ESP, Sandaun trust mismanaged

Focus, Normal

Compiled by FRANK KOLMA

AN investigation into a trust fund set up to manage infrastructure in East Sepik and Sandaun in 2002 was grossly mismanaged over the years that the parliamentary Public Accounts Committee called it a “slush fund”.
There is paper trail of only K7 million out of K30 million parked in the account.
K23 million, it seems, has disappeared without a trace.
And this is money that was managed directly by the Finance Department, the agency charged with overseeing the public accounts of the entire Government sector.
The Public Accounts Committee report to Parliament revealed other gross anomalies and misapplication of funds, abuse of laws and regulations and due process of a magnitude that beggars description.
Beginning this week, The National takes a close look at the PAC report into the Sepik Highways and Bridges Maintenance and Other Infrastructure Trust Account.
The PAC said: “The committee cannot identify virtually any tangible benefit to the country from the expenditure of K30 million of public monies.”
Among others the PAC reported that:
* The contracting of projects  funded from the trust account have not met the requirements of the Public Finances (Management) Act and a number of contracts were identified which have been entered into outside the required processes – including the failure to process contracts through the Provincial Supply and Tenders Board; 
* Contracts have been let to companies that were not viable or did not exist and the trustees and responsible officers of the Department of Finance have failed in their duty to ensure effective management of contracts; 
* There has been poor or non-existent management and supervision of contracts and contractors funded from the trust account; 
* The trustees failed in their obligation to ensure that payments were made only for properly completed work; 
* Contracts were not completed or were inadequately performed and in some cases not even commenced; 
* The former secretary for Finance, Thaddeus Kambanei, completely failed to meet his duties and obligations as either or both the head of the department of Finance and/or as a trustee of the trust account. As the senior accountable officer, his failures deserve the strongest possible censure; 
* Proper accounts and records have not been maintained and it has not been possible for the committee to confirm the validity of payments from the trust account; 
* Proper accounts and records were not maintained, and therefore, it has not been possible for the committee to develop an understanding of the contracting and contract management processes adopted by the trustees; 
* Proper accounts and records have not been maintained and it has not been possible for the committee to ascertain the source of more than K20 million which passed through the trust account; 
* The Department of Finance has failed to fulfil its obligations under the Public Finance (Management) Act to ensure appropriate financial management of the trust account; 
* There was no documented reason for the control of the trust account to be transferred to the Department of Finance in 2005. As a result, this decision lessened the perception of accountability and transparency relating to the operation of the account; 
* There have been continual and blatant breaches of trust and breaches of the requirements of the trust instrument;
* K30 million of public monies passed through the trust account. The source of only K7 million can be identified because there are no proper records; 
* Only one contract was apparently properly tendered, evaluated and granted and even then the records are incomplete and inadequate; 
* Failure to obey the law and a failure to account at all for public monies is evident at every level of administration that dealt with the trust account throughout its entire existence; and
* Negligence and reckless disregard for the requirements of law and the duties of a trustee characterise all transactions into and out of the trust account –  with the exception of only one contract.
The PAC said: “These failures were blatant and clearly the individuals concerned acted (or failed to act) with impunity and immunity –  never expecting to be called to account for their behaviour.
“Trustees failed to act lawfully, acted unlawfully, failed to act independently and did not begin to meet their obligations and duties in the management of the trust account and the expenditure of money from it.
“That a trust account could be abused by the very persons whose duty it was to protect and prudently manage such funds and that the operation of the Account could have reached such a level of incompetence and illegality with no attempt to require accountability, is a matter of profound national concern.”
The committee believed that similar “failings and unlawful conduct may well attend the other 2,500 Government trust accounts” and recommended that there be an inquiry into all trust accounts.