Hope Canal Project costs over $4B – forensic audit

… says cost was deliberately underestimated

The forensic audit conducted into the Hope Canal Project has revealed that a whopping $4.1 billion was expended on the project that was initially pegged at $3.6 billion.

According to the audit report of the National Drainage and Irrigation Authority (NDIA), conducted by Nigel Hinds, the budgeted cost of the project was $3.6; however, upon its completion in May 2015, the purported cost was listed as $3.4 billion.

“However, our findings indicate the cost of the project was over $4.1 billion,” the auditor stated.

Hinds explained that Hope Canal was substantively funded from the PetroCaribe Fund and all payments for the project were done through the Finance Ministry. He noted that the Ministries of Finance, Agriculture nor the NDIA were able to locate the contract agreement or loan terms for such a massive contract.

Nevertheless, Hinds said they reviewed the documentation that was available at the Finance, Procurement and Engineering Offices at the NDIA during which several revelations were made.

It was pointed out that in addition to the monies paid by the Finance Ministry, the NDIA also paid significant sums from its own funding for the years 2013 and 2014 in the sum of $166,596,644 and $90,817,833 respectively. This total amount of $257,414,477 excluded the cost of fuel supplied.

The auditor noted no information was available for years 2010, 2011 and 2015. Moreover, they stated that the NDIA supplied some 1,927,844 litres of fuel to the Hope Canal Project between June 2011 and May 2015, which amounted to a total of $402,919,396.

In addition, Hinds said that 14 super long reach excavators were purchased between 2009 and 2012 for the Hope Canal Project at the cost of $441,628,000, but the Finance Office is showing $466,862,450 were paid for 13 excavators and one bulldozer between 2009 and 2012.

“The dates do not correspond with the information shown for the Hope Canal Project. Documents were not available to verify dates of acquisition and amounts paid for equipment purchased directly for Hope Canal Project,” the auditor pointed out.

He went on to outline that from a list prepared by staff of the Finance Ministry, it showed that 18 units of machinery were dedicated to the Hope Canal Project over the years of construction. Then an additional four units with an estimated value of $90,000,000 were added.

Furthermore, two pick-ups were purchased for $8,400,000 from AINLIM for the project; however, registrations and invoices to verify ownership and cost were not available.

According to the auditor, the information provided to them indicates that the project cost of the Hope Canal Project amounts to $4,119,294,616.

“We were not able to obtain any information from the Ministry of Agriculture to confirm whether any payments for the Hope Canal Project were made through its records as was done in the case of NDIA. We were unable to obtain all the documentation to compute the actual cost of the project as it would appear that deliberate efforts were made to understate the actual cost,” Hinds posited.

He stated that the NDIA, the Agriculture and Finance Ministries were unable to access the Loan Agreement to determine the parties to the contract, the terms of the loan and the method of repayment.

The auditor pointed out that any finance cost would increase the cost of the project as it has to be capitalised; and given the non-availability of critical information, it is reasonable to infer that the Project exceeded its original cost from the information gathered. He said additional work needs to be done to access all information to determine the true cost of the project and the sources of finance.

Hinds pointed out that the Chief Executive Officer had explained that part of the increased cost was maintenance work done because of the prolonged time to complete the project and should not be treated as part of the project cost. “We did not share this opinion because project cost will include all cost incurred up to the point of completion,” the auditor said.

He also noted that the Project was supervised by external consultants CEMCO and SRKN, who provided monthly reports on the progress of the Project which were reviewed by Wordsworth. Additionally, the NDIA hired two consultants namely Paul Sarran and Surendra Singh to assist with various aspects of the Project.