FAAN Audit Report: N72.3m Contract Splitting Allegedly Used To Bypass Tenders Board

Secrets Reporters

An audit report has uncovered alleged contract splitting amounting to N72,314,050 at the Federal Airports Authority of Nigeria (FAAN), with the transactions reportedly structured to circumvent the approval authority of the agency’s appropriate Tenders Board.

This concerns payments for works and supplies which auditors said should have been treated as a single contract but were instead divided into smaller transactions. According to the report, the payments were structured to keep each transaction within the approval threshold of the Managing Director.

The auditors cited Financial Regulation 3116, which provides that any public officer involved in splitting contracts or approvals to circumvent tender procedures should be given 21 days to explain the action. Where the explanation is unsatisfactory, any resulting loss may be recovered from or surcharged against the officer responsible.

Six payments made for same purpose

The report identified a payment processed through Advance Payment Voucher PV-142402 for Christmas decorations at five international airports and FAAN’s Corporate Headquarters, as well as the purchase of out of stock pageants at recorder level.

According to the auditors, six separate payments were made to Oluwatoyin Kanyi and Ibrahim Abdullahi for various works and supplies. The payments averaged N10,340,000 and N2,457,250 respectively.

The report raised concerns over the transactions because they were reportedly made for the same subject and purpose, approved on the same date, and paid on the same day.

The auditors further noted that the combined value of the contracts exceeded the approval limit of the Managing Director for works and supply-related contracts. Despite this, the payments were made in separate parts and, according to the report, to a staff member rather than through a properly contracted arrangement.

The audit suggested that the transactions may have been deliberately divided into six payments to avoid submitting the combined contract value of N72,314,050 to the FAAN Tenders Board, which had the authority to approve works contracts above the Managing Director’s threshold.

Supply payments allegedly treated as works

Beyond the splitting of payments, the audit also identified instances where transactions that were supply related were reportedly classified as works.

According to the report, this classification could have been used to ensure that the transactions remained within the Managing Director’s approval threshold.

The auditors attributed the anomaly to weaknesses in FAAN’s internal control system, particularly around its procurement processes.

Risks to public funds

The audit warned that the alleged practice could expose the agency to several risks, including inflated quotations and prices.

It also raised concerns that the absence of proper due diligence, prudence and economy in the disbursement of public funds could result in waste and poor value for money.

Other risks identified include the possibility of substandard work and the engagement of unqualified personnel where procurement procedures are not properly followed.

Auditor’s recommendations

The auditors recommended that FAAN require those responsible to justify why the payments were split.

They also recommended that reasons be provided as to why the amount should not be refunded by the officer who approved the contracts, in line with Financial Regulation 3116.

The report further called for the strengthening of FAAN’s internal control system around procurement to prevent the recurrence of contract splitting and ensure that contracts are subjected to the appropriate approval and tendering procedures.

The finding places questions over the effectiveness of FAAN’s procurement controls and whether the agency’s approval structure was deliberately bypassed in the handling of the N72.3 million transactions.