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PAC REPORT on the RDA.Pdf THIRD REPORT OF THE PUBLIC ACCOUNTS COMMITTEE ON THE REPORT OF THE AUDITOR-GENERAL ON THE ROAD DEVELOPMENT AGENCY FOR THE PERIOD JANUARY 2006 TO SEPTEMBER 2009 FOR THE FOURTH SESSION OF THE TENTH NATIONAL ASSEMBLY APPOINTED BY THE RESOLUTION OF THE HOUSE ON 25 SEPTEMBER 2009 Consisting of: Mr E M Hachipuka, MP(Chairperson); Mr R C Banda, MP; Mr H H Hamududu, MP; Mr C L Milupi, MP; Mr L P M’sichili MP; Mrs A C K Mwamba, MP; Mr L M Mwenya, MP; Mr B Y Mwila, MP and Mr P Sichamba, MP. The membership of your Committee changed during the Session following the death of Mr R C Banda, MP and the resignation of Mr C L Milupi, MP as a Member of Parliament. Mr V Mwale, MP and Mr E M Munaile, MP respectively were appointed as replacements. The Honourable Mr Speaker National Assembly Parliament buildings LUSAKA Sir, Your Committee has the honour to present its Third Report on the Report of the Auditor-General on the Road Development Agency for the period January 2006 to September 2009. Functions of the Committee 2 The functions of your Committee are to examine the accounts showing the appropriation of sums granted by the National Assembly to meet the public expenditure, the Report of the Auditor-General on these accounts and such other accounts, and to exercise the powers conferred on them under Article 117(5) of the Constitution of the Republic of Zambia. Meetings of the Committee 3. Your Committee held eleven meetings to consider the Report of the Auditor-General on the Road Development Agency for the period January 2006 to September 2009. Procedure adopted by the Committee 4. Your Committee considered both oral and written submissions from the following witnesses: (i) the Hon Minister of Works and Supply; (ii) Secretary to the Treasury, Ministry of Finance and National Development; (iii) Controlling Officer – Ministry of Works and Supply; (iv) Mr Walusiku Lisulo, former Chairperson of the Road Development Agency; (v) Director-General of the Zambia Public Procurement Authority; (vi) Chief Executive Officer for the Road Development Agency; (vii) Chief Executive Officer for the National Road Fund Agency; (viii) Managing Director for Raubex Construction Limited, a contractor; and (ix) Partner for Brian Colquhoun Hugh O’Donnell and Partners, an engineering consulting firm. Your Committee also engaged the services of one of the engineers who were contracted as a group to be part of the Audit Team to provide non financial technical advice. This Report contains the observations and recommendations of your Committee and includes proposed remedial measures to correct identified financial irregularities and system deficiencies in the road sector. The Report is in three parts. Part one is the Executive Summary of the Auditor-General’s Report. Part two is the background to the Audit Report. Part three is a summary of submissions from witnesses and contains your Committee’s observations and recommendations on the Audit Report as a whole and on specific issues raised by the Auditor-General. 1 PART ONE EXECUTIVE SUMMARY OF THE AUDIT REPORT 5. The audit of the Road Development Agency (RDA) for the years 2006 and 2009 was conducted in accordance with the provisions of Article 121 of the Constitution of Zambia, Cap 378 of the Laws of Zambia and Public Finance Act No. 15 of 2004. The objectives of the audit were, among others, to ascertain whether: • procurement procedures were followed in the award of contracts; • roads projects were administered in accordance with contract agreements; and • expenditure was in conformity with the Laws of Zambia. The following were observed: a. Annual Plan and Budget i. Over Commitment The Agency committed Government to expenditure in excess of money appropriated by Parliament contrary to Section 7(3) of the Public Finance Act No.15 of 2004 . The over commitments, in 2008, amounted to K1, 015,817,097,718. This resulted in serious cash flow problems in 2009. ii. Inadequate Provisions for Contracts Adequate funds were not provided in the budget to cover the contracts. This resulted in delayed payments and completion of works. b. Procurement Stage i. Lack of Drawings and Condition Survey Drawings for the contracts were in most cases either delayed or not prepared and condition surveys were not conducted leading to inadequate interventions and unnecessary variations. ii. Engineers’ Estimates Contrary to common practice the engineer’s estimates were not used when carrying out evaluations . It was, therefore, difficult to ascertain the reasonableness of the bid sums. iii. Late Engagement of Supervising Consultants Consultants were mostly engaged later than the starting date of the works contract. In this regard, part of the contract periods were running without supervision. iv. Negotiation Meetings RDA did not usually hold contract negotiation meetings despite the inconsistencies in the evaluation and poor contract documents. v. Poor Quality Contract Documents Agreements or contracts are at times not signed and/or have no date. Sections indicated as forming part of the contract such as drawings were missing in some cases; and Contracts for unpaved roads would have drawings for a paved road. 2 c. Execution Stage i. Poor Contract Administration There were considerable delays in decision making relating to issues raised by Consultants/contractors, which in some cases, led to extension of time and additional costs . ii. Non Submission of Performance Bonds The clause on performance bond was not always respected, thereby failing to penalize the contractor in case of none performance. iii. Delayed Payments to Contractors and Consultants Some Payments to contractors were delayed resulting in interest charges and standing time. iv. Irregular Payments In some cases, payments were made for works not done v. Irregular Instructions to the Contractors In some cases, the Agency issued instructions directly to the contractors disregarding the consultants. The instructions were mostly related to payments to RDA staff and servicing of RDA motor vehicles. vi. Delayed Works There were very few projects which were completed on time. In most cases the contracts had to be extended and in some cases more than once. There were also cases where RDA instructed the contractors to slow down or stop works because of lack of funds. vii. Progress Reports Progress reports were, in a number of cases, not prepared by the supervisors. viii. Variations Decisions on variations were in some cases not justified by the contractor and, therefore, unreasonable . ix. Supervision Funds In cases where the supervision of the contracts was done by RDA, supervision funds were paid through the contractor, thereby raising issues of objectivity. x. Poor Quality Works Poor quality works were observed on most of the contracts reviewed. d. Analysis and Comments on the Test Results Analysis of results for road test samples that were collected from eighteen (18) projects as part of the audit for Road Work carried out by the RDA in 2007/2008, revealed the following results: 3 4 PART TWO INTRODUCTION AND BACKGROUND AUDIT PARAGRAPHS 1 - 5 6. The Auditor-General reported that the audit of the Road Development Agency (RDA) for the years 2006 to 2009 was submitted to the President for tabling in the National Assembly in accordance with the provisions of Article 121 of the Constitution of Zambia and Cap 378 of the Laws of Zambia. Audit Objective The objectives of the audit were, among others, to ascertain whether procurement procedures were followed in the award of contracts and whether, roads projects were administered in accordance with contract agreements and also whether the expenditure was in conformity with the Laws of Zambia. Scope and Methodology The Report was a result of an audit carried out at the Road Development Agency. The audit was planned and performed such that sufficient evidence, explanations and all necessary information were obtained to reach reasonable conclusions. In conducting the audit, tests of accounting records maintained at the Agency, the National Road Fund Agency (NRFA) and the Ministry of Works and Supply, such as accounting documents, tender documents, contracts, and certificates of completed works, progress reports and other relevant records were reviewed. In the course of preparing the Report, the Controlling Officer in the Ministry of Works and Supply was required to confirm the correctness of the facts presented. Where comments were received and varied materially with the facts presented, the relevant items were amended appropriately. Background The Government of the Republic of Zambia (GRZ), with assistance from its Cooperating Partners (CPs) that comprised the World Bank (WB), European Commission (EC), Danish Development Assistance (Danida), Japanese International Cooperation Agency (JICA), Nordic Development Fund (NDF), Africa Development Bank (AfDB) and German Development Bank (KfW) developed a Road Sector Investment Programme (ROADSIP). The goal of the programme was to systematically maintain and rehabilitate a core road network and to bring it to a maintainable standard by the year 2013. ROADSIP I covered the period from 1997 to 2007 and was extended to 2013 under ROADSIP II. In 2002, three (3) new road sector agencies, namely, the National Road Fund Agency (NRFA), the Road Development Agency (RDA), the Road Transport and Safety Agency (RTSA) were created through the enactment of the Public Roads Acts Nos. 11, 12 and 13. The Agencies, which became operational in 2005, have the following functions, among others: • National Road Fund Agency (NRFA) – responsible for mobilising resources for funding the road sector and administering the Road Fund. • Road Development Agency (RDA) – responsible for planning, maintaining and managing the core road network which was, previously, the responsibility of the Roads Department under the Ministry of Works and Supply. • Road Transport and Safety Agency (RTSA) – responsible for road safety, traffic management, motor vehicle registration and drivers licensing. 5 The total core road network is 40,113 km comprising 3,088 km of Trunk roads, 3,691 km of main roads, 13,707 km of district roads, 5,294 km of urban roads and 14,333 km of primary feeder roads.
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