Mera paid K16m in flawed deal

The Malawi Energy Regulatory Authority (Mera) paid over K16 million ( $53,333) in a flawed procurement transaction that saw the authority ignore its internal and public procurement processes.

Mera paid for a six-paragraph write-up and advertisement which were part of a 12-page supplement on Malawi by London-based advertising agency, Upper Reach Limited.

The supplement, published in the London Times on Thursday August 5 2010, was meant to promote the late president Bingu wa Mutharika and his policies.

The procurement, which cost Mera 39 800 euros (over K16 million at present exchange rates) in foreign advertising at the height of a national forex crisis, was paid for even after internal auditors questioned the manner in which Upper Reach was chosen for the service and also had advised the authority to stop payment.

Mera management also neglected advice to seek ‘no objection’ from the Office of the Director of Public Procurement (ODPP) as is the case when the value of goods or services surpasses a set threshold.

The Mera piece appears at the bottom of page three of the supplement, titled Leadership and Progress in the Warm Heart’ of Africa available on http://www.upper-reach.com/pdf/malawi.pdf.

Despite several efforts to talk to Mera, including sending a questionnaire to them last month, there has been no comment from the authority on the matter.

Auditors ignored

The Nation established that auditors recommended that the payment to Upper Reach should be stopped because, among other issues, there was no tendering, neither did Mera seek authorisation from ODPP to single-source procurement above Mera’s K3 million threshold.

Funds externalisation requests to National Bank Capital City Service Centre that we have seen, show that Mera chose to pay for the Upper Reach contract number 00303 through two different transfers within a space of five weeks.

ODPP public relations officer Mary Mbekeani said in a written response to a questionnaire on Wednesday: “We wish to advise you that we have checked our records and we have not found any submission from Mera in connection with advertising with Upper Reach.  As this is the case, you may wish to check with Mera since it is the procuring entity which called for the advertising of whatever services it was they were advertising with Upper Reach.”

Mbekeani, however, said ODPP will follow up the matter.

Documents confirm the transaction followed a contract signed on behalf of Mera by then acting chief executive officer Welton Saiwa on June 17 2010 for a one-third magazine space page advertising.

Alana Kalin signed the contract on behalf of Upper Reach, according to documents.

Through a memo dated August 10 2010, Mera public relations officer Edward Mponda asked the director of technical regulation Saiwa (then doubling as acting CEO) seeking approval for accounts to pay.

“Sir, the project has since been finalised by flighting the material in the London Times. Please find attached a copy of the material and the contract as well as the invoice attached,” wrote Mponda.

In his handover notes to CEO Alex Chiwaya, Saiwa reported that the Mera board gave consent to the procurement.

“Also note that the subject was noted by the board during its 9th meeting after the board chair gave consent to contribute to the insertion coverage. I, therefore, submit for your approval,” wrote Saiwa on August 10 2010.

On August 11 2010, Chiwaya approved the payment. The same day, Saiwa forwarded the memo to director of finance and administration Ellias Hausi for action.

Procedural lapse

Hausi then sought the approval of the Internal Procurement Committee (IPC) the following day.

But Mera IPC chairperson then, Michael Mwase, refused to endorse the procurement, noting the procedural lapse.

“There is nothing IPC can do, especially the fact that procurement has already been done and the CEO has already approved for payment,” the Mera IPC chairperson inscribed on the memo on August 12 2010.

The publication of the advert in London Times as well as all the push of memos for payment between offices happened after Mera internal audit team had queried the transaction on June 25 2010.

In his internal memo to acting CEO Saiwa, senior internal auditor MacIan Yona recommended that “payment for this transaction be stopped until all procurement provisions have been fulfilled.”

“There was no consultation in the process and, as a result, good and professional advice, which should have ordinarily been offered, was lost. Unfortunately, procurement issues are extremely sensitive these days; hence, the need for executive management to follow all processes to avoid suspicions.

“Controls in procurement process were disregarded and overridden, which is very worrisome to us as internal audit,” noted Yona in his memo to Saiwa.

In their findings, the Mera auditors were also concerned that there was no tender, neither did the authority use the three quotations rule to be able to get a provider who could offer value for money.

“In any case, such an amount should have been referred to Finance and Audit Committee. Transparency and accountability in this transaction was absent as no consultation even from within was done,” noted the auditor.

While payments to Upper Reach through Swift Number MIDLGB22, account GB43 MIDL 40051569619697, show that Mera paid  20 000 euros, the auditors noted that the whole transaction amounted to 39 800 euros.

“Our preliminary analysis of this transaction has established that the above company is pushing for the payment of 39 800 euros,” the auditors noted.

They observed the transaction did not even have “a Local Purchase Order (LPO) or a letter authorising this particular company to provide the service we are being asked to pay.”

The Upper Reach supplement also carried material and stories from other government departments and parastatals.

But The Nation could not immediately ascertain how much the whole project cost the Malawi tax-payer and what value the exercise added to the country.