EXECUTIVE director of the National Solid Waste Management Authority (NSWMA) Audley Gordon has given assurance that the entity's internal control system is being strengthened to prevent any manipulation of its procurement procedures.
The statement came against the background of the NSWMA's internal auditors having identified cheques written to 154 individual contractors totalling $32 million, which were lodged to a third-party account, and the auditor general's report identifying an additional 166 cheques valued at $38.8 million, which were also lodged to the same third-party account.
These payouts were made to contractors under the NSWMA's special projects and seasonal works programme. The works under this programme included desilting (street sweeping and cleaning) activities to remove sanding materials, bushes, and debris from roads and sidewalks as part of the agency's public cleansing activities.
The auditor general's audit revealed that in all cases the cheques were not endorsed by the payees; therefore it could not be determined the basis on which the commercial bank honoured the cheque deposit request by the third-party. The third-party is a contractor engaged by NSWMA but was not party to the related transactions.
This matter is now under police investigation.
At Tuesday's meeting of Parliament's Public Accounting Committee (PAC), Chairman Julian Robinson, in his questioning of Gordon on the matter, pointed to an administrative breakdown within the NSWMA that allowed for multiple cheques to be paid to one third-party account and asked if the NSWMA had done its own internal investigation of its processes and systems to determine how this happened and that it does not recur.
"We would've been stupid if we didn't learn internally and adjust accordingly. What I would say to you is that long before the auditor general's report, we began tweaking in terms of the operations right across the [board] and how things are done, there are some reporting arrangements, some signing arrangements that were changed," Gordon responded.
He explained that the NSWMA is an agency in transition, noting that the approach being taken is: "you fix as you go along".
"When you develop a particular protocol, you realise after executing on it for a while that it needs strengthening; and with the auditor general coming in and taking a deeper look because our internal audit which the auditor general acknowledged was…very brief, a spot audit then and they would have gone a little more extensive and they would have seen that this [matter] is a wider thing than we discovered," he said.
The NSWMA executive director noted that while he cannot guarantee 100 per cent security of internal systems, he stressed that "it would be awfully difficult for this to be repeated based on what we doing now".
According to the auditor general's report, over the last five years, 2016 -17 to 2020-21, NSWMA paid $5.5 billion to contractors under its special projects and seasonal works programme.
However, the audit report found that NSWMA did not implement adequate control procedures to ensure that the works were in fact executed and at agreed standard. Consequently, there was a high risk of expenditure not being accompanied with value and the system being manipulated by individuals with ill-intent.
The auditor general's report further outlined that in many instances, the operations manager performed multiple functions in the process of collating projects, authorising purchase requisitions, approving the purchase orders, signing the engagement contracts, certifying the works as satisfactorily completed and signing the cheques.
"Separation of these duties would make it difficult for individuals to manipulate the system. Further, a security feature on NSWMA's cheques to protect against fraud and forgery was removed by the operations manager and the accountant by the un-crossing of cheques without evidence of the payees' approval, which made the cheques payable to anyone," the audit report stated.
When asked if any administrative action was taken against the individuals involved, Gordon said he would "get into serious trouble if I just take it upon my head as an executive director and begin to create sanctions on my own without regard to…due process".
"I understand only too well that irrespective of what we think and our emotions in reacting to situations, we have to be mindful that we are dealing with individuals' lives and livelihoods and we have to be careful to allow the process to guide our actions," he said.
The report revealed that NSWMA has commissioned an investigation into the matter. "Nonetheless, the internal control system is in urgent need of strengthening. This is critical in a context where NSWMA is challenged for adequate resources," the report said.
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