The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

BAHAMAS Power & Light’s (BPL) chief financial officer was victimised for trying to set-up proper procurement processes, amid a culture of “bid rigging” on high-value contracts.

The EY (Ernst & Young) forensic audit of BPL revealed that Cecile Greene was “consistently targeted” by the electricity monopoly’s “former Board” for trying to save customers millions of dollars.

The allegations were raised by BEC’s former general manager, Kevin Basden, who alleged in an interview that former management executives and Board directors “rigged” the award of multi-million dollar contracts by the utility.

“During the interview, Mr Basden corroborated a number of procurement irregularities identified by EY as part of our transaction testing,” the EY report said. “Mr Basden suggested that there were numerous instances of ‘bid rigging’ with respect to high dollar contracts that were awarded to vendors by former executives and Board members.

“As part of our electronic document review, EY identified numerous instances whereby Mr Basden was ‘pushing back’ against some of the irregular procurement practices of former Board members.

“Further, Mr Basden suggested that Mrs Greene was consistently a target of the former Board due to her efforts in implementing a formal tendering process.”

The EY report does not identify the “former Board”, or the various instances of ‘bid rigging’ described by Mr Basden and those involved.

However, it yet again illustrates how non-existent corporate governance; weak and ill-enforced internal controls; and too much political interference in state-owned enterprises (SOEs) have caused the Bahamian public to incur multi-million dollar losses contributing to this country’s economic and fiscal malaise.

EY conducted two interviews with Mrs Greene, with the first focusing on BPL’s financial controls and accounts processing systems in the wake of the near-$1.9 million fraudulent cheques scam.

“EY performed a walk through of the accounts payable (AP) process and challenged Mrs Greene on the control environment and volume of work in process activity,” the report said.

“While Mrs Greene acknowledged some of the issues EY identified in both areas, she also defended the progress she has made since accepting her position as chief financial officer in 2009.

“Mrs Greene stated that she believes the control environment is adequate, but could be enhanced. Further, she stated that she has made significant progress in reducing the amount of work in process inventory from $200 million in 2009 to $60 million currently.”

EY said its second interview was conducted to obtain Mrs Greene’s perspective on “the procurement irregularities” identified by the accounting firm in its audit.

“Mrs Greene corroborated the majority of the findings and observations EY made in this area,” the report said. “Mrs Greene stated that the recommendations of the tender committee, of which she was a member, were consistently overruled behind closed door meetings of the two previous Boards of Directors.”

EY identified numerous occasions where Leslie Miller, the then-Bahamas Electricity Corporation’s (BEC) executive chairman between 2012-2016, improperly inserted himself into the awarding of contracts, with several interventions described as “irregular”.

“We noted five instances where correspondence from the vendor (invoices, bids, proposals) was addressed directly to the chairman [Mr Miller] and not the procurement or engineering functions,” the EY report said.

“We noted nine instances where handwritten approval was provided by the chairman for amounts below $250,000. We noted 10 instances of written correspondence from the chairman to staff instructing them to engage with or process payments to a given vendor.”

EY released an e-mail from Mr Basden to then-deputy prime minister Philip Davis, which revealed that Mr Miller had given a security firm, Actun Security, a three-year contract extension without any formal bidding process being conducted.

Mr Miller also authorised a “highly irregular” mobilisation payment to Actun, and the report said: “EY performed an analysis comparing the average monthly cost of the prior security contractor, Wemco, to the average monthly cost for the new vendor, Actun.

“The average monthly cost of security provided by Wemco for the one-year period December 2011-2012 was $72,280. The average monthly cost of security provided by Actun for the one-year period November 2012-October 2013 was $94,419, representing a 30.6 per cent increase in security expenses for the same services.”

EY’s report, entitled Project Hogfish, highlighted “numerous irregularities in the manner in which contracts were awarded by BEC since 2012”, implying that the electrical utility’s tendering and procurement processes had broken down almost entirely.

This, in turn, undermines the creation of a Bahamian meritocracy and ensures BPL’s customers and shareholder (the Government) received poor value for money, with the extra costs caused by some contract awards and likely shoddy workmanship exacerbating the utility’s $20 million-plus annual losses.

The EY report also found that access to BPL’s systems for the creation of vendor profiles was “not appropriately restricted” - something that assumes extra significance given the fraudulent cheques issued to fictitious companies.

“The process and responsibilities - including defined segregation of duties - for the creation of new vendor profiles is not currently documented in procurement policy,” EY said. “During interviews with procurement staff, we were told conflicting information about who has the responsibility, and the functionality, to set up new vendor profiles.

“We were told by one staff member that the procurement manager is responsible for creating new vendor profiles, and by another staff member that accounts payable are responsible for their creation.”

EY said both BPL’s procurement and accounts payable staff had permissions enabling them to access the system and create new vendors.

“When the creation of new vendor profiles is not appropriately restricted, there is an increased risk that fraudulent payments will be made to external individuals or organisations, or that vendors will be engaged without adequate analysis and due diligence,” EY warned.