Audit Questions N49.98m Payment for Computers, Laptops Supplied to Four Northern Locations

 Secrets Reporters

An audit of expenditure of Federal Airport Authority of Nigeria (FAAN), has raised concerns over the payment of N49.98 million to a company named P for the supply of computers, laptops and other items to government facilities in Abuja and four locations in northern Nigeria, after auditors said they could not find the approved specifications needed to establish whether the government received value for the money paid.

The payment, amounting to N49,983,931, was made to Pin Tap Nigeria Ltd through payment voucher PV-250656 dated October 17, 2023, for the purchase and supply of computers, laptops and other items intended for use in Abuja, Kano, Jos, Kaduna and Zaria.

However, the audit found that a key document relating to the procurement was missing from the records examined.

According to the auditors, a copy of the Ministerial Tender Board’s approval containing the reviewed and approved quotations and specifications of the items to be supplied was not sighted. The absence of the document, the auditors said, made it difficult to establish whether the items supplied matched the specifications agreed during the procurement process and whether the amount paid represented value for money. The finding is significant because computers and other electronic equipment can vary substantially in price depending on their make, model, specifications, capacity and other technical features. Without the approved specifications and quotations, auditors said they could not sufficiently establish the quantity, quality, make or type of equipment that was supposed to be supplied against the N49.98 million paid.

This, according to the audit, creates the possibility of over-invoicing and could result in a deliberate loss of government funds.

N49.98m Payment without Key Procurement Document

Financial Regulation 412 requires government payment vouchers relating to the supply of goods or execution of works to be accompanied by a certificate confirming that the payment is in accordance with the terms of the contract.

For supplies, the regulation requires confirmation that the articles have been received according to specification. The regulation also provides that where payment is being made on account, no amount should be claimed beyond the cost of the work certified to have been performed.

The requirement is designed to ensure that government does not simply pay contractors because an invoice has been submitted. There must be evidence showing what was contracted, what was supplied and whether what was supplied met the agreed specifications.

In the case of the N49.98 million payment to Pin Tap Nigeria Ltd, the auditors said the relevant Ministerial Tender Board approval containing the reviewed quotations and specifications was not available for their examination. That omission left the audit team unable to verify the basis upon which the contract price was determined. It also made it difficult to compare the equipment eventually supplied with the items and specifications approved during the procurement process.

What Exactly Was Purchased?

The audit finding identifies the items generally as computers, laptops and other equipment. However, without the detailed specifications contained in the Tender Board approval, questions remain about the exact nature of the supplies. What make and model of computers were approved? How many laptops and desktop computers were to be supplied? What processing capacity, storage, memory and other technical specifications were required? What were the approved unit prices? And did the items eventually supplied correspond with those specifications? The audit could not establish these details from the documents available to it.

For instance, two computers may look similar but have substantially different prices depending on their processors, memory, storage capacity, manufacturer and other specifications. Without the approved quotation and specifications, it becomes difficult for auditors to determine whether the government paid a reasonable market-related price or whether it was charged more than necessary.

Over Invoicing Concern

The auditors specifically warned that the absence of the procurement documentation casts doubt on the quantity, quality, make and type of items supplied in relation to the amount paid. They therefore identified the possibility of over invoicing. The audit did not establish that Pin Tap Nigeria Ltd actually over invoiced the government. Rather, it flagged the absence of the documents required to verify the payment as a circumstance that could allow over-invoicing to occur without being easily detected.

The immediate issue is the inability of the auditors to verify the N49.98 million expenditure against the approved specifications and quotations. If the Tender Board approval is eventually produced and the items supplied can be matched against the approved specifications and prices, the concern could potentially be resolved. If the document cannot be produced, however, the payment remains difficult to substantiate from the audit’s perspective.

A Question of Internal Controls

Beyond the contractor, the audit also raises questions about the internal control system within the procuring entity. The auditors described the situation as evidence of poor internal controls and warned that weak controls could lead to false certification of contracts.

Government procurement is built around several layers of checks. A procurement should be approved, specifications should be established, quotations should be evaluated, a contract should be awarded and the eventual supplies should be inspected and certified before payment is made.

Each stage is intended to prevent public funds from being paid for goods that are either not supplied, supplied below specification or supplied at inflated prices. When key documentation is missing at the payment stage, one of those safeguards is weakened.

In this case, the auditors want to know why the payment was processed without the Tender Board approval containing the specifications and reviewed quotations.

Where the Equipment Was Meant to Go

The N49.98 million procurement covered equipment intended for several locations, including Abuja, Kano, Jos, Kaduna and Zaria. The geographical spread of the supplies makes proper documentation even more important.

With equipment being distributed across different locations, there should ordinarily be a clear trail showing what was supplied to each location and whether the quantities and specifications corresponded with the contract.

The audit finding provided, however, does not contain a breakdown of how many computers or laptops were supplied to each location or the amount attributed to each site. It therefore leaves another area that would require further verification.

A detailed investigation would need to establish the delivery notes, inspection reports, stores records and evidence of receipt at each location. Those records could help determine whether the equipment was actually delivered and whether it matched the contract.

Risk to Public Funds

The auditors identified several risks arising from the transaction. These include the possibility of a deliberate attempt to siphon government funds, lack of transparency and accountability in the procurement process, the supply of substandard equipment and weak internal controls that could result in false certification of contracts.

Again, the audit’s identification of these risks does not by itself prove that any of them occurred. But the risks explain why the missing documentation is significant. If government cannot establish what it agreed to purchase, the quantity required, the approved price and the specifications of the items, it becomes more difficult to demonstrate that the N49.98 million expenditure represented value for money and if the equipment supplied was below specification, government could potentially have paid for more expensive equipment while receiving inferior products.

Auditors Demand Explanation

The auditors recommended that the Managing Director explain why the organisation’s internal controls were allowed to remain weak in a manner that, in their assessment, could facilitate the processing of payments that might defraud government and taxpayers.

More importantly, they requested that a detailed copy of the Ministerial Tender Board’s approval be provided. The document should contain the reviewed and approved quotations as well as the specifications of the items to be supplied.

The auditors said this document is necessary for them to properly examine and validate the expenditure. If the required documentation cannot be produced, the audit recommended that the contract amount be refunded to the Consolidated Revenue Fund (CRF).

Evidence of the remittance is also expected to be forwarded to the Office of the Auditor General for the Federation (OAuGF) for confirmation. That recommendation places the issue squarely before management. The question is no longer simply whether N49.98 million was paid. The authority must now demonstrate what it paid for, what was approved, what was supplied and whether the amount paid can be justified based on the procurement records.