The forensic audit into the financial affairs of Bahamas Power and Light (BPL) cost the power company $300,000, BPL Chairperson Darnell Osborne confirmed yesterday.
Ernst & Young (EY), which was engaged under the previous board in April after fraud was uncovered at the power company, completed its audit last August.
Minister of Public Works Desmond Bannister tabled the report in the House of Assembly on November 8, 2017.
Osborne said upon the new board being appointed, it was determined necessary to continue with the process of the audit.
“We needed to have a forensic audit done to try and get a firm figure in terms of the loss to the corporation,” she told The Nassau Guardian.
“It is something that is industry practice when a fraud has occurred. You tender and have a forensic audit done. It was initiated under the previous board and continued by ourselves.”
The expense for the audit, as pointed out by Minister of Finance Peter Turnquest last week, came out of BPL’s budget.
Since the completion of the audit, the board has conducted an operational audit, hired a risk manager and a procurement specialist to prevent future irregularities.
EY found, among other things, that the invoice approval and payment process that was in place allowed for fraud to go undetected for several months.
Auditors identified 41 checks totaling over $1.8 million made to 13 fictitious vendors, and three checks totaling $126,779 made to legitimate vendors. Of the 44 payments identified, fictitious supporting documentation was found that related to 15 payments.
The alleged fraud was perpetrated between January and May 2017, the report states.
According to the report, the alleged fraud was discovered when an employee noted an unusually large invoice for a vendor with which the employee was unfamiliar.
Last September, a former First Caribbean CIBC employee, was accused of defrauding BPL of over $1 million between January and May 2017. Two more people, who also did not work at BPL, were charged in connection with the scheme. In addition, two former BPL employees were also charged last November with allegedly defrauding the electricity company of just under $1.9 million.
The EY report also pointed to numerous irregularities in the manner in which contracts were awarded by the Bahamas Electricity Corporation, now BPL, since 2012.
For instance, BPL paid a company owned by Progressive Liberal Party (PLP) Chairman Emeritus Errington ‘Minky’ Isaacs in excess of $4.5 million.
In another instance, BPL paid over $2.6 million to Bahamas Courier and Logistics, a company owned by the father of former Minister of Education Jerome Fitzgerald.
Furthermore, BPL spent $4.5 million with Penta Industrial Services, but there was no indication that there was a competitive bidding process.
In two instances, J.S. Johnson Insurance Agents and Brokers was the winning contractor in the bidding process for insurance coverage. However, both contracts were subsequently issued to Sunshine Insurance.
The report advises that altogether, BPL spent more than $14 million with Sunshine Insurance during the period under investigation.
EY performed procurement testing related to 35 vendors with a total spend of over $41.2 million to test the tendering process.
There were numerous examples where the tender process was not followed.
The auditors also identified instances where contracts were awarded to vendors who were not selected or did not participate in the tender process; and also a lack of vendor due diligence, leading to contracts being awarded to entities owned by public officials or BEC board members.
The auditors also identified instances where the former executive chairman, Leslie Miller, influenced procurement decisions or circumvented the procurement process entirely, though Miller has denied he acted inappropriately in the award of any contract while he was executive chairman.
According to Osborne, better controls in accounts have been put in place to prevent irregularities; BPL has changed and tightened up on its procurement process.
The government has committed to forensically auditing a number of government corporations and entities. EY also audited the Water and Sewerage Corporation (WSC) and completed its report in February. That audit was tabled last month, but the corporation was negotiating costing with EY as auditors were instructed to go beyond the original scope of work.