17 May 2018

Tanzania: CAG Exposes Rot in Mbeya City Council

Dar es Salaam — A loss amounting to Sh12.34 billion has been reported in the accounts of the Mbeya City Council (MCC) linked to the construction of the new Mwanjelwa Market. This is according to the Controller and Auditor General (CAG) report.

The report has also exposed various other irregularities such as securing loans without receiving Treasury bond, borrowing excessively, making excessive payment to contractors and cost paid due to negligence and lack of professionalism. Other irregularities are linked to costs incurred after termination of the original contract, making advance payments contrary to standard procedure and uncollected liquidated damages.

The CAG, Prof Mussa Assad, carried out the special audit in response to the directive by Prime Minister Kassim Majaliwa.

The audit report shows MCC secured a Sh19.562 billion loan from CRDB Bank for the project in three phases of Sh13 billion, Sh3.5 billion and Sh3.062 billion respectively. But, its decision to secure funds from the CRDB Bank charging 14.5 per cent to 16 per cent interest instead of the National Social Security Fund (NSSF) which charged 11 per cent caused loss of Sh5.138 billion.

The report shows that MCC incurred Sh3.360 billion loss when it secured Sh13.062 billion loan from CRDB Bank before commencement of the project.

"The loss was occasioned because CRDB charged interest, despite the fact that the money was deposited in banks own account, instead of a special account opened at the bank for that purpose," reads report in part.

MCC also incurred a Sh3.162 billion loss due to changes and additional work resulted from negligence and lack of professionalism in the changes of project design. "Another loss amounted to Sh682.798 million was recorded for not involving the consultant in the process of getting the second contractor after the first contract was terminated," reads the report.

Outlining the irregularities noted, the audit revealed that MCC signed loan contract with CRDB before receiving government bonds as loan guarantee.

While the bond for the first Sh13 billion loan was released on June 17, 2009, the two sides had signed the contract on May 2, 2008, that is, more than a year.

In another irregularity, MCC borrowed Sh19.562 billion instead of Sh14.044 billion stipulated in the project business strategic plan, which is Sh5.517 billion (39 per cent) more. Also, the council made Sh590 million payment to M/S Tanzania Building Works Ltd for unperformed works, paid Sh112 million in excess as compared to stipulations of the Bills of Quantities (BoQ). "Sh68 million was paid to contractor, M/s Nandhra Engineering & Construction for works not done and that Sh370 million was paid more than the BOQ quotations," reads the report, adding.

"Non-compliance with the project design created additional works which incurring the company with Sh2.808 billion loss when the job was assigned to the second contractor with Sh353.734 million being additional consultation costs," reads the report.

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