May 30,2016
Over 5,000 laptops costing more than $300 million from the One Laptop Per Family (OLPF) project were either stolen or defective, according to an investigation into the initiative which found that the OLPF fell short of its objective, was “grossly overstaffed” and the $4.3 billion spent on it could have been reduced.
In a report submitted to Minister of Finance Winston Jordan, the auditing firm Ram & McRae highlighted a number of issues with the Bharrat Jagdeo-initiated project and recommended that the police be called in to probe the laptop thefts. It said there were issues primarily in the areas of planning, management and supervision of the departments. There was also no proper control over inventory which resulted in the loss of the laptops.
The report said too that the entire project was “grossly overstaffed” and still a number of departments failed to carry out daily duties in accordance with the standard operating procedures. Overall, there was a general lack of proper internal controls and maintenance of adequate financial systems, it said.
The OLPF project was launched by the PPP/C government in 2011 with the main objective being to acquire and distribute laptops to 90, 000 families countrywide. The report said up to December 31, 2014, the project had fallen short of the target of 90 000 laptops to be distributed by 31 697 or 35%. It said that the project only acquired 55 145 laptops, of which, 50 009 were distributed.
The cost of the 55, 145 laptops was $3.1 billion while other costs from May 9, 2011 to May 31, 2015 amounted to $1.2 billion. Of this sum, a whopping $734.9 million or 58% went towards employment costs for the average of 133 employees for the period 2012 to 2014 while administrative expenses amounted to $422.7 million or 33% of the total expenses.
“Overall, we are of the opinion that the amount spent on the OLPF project could have been reduced if the expenses were properly managed by the project administrators,” the report said. It had earlier pointed out that political considerations may have influenced the appointment of the more senior staff including two sons of former PPP/C member of parliament Joseph Hamilton.
The OLPF project was part of a larger Information Communi-cation Technology project which is funded by loan and grant from the Government of China amounting to $10.2 billion and from the Government of Guyana which has put in $3.4 billion.
According to the report, the OLPF project was not governed by any specific legislation and the then project manager Margot Boyce was unable to provide auditors with a project document or plan detailing the number of laptops required for the project, the procurement stages and prospective suppliers of the laptops, procedures for distribution and the number of departments and employees required to effectively and efficiently execute the project.
“In the circumstances the problems which the project encountered, the actual loss of 1,875 laptops and the potential loss of a further 3,158 through damage were probably inevitable,” it said. The report noted that the administration has indicated that it will modify the project with a different focus. The report said should the project be continued, immediate steps should be taken to prepare a plan, setting out the objectives and procedures for the acquisition of any further supplies, and their receipt and storage and distribution and accounting.
The report pointed out that the OLPF project was led by Boyce and her deputy Azariah Asim. Neither, the report said, was qualified for their position. Other senior managers were also not qualified for their positions, the report said. Their salaries ranged from $700, 000 to $150,000 per month.
Inadequate
With regards to the missing laptops, the report said that internal controls established to manage inventory, the most critical element of the entire project, were inadequate. “The project was reportedly unable to account for 71 laptops on July 27, 2012 and this number increased to 103 on July 30, 2012 when it was discovered that an additional 32 were missing,” it recalled. It noted that as a result of a subsequent police investigation, six employees were sent on administrative leave. Eight were required to do a polygraph test. Seven persons were later dismissed and the more than $5M which represents the cost of the missing laptops was never recovered.
The report revealed that during the course of the audit on August 5 last year, a 100% physical inventory count was requested and observed and subsequently a reconciliation based on the documents provided was done. This revealed that management was unable to account for an additional 1,875 laptops costing $109 million. “We believe that this matter should be referred to the police for a full investigation. The 3,158 laptops in stock, costing $191,079,058 are all damaged. We have been unable to determine whether these are beyond repair. It is likely therefore that of the total number of laptops acquired by purchase or grant of 55,145, some 5,136 were either stolen or are defective. In dollar terms, the actual loss to the Government is $306,160,171,” the report said.
Meantime, the report stated that the financial systems and internal controls governing the project were generally weak. “Since the Project did not have a Board of Directors, the underlying principles of corporate governance should have been fulfilled by management. There is no evidence that this was done,” it said.
According to the report, the project operated with Standard Operating Procedures (SOP) for each department. However, an examination revealed that a number of departments, including critically, Accounts, Warehouse, Documentation and Registry, did not perform duties in accordance with those procedures. With regards to the warehouse, deficiencies include that there was no complete record of the laptops received, no evidence that periodic inventory counts were conducted, no reconciliations were done between the physical quantities of laptops and the inventory, and the inventory records for the years 2014 and 2015 could not be located.
The report also pointed out that a review found lots of errors within the Data Entry Depart-ment as it was observed that numerous applicants were approved for distribution even though all the relevant information was not obtained. More than 60% of the recipient entries did not include the applicants’ date of birth, gender, parental status and telephone number(s) and it was also noted that a number of errors were documented in the recipients’ database, the report stated.
There was no application ID in over 70% of the entries recorded in the 2014 recipient database and as such, this made it impossible to locate the preliminary applicant for any recipient in question. “It is our opinion that internal controls such as management and supervision in the Data Entry Department have not operated effectively during the lifetime of the project,” the report said.
It stated that these are significant errors which should have been detected and prevented by basic supervisory controls. In the circumstances, the report said, it is unable to determine how many of the recipients of laptops were genuine.
Further, the report revealed that the OLPF’s obligation to provide 10 hours of training to all laptop recipients was scrapped based on the logic that training was too expensive. It was stated that it was Boyce who decided to cease the training aspect of the project during the last quarter of 2013. “Our rough estimate is that some 14,138 laptops were distributed without the requisite training,” the report said.
Meantime, the report said that the OLPF project had as much as 16 departments, most of which were not necessary as there were overlapping responsibilities. The average number of employees of the OLPF project amounted to 133 persons.
“The Project Manager was unable to offer any justification for the apparently high number of departments and employees, particularly since distributions were not carried out on a continuous basis and the procedures leading to distributions were relatively straightforward”. The audit said that it therefore considered the existence of the following departments: registry, public relations, quality assurance, accounts, documentation and verification and retention of the employees therein unjustifiable.
Meantime, the report pointed out that Jordan in his budget presentation last year had said that $1.7 billion has been budgeted for the procurement of 9, 609 laptops.
“We draw attention to the average unit price of $169,737 for the 9,609 laptops to be acquired. This compares unfavourably with the average price of $58,044.83 per laptop acquired by the last Administration. It should be noted that the new laptops are of a higher quality and specifications compared to the models acquired by the previous administration. Nevertheless, laptops of similar capacity are listed on the international markets at a retail price ranging from $86,310 to $108,974,” it said.
The report added that the overall financing of the OLPF project was opaque and funded out of money received by the National Frequency Management Unit which was itself retaining funds otherwise payable into the Consolidated Fund. The report declared that it is clear from the summary analysis done that 92% of the total cost was incurred due to indirect expenses, while only 8% was directly attributable to the underlying objective of the project.
Among other recommendations, the report urged the development of a comprehensive project plan which includes the objective of the project and strategies to achieve those objectives and have the plan approved by Cabinet.
