ALaswa Company)
Recommendation: We recommend the Ministry by the necessity to follow-up and complete the projects based on the set plans to make sure that the goals of these projects are achieved.
Management Response
Follow-up We noted that this point still valid.
176 |
Ministry of Trade State Company for Foodstuff Trading
177 |
Findings
1. Files aren’t saved in a safe place High Risk
Observation: During our audit on the State Company for Foodstuff Trading and Iraqi Grain Board, we noted that the important files are not saved in a safe place which may be expose these files to various risks for example (fire, theft, damage, loss)
Recommendation: We recommend that the State Company for Foodstuff Trading and Iraqi Grain Board should save the important files in a safe place to avoid risks such as (fire, theft, damage, lost).
Management Response:
Follow-up We noted that this point still valid.
178 |
Findings
2. Direct Purchase Moderate Risk
Observation: During our review of a sample of the sugar contracts, we noted that the ministry contracted directly in order to meet the need of sugar, without resorting to the tenders approach based on the decision of the Council of Ministers No. 56 of 2010 which states (providing the Ministry of Trade with the authority of direct purchase which is exempted from the provisions of Article (4) of the Government Contracts Execution Regulations (1) for the year 2008) for example:
Supplier name Contract Number Type Al arbia for Sugar 224 Suger ALkhalij for suger 217 Suger AWIS 752 oil AWIS 509 oil
Recommendation: We recommend to resort to the Tenders approach in purchases to obtain price offers and materials from more than one source and avoid buying from intermediary companies to obtain the required quality and price.
Management Response
Follow-up We noted that this point still valid.
179 |
Ministry of Trade Iraqi Grain Board
180 |
Findings
1. Dealing with incompetent companies High Risk
Observation: During our review of the Iraqi Grain Board contract no. MOT/GB/R12/2/2013 and no. MOT/GB/R13/1/2013 for Rice supply which was concluded and signed with Midgulf Company in (29/1/2014) and (14/1/2014) respectively and that was cancelled and the related letters of guarantee (performance bond) were confiscated. We noted that the reason of dealing with incompetent companies due to the following data noted in the above contract: 1. The financial statements submitted by the company in 2012 show the company loss in 2012 in value of (120.029 dollar) and little profit in 2011 in value of (5.911 dollar) according to the Audit Firm opinion. 2. The Company didn’t submit a work list of similar works as (they were not attached with submitted bid in the beginning of the tendering) 3. The Company didn’t submit supporting documents to prove importing and exporting rice activity and continuity in the same activity for the last two years.
Recommendation: 1- We recommend that Iraqi Grain Board should comply with the Regulations for Implementing Government Contracts no. (1) of 2008 and the contract and tender terms. 2- We also recommend awarding the tender to competent company that abide by the contract.
Management Response:
Follow-up We noted that this point still valid.
181 |
Findings
2. Non-verification of contracted companies Moderate Risk
Observation: During our review of Iraqi Grain Board, we noted that the company didn’t communicate with the Companies Registration Department and General Commission of Taxes prior to contract signing according to Article 7, Item Twentieth-paragraph (C) of the (cancelled) Regulations for Implementing Government Contract no. (1) of 2008 and Regulations for Implementing Government Contract no. (2) of 2014 to ensure that the contracting companies are registered in Iraq or if they bear any tax obligation inside Iraq. No proof is given to us to support that the following documents are available. For example;
Supplying Company Contract No. Contract Date Toepfer MOT/GB/W10/1/2013 15/1/2014 Glencore MOT/GB/W10/4/2013 14/1/2014
Glencore MOT/GB/W1/2/2014 10/2/2014 Richardson MOT/GB/W5/1/2014 23/11/2014
Mid Gulf MOT/GB/R12/2/2013 14/1/2014 Mid Gulf MOT/GB/R13/1/2013 29/1/2014
ADM MOT/GB/R13/2/2013 26/1/2014 Saif International MOT/GB/R1/3/2014 26/1/2014
Ameropa MOT/GB/R4/1/2014 9/4/2014 Saif International MOT/GB/R5/3/2014 6/7/2014
ADM MOT/GR/R10/1/2014 16/12/2014
Recommendation We recommend that Ministry of Trade/Iraqi Grain Board should communicate with Companies Registration Department and General Commission of Taxes prior to signing the contract to ensure integrity of companies’ tax and financial position
Management Response
Follow-up We noted that this point still valid.
182 |
Findings
3. Files aren’t saved in a safe place High Risk
Observation: During our audit on the State Company for Foodstuff Trading and Iraqi Grain Board, we noted that the important files are not saved in a safe place which may be expose these files to various risks for example (fire, theft, damage, loss)
Recommendation: We recommend that the State Company for Foodstuff Trading and Iraqi Grain Board should save the important files in a safe place to avoid risks such as (fire, theft, damage, lost).
Management Response:
Follow-up We noted that this point still valid.
183 |
Ministry of Water resources Ministry Headquarter
184 |
Findings
1. Delay in project completion High Risk Observation: During our review of contract samples, we noted that some continuous contracts completion have been delayed which led to inappropriate use of the financial allocations during the previous years. Also the relative projects are continued to be included in the investment budget for the coming years resulted in incapability of executing new projects. Delay in projects completion during the previous years led to difficulty of completion during 2014 and 2015 due to the deficit of the federal budget as follows: Actual Planned Authority Executing Deviation Additional Contract Contract Contract Contract name completion Completion name company percentage period expiry date amount duration percentage percentage Contract No. (49) of General Al 63% 100% 37% 392 days 24/10/2011 77906900 24 2008 Authority Dayaghm 00 months Sector network for for IQD construction (A-3) Irrigation contractin Western Gharraf project Projects and g Reclamation Company + Al Zabd Company Contract No.(37) of General Al 32% 100% 68% 169 days 2/8/2012 40849020 18 2010. Reclamation of Al Authority Dayaghm 00 months Hilla territories – for Company IQD Diwanya/First phase Irrigation Projects and Reclamation Contract No. (21) of General Al Fao 52% 86% 30% 655 days 7/2/2016 13266440 18 2012 Reclamation of Authority 750 months Saad river territories for IQD Irrigation Projects and Reclamation Contract No. (4) of General Noor Al 12% 100% 88% 263 days 15/12/2014 21986900 360 2013 civil work Authority Dareeh 00 DAYS executions, transfer and for Company IQD install mechanical and Irrigation + Al electrical equipment Projects and Hagaan Reclamation Contract No. (26) of General Zeric 40% 100% %60 1116 24/12/2014 61720331 2 years 2009 Authority Company days 440 and 2 for IQD months Irrigation Projects and Reclamation Contract No. (4) of General Al Aghar 42% 100% 58% 5 days 30/8/2010 37442048 12 2009 - Hurriya – Authority Company 00 months Daghara project. for + Golden IQD Irrigation Gate Projects and Company Reclamation Contract No.(32) of General Al salam 91% 100% 9% - 5/5/2011 3343343.5 1 year 2009 Authority road 5USD for Irrigation Projects and Reclamation Contract No. (213) General Al Fao 39% 100% 61% 485 days 30/9/2015 11249228 365 days AL Mosac for closed Authority General 598 irrigation for the Company IQD Operation of and Irrigation British and Serabia Drainage Company Projects
185 |
Findings
Contract No. (218) General Seif Al 30% 100% 70% 40 days 6/6/2015 837400000 180 Maasoma river Authority for Muluk IQD days bridge – AL the Operation Company Diwanya of Irrigation and Drainage Projects Contract No.(205) General Dera Al 0% 100% 100% 22 days 14/10/201 1822195000 170 of lining the canal Authority for Jazira for 4 IQD days TG-00 from 5 Km the Operation contractin to 10 Km within of Irrigation g limited water resources and Drainage section in Projects Rasheed/within Al Nahrein Contract No. (2) of General Al Karam 58% 100% 42% 257 22/5/2015 4656867000 30 2012 – Completion Authority for Al Arabi days IQD month and restoration of Dams and for s General Authority Reservoirs General for Dams and Contractin Reservoirs building g Limited in sadr el Canal in Baghdad Contract No. (13) General Coop 81.5% 94% 14% 140 23/3/2015 6062351930 35 of 2011 Execution Authority for Internation days 0 month of Nazm Abu Dams and al (Dutch IQD s Company) Sokher Reservoirs Project/najaf
Recommendation: We recommend that the ministry should review the above contracts and take the appropriate decision of the same, either to withdraw work or terminate the contract with the lagging companies due to contract expiry dates and should assign these projects to efficient and qualified companies for project completion in addition to taking the legal procedures to ensure the rights/interests of the ministry.
Management response:
Follow-up We noted that this point still valid.
186 |
Findings
2. Obstacles and conflicts High Risk Observation: During our review of the ministry’s contract samples, we noted that the authorities delivered the work locations including financial obstacles and problems after transferring projects to the contracting companies which is considered as a violation of Regulations for Implementing Government Contracts No. (1) of 2008 (Article 3/First/E-F-G-H), and Regulations No. (2) of 2014 (Article 2/F-G-H) which indicates the following: - An approval by the related parties on the site and the land for the project or for the works when implementing public works contracts - All legal and financial problems at the work site, if any, including procedures for site possession, shall be removed when implementing public works tenders. - The site shall be ready to start work, totally or partially, within the time schedule This may cause delay in work initiation and project execution, costs increase in some contracts that may lead to project termination. As the following examples: Beneficiary/entity in Terminatio Project Name Obstacles types charge n duration
AL Mosac for General Authority for -Changes in the drains designs cause delay in 189 days closed irrigation the Operation of executing the parts concerning field and project No. Irrigation and Drainage collector drainage channels establishment (213) Projects -Tunnel channel overlaps with water pipelines and pipeline station of the Mohamed king country in addition to contradicting pump station PS3 electrical poles Contract No. (7) General Authority for Large quantity of scrap steel placed in the work 60 days of 2012 – Dams and Reservoirs location Completion and restoration of General Authority for Dams and Reservoirs building in sadr el Canal in Baghdad Contract No. General Authority for Excavation works and cultivated lands and 32 days (13) of 2011 Dams and Reservoirs resident building which are compensated but not Execution of removed. misaligned with the electrical columns Nazm Aby Sokher Project/najaf Recommendation: We recommend that MOWR should comply with Regulations for Implementing Government Contracts NO. (1) of 2008 and No. (2) of 2014. Management Response: Follow-up We noted that this point still valid.
187 |
Ministry of Ministry of Water Resources - General Authority for Irrigation Projects and Reclamation
188 |
Findings
1. Sector 3-A network construction contract west Gharaf in High Risk Wasit governorate (49/2008)
Observation: During our review of Contract No. (49) of 2008 regarding Sector 3-A network construction contract west Gharaf in Wasit governorate (49/2008) with amount of (779.0690.000) and execution period (24 months), we noted the following: 2. The ministry withdrawn work from the executing companies (Al Dayaghm for contracting Company and General Al Zabd Limited Company) in 22/10/2013 due to incompliance with contract implementation period, executing companies works were terminated as per the contract and the latest extension was in 24/10/2011, accordingly the delay period exceeds two years. 3. Letter of guarantee (performance bond) amount, deposited in Union Bank of Iraq, is not confiscated or seized by MOWR until our visit date, this is considered as a violation of Regulations for Implementing Government Contracts NO. (1) of 2008 Article 17 – Second (A) and (C) which stipulates on (Confiscation of, or keeping, final guarantee bonds) and (the contracting agency may assign the contract to another contractor if the first contractor breaches his contractual obligation and the breaching contractor shall bear the difference between the two bids when implementing the contract in addition to confiscation of his performance bonds and the proper procedures)
Recommendation: We recommend that the ministry (General Authority for Irrigation Projects and Reclamation) should comply with Regulations for Implementing Government Contracts NO. (1) of 2008 Article 17 – Second (A) and (C). Further The ministry should verify the reasons of non- confiscating or non-seizing the guarantee amount deposited in the Union Bank of Iraq in addition to solving this issue according to Regulations for Implementing Government Contracts
Management Response:
Follow-up We noted that this point still valid.
189 |
Findings
2. Mahrout lands reclamation contract (56/2010) High Risk
Observation: During our review of Contract of Mahrout lands reclamation No. (56/ 2010), with the contract amount of (4912377000) IQD, we noted the following: 1. The original contract duration was 540 days, however the additional extensions presented to the contractor (Al Sahal AlAkhdar for General Contracting Limited and Alaq for General Contracting Limited Company) are 229 days in which 184 days were due to changes as per the change order No. (1). The extended periods granted by the ministry are more than 40% which exceed the initial contract duration accordingly this indicates inefficiency of the project primary planning. Further, The actual completion percentage is 43% while the planned completion percentage is 89% and deviation percentage is 46%. 2. Work is withdrawn and suspended in 24/3/2013 as per letter No. 4858 dated 23/4/2014 until our visit date which is considered as a violation of Regulations for Implementing Government Contracts No. (1) of 2008. The decision of withdrawing and suspending work from the inefficient companies waste the ministry’s time and effort in addition to seizing the financial allocations without getting use of them.
Recommendation: We recommend that the ministry should: -Comply with Regulations for Implementing Government Contracts No. (1) of 2008 Article 17 (second) (A), (B) and (C). -Suspended projects should be awarded to efficient and qualified companies for completion.
Management Response:
Follow-up We noted that this point still valid.
190 |
Ministry of Water resources General Authority for the Operation of Irrigation and Drainage Projects
191 |
Findings
Supply (30) floating pump stations along with mechanical 1. High Risk supplements and reserve materials – contract (256)
Observation: During our review of Contract No. (256) regarding preparation of ( (30) floating pumping stations and mechanical accessories and standby/stored materials) with amount of (51.700.000.000) IQD, we noted the following: 1. The contract was concluded with Ibn Majed General Company in 30/12/2012, one of the Ministry of Industry and Minerals entities, while work was initiated in 7/7/2013, this means that the work is initiated after seven months of the contract signing date due to undeliverable of the first payment of the contract amount. 2. The contracting company failed to comply with the schedule mentioned in the contract, as the delay period was (365 days) which exceed 81% of the original contract duration while the actual completion percentage was (47%) and the planned completion percentage was (100%), and the deviation percentage was (52%). A primary warning letter No. 18376 was sent to the company in 16/8/2015 after (320) of the contract completion which indicates lack of follow up and monitoring in this regard. Further, no procedures were taken against this company until our visit date.
Recommendation: We recommend that the ministry (General Authority for the Operation of Irrigation and Drainage Projects) should be responsible, in coordination with the executing company, for expediting work initiation and implement related project. We also recommend that General Authority for the Operation of Irrigation and Drainage Projects should monitor contract implementation by the contracting company and take the legal procedures against the same according to Regulations for Implementing Government Contracts and the contract signed with the company.
Management Response:
Follow-up We noted that this point still valid.
192 |
Ministry of water resources General Authority for Dams and Reservoirs
193 |
Findings
1. Nazem Abu Sakheir/Alnajaf contract no. 13/2011 High Risk implementation
Observation: During our review of Contract No. of 2011 regarding Execution of Nazm Aby Sokher Project/Najaf with (Coop International (Dutch Company) with (60.623.519.300) IQD. The contract duration is (35 months) with completion percentage (81.5%) and the planned completion percentage is (94.03%), we noted the following:
1. Change orders were issued with 9.198.625.710 IQD, without issuing the letter of guarantee for the General Authority for Dams and Reservoirs by the executing company. Accordingly The final performance bonds don’t represent 5% of the contract amount after adding the change orders amount. This is considered as a violation of Regulations for Implementing Government Contracts No. (2) of 2014 Article 9/Second (A) which stipulates on (the final guarantees shall be submitted in a form of performance bonds with 5% of the contract amount after being informed of the letter of transfer and prior to contract signing. 2. The contract file doesn’t include the bidding documents in addition to bids and tenders submitted by the bidders so saving documents in this way will distract Contract Section and will complicate the procedures of auditing and monitoring the contract .
Recommendation: We recommend the Ministry with the following: 1- The Ministry should follow the Regulations For Implementing Government Contracts No. (1) of 2008 and No. (2) of 2014. The Ministry shall also follow up the contract and ask the executing company to issue letters of guarantees that covers the following change orders of the contract to ensure best performance and execution. 2- We also recommend that the Ministry should save the necessary documents related to contracts with contract files to track, audit and review them easily. We also recommend that the Ministry should set a fixed system to save contracts and a list of the main documents that should be made available for all contracts files.
Management Response:
Follow-up We noted that this point still valid.
194 |
Findings
2. Development of Shihabi dam for tourism in Wasit High Risk governorate – contract 9/of 2013
Observation: During our review of the contract No. 9 of 2013 (Development of Al Shahabi Dam for tourism in Waset Governorate) with amount of (2.808.500.000) IQD, the contract duration was (365 days), the Ministry (General Authority for Dams and Reservoirs) withdrew the work from the executing company (Al Radwan General Company) in 20/8/2014, one of Ministry of Industry and Minerals entity. Accordingly a request is sent to confiscate the performance bond (5%) submitted by Economy Bank for Investment and Finance, but the Bank declined to pay the bond’s amount as per the letter No. 1091 dated 4/9/2014 due to non-availability of liquidity, then a warning letter was sent to the Bank in 9/9/2015.
Recommendation: We recommend that the Ministry (General Authority for Dams and Reservoirs) should follow up with Economy Bank for Investment and Finance concerning the above issue in order to pay the guarantee amount or should take the legal procedures to collect the guarantee amount,
Management Response:
Follow-up We noted that this point still valid.
195 |
Mayoralty of Baghdad
196 |
Findings
1. Exchange rates used in letters of credit High Risk
Observation: During our review of a number of Baghdad Sewage Department contracts, we noted that the Department assessed the import contracts proposals based on the USD exchange rate of 1166 according to the Central Bank circular whereas the Department bought the dollar for the letter of credit at a rate of 1194, accordingly the Department bore the exchange rates variances as shown in the table below:
Exchange rate Contract Amount Contract Amount Contracting Company name variance the Contract Date (Exchange rate is (Exchange rate is and Contract No Department 1166) 1194) bears
Hubert Company 10/4/2014 3.344.787.600 3.425.108.400 80.320.800 ,Contract No. 13/1/2013
Al Hejgaz Company, 10/3/2014 10.202.488.340 10.447.448.060 244.999.720 Contract No. 44/1/2013 Al Hejaz Company, 10/3/2014 3.100.834.000 3.175.296.560 74.462.566 Contract No. 51/1/2013
Recommendation: We recommend that Baghdad Sewage Department shall approve the cash purchase of the dollar while assessing bids and concluding contracts with executing parties to avoid bearing the exchange rate variances.
Management Response:
Follow-up We noted that this point still valid.
197 |
Findings
2. Preparation, installation, operation and maintenance of High Risk screw pumps for AlRostomiya project – T3
Observation: During our review of preparation, installation, operation and maintenance of screw pumps for AlRostomiya project – T3 contract, the Awarding Audit/verification Committee nominated (Hubert) Dutch company in 9/12/2013 for the invitation No. 13/1/2013 concerning Preparation, installation, operation and maintenance of screw pumps for AlRostomiya project – T3, we noted the following:
1. (Hubert) Company is awarded on 16/1/2014, consequently Hubert Company authorized SakrAl Mohand company to pay the stamp fees and issue a letter of guarantee in the name of (Hubert) Company only. 2. Sewage Department failed to comply with Regulations for Implementing Government Contracts No. 1 of 2008 Article Seventeen (First Item), accordingly five warning letters were sent to the awarded company in different dates within four months, requesting the awarded company to complete the contracting procedures immediately although 77 days of the award date were elapsed. 3. The best performance letter along with the stamp fees were submitted in the name of Sakr Al Mohand, although the contract is concluded with (Hubert) Company). Further, Sakr Al Mohand Company don’t extend the letter of guarantee until our visit date in 30 September 2015. 4. An internal letter of credit was opened in the name of Sakr Al Mohand as there is no partnership contract between (Hubert) Company and Sakr Al Mohand Company. 5. The contract and related annex stipulate on preparing screw pumps, accessories and reserve materials, whereas the invitation and award letter stipulate on that the contract is regarding preparation, installation, operation and maintenance of screw pumps
Recommendation: We recommend that Mayoralty of Baghdad should review the contract concluded between Dutch (Hubert) Company and ensure the observed procedures and verify the relationship between Dutch (Hubert) Company and Sakr Al Mohand Company to avoid any future disputes with the contracting entities. We also recommend that Baghdad Sewage Department should comply with the Regulations for Implementing Government Contracts in all contracting procedures
Management Response:
Follow-up We noted that this point still valid.
198 |
Findings
3. Issuance of cheques without sufficient financial coverage High Risk
Observation: During our review of the bank accounts comparisons of Mayoralty of Baghdad, we noted that the balance contradicts with the actual balance (payable) due to issuing cheques by these departments without sufficient financial coverage in the bank account.
Creditor balance as Bank Account Department Name shown in the Name Number Mayoralty department
Baghdad Sewage Department Rafidain 60074 )509.949.556(
Baghdad Water Department Rafidain 60028 )2.012.583.118(
Issuing cheques without depositing a financial cover in the bank account leads to delay of payments for some entities and accordingly some disputes and delay of project execution will arise.
Recommendation: We recommend that Mayoralty of Baghdad should not issue bonds without sufficient financial cover, which leads to legal issues in the future.
Management Response:
Follow-up We noted that this point still valid.
199 |
Findings
4. Closing dormant accounts High Risk
Observation: During our review of the bank accounts of Mayoralty of Baghdad and respective departments, we noted that no transactions on some accounts are performed since long time, such accounts are opened earlier for previous objectives and projects already ended such as the following:
Account Name Department Bank Name Account balance Name Account 6015 Mayoralty of Rafidain 605.277.197 Baghdad Account 6016 Mayoralty of Rafidain 8.578.499.614 Baghdad Contingency plan account 2006/ Baghdad water Rafidain 3.946.922.824 )60053( Department Regions development plan Baghdad water Rafidain 5.481.216.781 account)60045( 2006/ Department
These accounts increase Financial Department burden in terms of monitoring and controlling such accounts while the exerted efforts should be utilized in other activities.
Recommendation: We recommend that the Department should monitor the dormant accounts and identify the reasons of non-performing transaction on these accounts and should take the appropriate procedures to close out these accounts and return the amounts to the Ministry of Finance.
Management Response:
Follow-up We noted that this point still valid.
200 |
Findings
5. Al-Russafa Grand Water Project High Risk
Observation: During our review of Al-Russafa grand water project, we noted the following: 1. The project was not completed althoughits execution period expired on 13/6/2014, accordingly the project was not operated until our visit to Baghdad Water Department. 2. The executing company changed the Bar screen regarding wastewater refinement from the big contaminants as the change include the rotation type (contracted type) into another type (Vertical) without informing Baghdad Water Department of this change. 3. The executing entity (Al Mabrook and Al Essam Al Iraqi for General Contracting limited and French Degremont company) prepared Moderate voltage (MV) motors manufactured in china whereas the submitted documents and catalogues indicated that the motors were of Finnish origin. Accordingly these documents and catalogues were approved by Baghdad Water Department, taking into account that these documents and catalogues that submitted by the contractor and approved by Baghdad Water Department were considered as a an integral part of the contract and binding as stipulated in Article 17 of Item 9 of the contract. Recommendation: We recommend that Baghdad Water Department should: 1) Comply with paragraph (A-B-C) of Item (Second) / Article (10) of the Regulations for Implementing Government Contracts No. (2) of 2014 which stipulate the following: A. If the contractor breached in the final contract phases. Accordingly the contracting agency shall form an expediting commission, and the violated contractor should be presented in this committee, B. An official warning shall be sent to the violated contractor which set forth the necessity of business completion according to the agreed work progress schedule within 15 days of the warning date. C. Issue a decision of withdrawing work from the contractor and execute the breaching works at his cost by another contractor by adopting the contracting method set forth in Article (3) of the Regulations for Implementing Government Contracts No. (2) of 2014. 2) The Second Party shall be obliged to execute project as per the specifications referred to in the bid submitted by the Second Party and as stated in the contract.
Management Response:
Follow-up We noted that this point still valid.
201 |
Findings
6. Contract for the implementation of the joint sanitation network High Risk / service 774-772
Observation: During our review of priorities of the contract for the implementation of the joint sanitation network / service 774-772, we noted the following: The technical and economic feasibility study of the project is not certified by the Ministry of Planning, which is not in compliance with Article 3 / first paragraph) that necessitated the presence of authentication prior to the technical and economic feasibility study of the project that is made by the Ministry of Planning before the preparation of tender documents. Delay in signing the contract after an assignment date, where the assignment was dated 14/03/2013 while the contract signing date 17/04/2013 and this not in compliance with the Government Contract Execution Regulations for the year 2008 (Article 7 – paragraph (b) / 20).
Recommendation: We recommended to comply with Instructions of Implementation of Governmental Contracts No.1 for year 2008.
Management Response
Follow-up We noted that this point still valid.
202 |
Findings
7. Basic designs High Risk
Observation: We noted during our review of a sample of contracts, that there are contracts that had been signed depending on outdated maps and designs, despite the importance of these contracts and its large amounts, and thus causing a significant delay in the completion of these projects because those maps and designs are inapplicable on the ground, mostly requiring to make many changes on the designs which required making change orders for many of these projects. The following table illustrates a sample of those projects:
Contract Contract Contract Used Completion Contract Date of sign off Contractor amount blueprins date duration blueprints date (IQD)
Executing the 97,471,500,0 main sewer lines John Not completed Al Mabani Al 2007/6/29 3 Years 00 1982 in the north east Haist yet Asrieh Group
beside Rasafa Al Mabrook BNI Notcompleted 28 Company 1,131,324, Executing Rasafa 1982 British yet 2008/12/7 Months and Isaam Al 700,000 Water project Company Iraqi Company Preparing and Not completed Abtal Al 1,453,889, laying Pipes Russian 1998 Yet 2012/8/28 150 Days Furat 000 ductable for pure Company
water (772-774) Company Executing joint Al Takhaful Not completed 200 Dyas 896,400,000 Unknown sewer pipe in for Unknown 2011/6/23 Company yet area 442
Management Response
Follow-up We noted that this point still valid.
203 |
Findings
8. Lack of Work Sites Readiness High Risk
Observation: We noted during our review of a sample of contracts, that there are abuses in work sites which prevent contractors to implement the assigned projects, some of these abuses were by citizens and the others were by Government Organizations, these abuses represented in exploitation of land and establishment of buildings and other facilities, which leads to significant delay in the completion of these contracts. Municipality of Baghdad did not remove these abuses before signing contracts. The following table illustrates a sample of those projects:
Contract Name Date of contract Contract Contractor Completion date sign off duration Executing the 2008/12/30 42 Months Al Amoud Not completed main sewer lines Company yet in the north east beside Rasafa No.2 Executing the 2007/6/29 3 Years Al Mabani Al Not completed joint sewer pipe Asrieh Group yet in the north east Rasafa Rasafa Water 2008/12/7 28 Months Al Mabrook Not completed Contract Company and yet Isaam Al Iraqi Company
The failure of removing the abuses and preparation of work sites, is a contradiction to the instructions of implementation of Government’s contracts for the year 2008 (Article 3 - paragraph f), which requires “removal of legal and physical problems, if any, at the work site prior to the preparation of tender documents”.
Management Response
Follow-up We noted that this point still valid.
204 |
Findings
9. Contract of rehabilitation and maintenance of filter High Risk sewage Karkh / Albuaaitha project
Observation: We noted during our review of the contract of rehabilitation and maintenance of filter sewage Al-Karkh / Albuaaitha project, that the department of sewage in Baghdad Municipality had contracted with the Swaa United General Contracting Company on 2/9/2012, despite the fact that this Company presented forged Documents in the past (forged incorporation certificate and fictitious address) to the Water Department in the Municipality of Baghdad for the tender of supplying alum material in 2010, the Municipality did not take any action against the Company, taking in consideration that the project is delayed with a completion percentage of 25 till 31/12/2013. Contracting with companies that submit forged documents is a serious issue that can cause the loss to the Government’s resources.
Recommendation: We recommend the inclusion of companies that presented forged documents in the blacklist and never contract them.
Management Response
Follow-up
We noted that this point still valid.
205 |
Findings
10. Advances and Deposits High Risk
Observation: During our review we noted that the Municipality of Baghdad has recorded advances and deposits which were accumulated since many years and were not reconciled till now. As at 31/12/2012 the advances and the deposits balances were as shown below
Account name Account number Amount
Operating advances 1671 11,193,525,638
Advances at other 1661 3,378,071
Total Advances 14,572,313,709
Received deposits and saving 2661 63,896,952,564 accounts
Total deposits 63,896,925,564
The failure to reconcile advances and deposits may lead to increase the chances of manipulation and losing the rights of the Municipality.
Recommendation: We recommend the Municipality of Baghdad to reconcile the accumulated advances and deposits as soon as possible.
Management Response
Follow-up
We noted that this point still valid.
206 |
Findings
11. Job description High Risk
Observation: During our review of the database of some employees in the Municipality of Baghdad, we noted that there is no proper review and Clear policy in the distribution of grades as explained in the example below:
Position Educational Employ number qualification Manager Junior professional 11
Associate Director Junior professional 66
Senior auditor Junior professional 9
Senior accountant Junior professional 15
Manager Junior high 21
Associate Director Junior high 50
In addition, we noted during our review of a sample of employees, that there are Assistant Managers who did not have a college degree, as it is required by General Secretariat of the Council of Ministers declaration No. S/2/5/21/18536 on 21/6/2006. Such case may lead to un-optimal exploitation of competencies and indicates weaknesses in the distribution system of bonuses and promotions.
Recommendation: We recommend the necessity of equitable distribution of functional grades and appropriate promotions to exploit the efforts and competencies.
Management Response
Follow-up
We noted that this point still valid.
207 |
Findings
Sunni Endowment Diwan
208 |
Findings
1. Contracts and supporting data High Risk
Observation: During our audit, we noted that the contract documents are not filed in a specific place, otherwise they are distributed among many departments in the Diwan such as Government Contract Department – Project follow up Department – Plan Accounts Department which leads to difficulty while tracking the contracting process documents and therefore leading to inability of auditing all the contract documents .
Recommendation: We recommend that the Diwan should develop a system for saving the contract documents along with all the supporting documents in one folder in addition to organizing such documents in an appropriate way to easily obtain and review them within Government Contracts Department.
Management Response:
Follow-up We noted that this point still valid.
209 |
Findings
2. Advances and Deposits Moderate Risk
Observation: During our review we noted that there are advances belong to previous years with an amount of IQD 5,889,733,386, in addition we noted that there is a deposits which were accumulated since 2008 which a total amount of IQD 3,474,970,558 which are not reconciled or settled, which is not in compliance with administrative order number 37360 issued on 9/12/2009, which states on the settlement of the advances and deposits and on the application of delay charges with an amount of 7%.
Recommendation: We recommend the Ministry to reconcile the accumulated advances and deposits as soon as possible, and also follow the instructions of the General Secretariat of the Council of Ministries regarding the advances by applying the delay fines percentage (7%).
Management Response
Follow-up We noted that this point still valid.
210 |
Findings
3. Endowment organizational structure Moderate Risk
Observation: During our review for the endowment law No.56 for the year 2012 published in Alwaqaiaa Aliraqia Newspaper No.4254 dated 15/10/2012, we noted that lack of governmental contracts department in the endowment organization while the department represent in Endowment current organizational structural and the important role for this department to manage the endowment contracts.
Recommendation: We recommend the endowment to take the necessary procedures to list the governmental contracts department in the endowment law.
Management Response
Follow-up We noted that this point still valid.
211 |
Findings
4. Function and tasks of governmental contracts department Moderate Risk
Observation: During our visit to the Governmental Contracts Department at Sunni Endowment, we noted that the department does not do The tasks Mentioned in Government Contract Execution Regulations No.1 for the year 2008 Article 12, and Ministry of planning letter No. 4632 dated 5/7/2012, Where the work was distributed between the beneficiaries, projects department, and governmental contracts department.
Recommendation: We recommend the endowment to comply with the Instructions of Implementation of Governmental Contracts and the instruction issued by the Ministry of Planning (Governmental contracts department).
Management Response
Follow-up We noted that this point still valid.
212 |
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