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Report Number: AR_13_2008
16 April 2009
Auditor-General's Report
Audit Report for the Presidential Palace, Theemuge 2007 and 2008
Translated by Maldives Culture

In the name of Allah, the Generous and Merciful

Contents
1. Introduction
2. Main findings in this Audit Report
2.1 Theemuge - background
2.2 Theemuge Expenditure
2.3 Expenditure in the name of 'government assistance and subsidies'
2.4 Household expenditure
2.5 A launch bought in 2002
2.6 Construction of the present buildings at Theemuge
2.7 Tangible property acquired through budget expenditure
2.8 Presidential allowances
3. Conclusion

(Auditor General) Ibrahim Namee's signature

Auditor General's Report for the President and Parliament:
Presidential Palace Audit Report for 2007 and 2008
Report Number: AR 13/2008

1. Introduction

The purpose of this report is to present to the president the main findings of the Theemuge [ex-president Maumoon Gayyoom's presidential palace] audit in accordance with statute number 4/2007 and to provide recommendations, and bring those recommendations to the attention of parliament.

The audit looks at expenditures related to Theemuge in 2007 and 2008 from the government budget. Additionally, it looks at the expenses for the construction of the present buildings at Theemuge from 1992 to 1994, and the expenditure on a yacht bought in 2002 for the use of the president.

The audit was to be conducted in August 2008, however it was delayed twice due to requests from Theemuge and the non-availability of high level staff members. The audit eventually commenced in January 2009 and completed by April. It took so long because of the delay in receiving information and lack of proper record keeping practices, the incomplete nature of the accounting records for the year 2008, and the need for the audit office to consolidate the accounts based on available records from Theemuge.

Information for this audit was obtained from the financial records of the presidential palace, ministry of finance, and the presidential office.

This report will be presented to the finance committee of the parliament, and will be made available at the website of the Maldives Auditor-General's office, www.audit.gov.mv


2. Main findings of the audit

2.1 Theemuge - background
Theemuge is the address of the official residence of the presidential palace occupied by the president of Maldives for the last 30 years. Used as the presidential palace from 1978 to 1992, the buildings were demolished and construction of the present buildings completed in late 1994. According to the documents, the entire building cost Rf207 million which is about US $17 million.

Briefly, modern Theemuge now consists of the buildings within the Theemuge land block, buildings constructed on the two adjacent blocks of land from the Theemuge budget, buildings on land in other areas of Male', Aarah island just north of Male', buildings and facilities in the atolls, and facilities in embassies overseas. Below is a brief description of these places and facilities.

The present three storey building at Theemuge consists of three main parts and facilities as follows:
- 7 rooms (official presidential room, guest room and five rooms used by the president's family members, in total seven rooms), (marble floors and rugs)
- a swimming pool (the water for this pool is desalinated water from salty ground water)
- a badminton court, games room, gym, and facilities and equipment for these activities
- an office for the president
- offices (three rooms) for administrative and financial management purposes
- two halls for entertainment and other uses
- astronomical observatory area on the roof, and a telescope mounted in a small observation room
- a three storey building for the staff, separate from the main building. One floor for the police who provide security services, and another for staff members on duty. The ground floor is used for power generation, car garaging, storage of water pumps, and has other spacious areas for conferencing and cinema.
There are eleven sea launches for the use of Theemuge, 55 cars and other motor vehicles, and 20 motor bikes.
The 55 vehicles include a car for the use of the president at each of the four regional airports and 12 unregistered cars ordered during the previous president's term that arrived in 2009. A list of these vehicles is in Table 1 below.

Table 1: Vehicles specifically for Theemuge

For the President in Male' (Mercedes Benz) 7 cars
For the President in Regional airports 4 cars
For the President at Hulhule' airport 1 car
President to take to visiting islands 4 cars
For the first lady (Nissan, BMW) 2 cars
For the children of the President 7 cars
For a daughter-in-law of the President 1 car
For the most senior level staff of Theemuge 5 cars
For the purposes of Theemuge 9 cars
For the purposes of Theemuge 3 vans
For the purposes of Theemuge 5 pick-ups
For the purposes of Theemuge 1 lorry
For the purposes of Theemuge 1 fork-lift
Broken down 5 cars
Total 55 vehicles


Theemuge is organised so that the complex is entirely self-contained. It has everything needed for cooking and eating, washing and laundry services, photography, printing and framing services, gardening, carpentry and repairs, vehicle maintenance and repairs, and acquiring cars for ministers and maintenance repair services.

Excluding the Maldives National Defence force guards, over 300 staff were providing services in Theemuge. In 2006, a total of Rf45 million was spent on salaries, benefits, food allowances and medical treatment for these employees. Apart from attending to the needs of the president and the first lady, the list of employees includes drivers for the president's children and those who care for the president's grandchildren.

Two blocks of land next to Theemuge:
The two blocks of land next to Theemuge, namely M. Shabnameege and M. Muraidhooge, were acquired for the use of Theemuge. The photographic studio is within the Shabnameege block. The equipment acquired for this studio includes the latest cameras, machinery and large amounts of other equipment. However, there are no records indicating the equipment was acquired from the Theemuge budget.

Buildings and other infrastructure around Male' for the use of Theemuge:
- Launch section, Bodu Thakurufaan Magu: a slipway, an office building, petrol storage and vehicle fueling pump, a workshop
- Vehicle garage, Lily Magu: car garage, warehouse, car repair workshop
- G. Pensie-maage: a capentry workshop and a four-storey building for staff members sleeping quarters
- Gudhan Koshi, Ameenee Magu: a block of land containing two buildings, each four-storeys used as staff sleeping quarters and for warehousing.
- H. Veyoge: a building with canteen and sleeping quarters for the staff
- Palm Liaa: a five storey building under construction to provide sleeping quarters for the launch section staff members, administrative serices, and to run the workshop
- M. Baabussa-aadhaath: a block of land with a dilapidated building with no specific use
- M. Starling: a block of land with a building in the process of being acquired by the government
- M. Laamige: a block of land with a building in the process of being acquired by the government
- G. Maavaage: a one storey building used as laundry and a photo-framing shop
- Mulee-agge Koshi: a block of land specifically for the housing needs of the staff of Theemuge (the staff members build their own houses at their own expense for them to live in during the tenure of their service to Theemuge)

Aarah:
This island contains facilities for the use of the President and his family including sports areas and equipment, and quarters for visitors. Facilities in this island are built and maintained by the Maldives Defence Force.

Facilities and buildings in the atolls:
At each of the four regional airports, there is a high standard house and car specifically for the use of the president and his family. These facilities were built, managed and maintained from the Theemuge budget. In addition, there are accommodation facilities at the atoll houses in the capital islands of the atolls, and cars kept in other islands.

Facilities at Maldivian embassies overseas:
At the embassy in Sri Lanka, the third floor of a recently contructed three storey building is set aside specifically to be furbished as a presidential suite that includes a presidential bedroom and another room. Although this floor is yet to be completely furnished, it has been carpeted and set aside without being used for any other purpose.

The basement and the ground floor of the High Commission building in London are assigned for the use of official work, and the two top better floors are set up with a presidential room and other facilities for the use of the president and his family.

These rooms are built, maintained and managed from the Theemuge budget.

Recommendations

1. We note that the activities of Theemuge expanded gradually over the years. There has been no set standards for expenditure and instead it has been left up to the president. Relying on this valuable lesson, I recommend setting a salary and specific benefits and allowances for the current president.

In addition to setting a salary, a living allowance that enables him to live at an acceptable standard as the head of state should be determined by a law passed by parliament. Although section 118 of the constitution that came into force in 2008 says that the salary and other presidential allowances must be made in accordance with a law that is passed for that purpose, there is no such law as yet - although the current president's salary is paid as decided by parliament.

Instead of providing benefits, an allowance should be large enough that the president does not need benefit payments. Alternatively, the president can be provided with a salary sufficient for all the expenses necessary to provide an appropriate standard of living. Regardless of the arrangements, it is essential that the process is clearly written down to provide the necessary protection for public funds and property. It is also a requirement of the constitution.

It is essential to have a set place of residence for the president, precisely budgeted funds for the presidential residence, staff members employed at government expense, the number of staff members, and such other benefits for the president. These requirements allow accountability of public expenditure, promote efficiency, and minimise wastefulness.

Funds used for 'contingency expenses' must also be a specified amount, and procedures must be in place to ensure such funds are only be spent on essential government needs. This is in line with the accepted international best practice procedures designed to provide appropriate protection for government funds.

2. Theemuge, Aarah island, and blocks of land and buildings that were used by the presidential palace, must be released as soon as possible for other government purposes if they are not going be needed by the presidential residency system. This is recommended because they are valuable government assets and must not be allowed to deteriorate, especially at a time when many government agencies are run from privately owned buildings leased at very high rents.

3. It is recommended that facilities specifically kept for the president be used to generate some form of income. Similarly, the presidential facilities at the regional airports should be released for commercial purposes, and facilities set up at overseas embassies should be used for official embassy purposes. Any extra vehicles not approved by parliament for the president should be sold, because the value of these assets deteriorates yearly while maintenance costs increase.


2.2 Theemuge Expenditure

Table 2: Budget expenditure on Theemuge from 2007 to 2008 (Rufiyaa in millions)

   
11
10
9
8
7
6
5
4
3
2
1
  Expenditure items
% of 2000
2000
2001
2002
2003
2004
2005
2006
2007
2008
% of 2008
a Staff expenses
19%
13
13
14
14
18
23
23
23
39
22%
b Travel
6%
4
4
4
5
4
4
7
7
5
3%
c Office equipment
7%
5
5
5
6
7
9
9
11
11
6%
d Maintenance and repairs
4%
3
4
6
9
5
4
5
9
7
4%
e Courier and communication services
44%
31
27
23
27
28
33
33
17
15
8%
f Total (excluding government assitance and subsidies)
80%
56
53
57
61
62
73
77
67
77
43%
g Government assistance and subsidies
20%
14
16
19
32
56
60
72
104
104
57%
h Total recurrent expenditure
100%
70
69
76
93
118
133
149
171
181
100%
i Capital expenditure
8
7
14
7
5
7
9
8
6
j Budget Total
78
76
90
100
123
140
158
179
187


Table 2 shows a summary of expenditure of Theemuge budget. Columns 2 to 10 show the total expenditure on various things. Rows 'a' to 'j' give the amounts spent on each listed item.

To show the rate of increase in the expenditure of Theemuge, instead of writng down the details of all expenditure and in order to make it easier for the readers of the report, comparisons are made between the years 2000, 2004, 2007, and 2008.

Column 10, rows 'h', 'i' and 'j' show the recurrent expenditure for 2000 was Rf70 million, and capital expenditure was Rf 8 million, and the total for that year was Rf78 million.

Column 6, rows 'h', 'i' and 'j' show the recurrent expenditure for the year 2004 was Rf118 million and capital expenditure was Rf5 million, making a total of Rf 123 million for the year.

Column 3, rows 'h', 'i' and 'j' show for the year 2007, the recurrent expenditure was Rf171 million and the capital expenditure was Rf8 million, with a total of Rf179 million for the year.

Column 2, rows 'h', 'i' and 'j' show for the year 2008, the recurrent expenditure was Rf181 million and capital expenditure was Rf6 million, a total of Rf187 million.

Capital expenditure:
As shown in row 'i' for the last nine years, the capital expenditure remained between Rf5 million to Rf9 million, except for the year 2002. Capital expenditure in 2002 rose to Rf14 million (as shown in column 8 row 'i'), because of expenditure for the construction of the building in M. Muraidhoo.

Re-current expenditure including government assistance and subsidies:
In the last nine years there was a significant increase in this part of the budget. Recurrent expenditure including government assistance and subsidies increased at alarming rate as shown in row 'g'.

In 2000, expenditure on government assistance and subsidies was Rf14 million (column 10 row 'g'); and in 2004 it amounted to Rf56 million (column 6 row 'g'); and in 2007 this expenditure increased to Rf104 million (column 3 row 'g').

Recurrent expenditure:
The recurrent expenditure excluding government assistance subsidies for the last nine years increased as shown in row 'f'. In 2000, the recurrent expenditure was Rf56 million; in 2004 this increased to Rf62 million; and in 2007, it increased to Rf67 million; and in 2008 it increased to Rf77 million.

The most prominent feature of Theemuge budget expenditure over the last few years is that it increased out of control up until 2008 and 'government assistance and subsidies' vastly expanded as all expenses were paid through this account.

The reason for this conclusion is based on the fact that the expenditure under government assistance and subsidies was Rf14 million in 2000 which is 18% of the total budget for year; in 2004 it increased to Rf56 million which is 46% of the total budget, and then in 2007 and 2008, it increased to Rf104 million which amounted to 58% of the total budget for 2007 and 56% for 2008.



2.3 Expenditure in the name of 'government assistance and subsidies'

Table 3: expenditure in 2007 and 2008 under the name of 'government assistance and subsidies'

  Assistance type
2007
%
2008
%
a Improve conditions for destitute people
48,277,616
46%
44,981,916
43%
b Financial grants to private individuals
50,703,405
49%
53,673,000
52%
c Funds for awards
575,211
0.5%
611,360
0.5%
d Scholarships and fellowships
2,567,382
2%
2,290,573
2%
e Associations and community groups
782,855
0.5%
640,345
0.5%
f Contingency and miscellaneous
1,580,767
2%
2,001,805
0.5%
g Total of government assistance and subsidies
104,484,236
100%
104,198,963
100%


Note:
The information in Table 3 includes corrections of the confusing account methods used in maintaining accounts in 2007 and 2008.

Table 3 shows the details of Theemuge budget expenditure from the government assistance and subsidies account of Rf104.4 million in 2007 and Rf104.1 million in 2008. They are made in the name of improvement of the lives of the destitute Rf48.2 million (in 2008 Rf44.9 million), in the name of grants to individuals Rf50.7 million (in 2008 Rf53.6 million), in the name of awards Rf570,000 (in 2008 Rf610,000), in the name of scholarships and fellowships Rf2.5 million (in 2008 Rf2.2 million), in the name of assistance to associations and community groups Rf780.000 (in 2008 Rf640,000), and in the name of contingency and miscellaneous expenses Rf1.5 million (in 2008 Rf2 miliion).

The expenditure in the name of government assistance and subsidies from Theemuge was widely believed to be only government funds to assist the destitute. This appears to have been a cover to allow more unrestricted expenditure on other things by giving prominence to the welfare activities of Theemuge.

However, closer examination shows that the Rf104.4 million in 2008 and Rf104.1 in 2007 were mostly spent not on the destitute, but instead the money was given to people who were close relatives of the president and their friends, people who held high positions in government, and some members of parliament.

As shown in row 3 of the table above, the expenditure for the improvement of the destitute in 2007 was Rf48.2 million and in 2007 it was Rf44.9 million. At the same time, as shown in row 'b' the amounts spent on as grants for private individuals was 49% (Rf50.7 million) in 2007 and 52% (Rf53.6 million) in 2008, and as a result the amount spent on actual welfare was half of the amounts that was budgeted for the years.

More alarmingly, there are indications that when funds for the needy were given, it was through the efforts of an influential person or where the recipient was affiliated with a certain political party. The details of this expediture are outlined below.

Expenditure for the improvement of the destitute (a):
Records kept under this account indicate that these funds were not spent on the improvement of the conditions of the destitute, but instead on ministers, relatives of certain ministers, relatives of the president, officials in high-level government positions and certain members of the parliament.

The records show almost all of the funds were spent on 'close associates' to pay for medical treatment in Singapore, for travel, hotel accommodation, food, taxis, all day taxi hire, for medical check ups, prescription glasses, reading glasses, and for the wife and children of the recipients receiving medical treatment.

The costs were paid by the Maldives Government Trade Centre in Singapore and reimbursed by Theemuge. The financial statements and invoices this office received, indicate that often the payments were made based on a note sent to Theemuge or by phone, and without the required written application requesting welfare assistance for medical treatment, and in the absence of a limit for any person given the assistance.

These funds were spent to obtain the support, affection and affiliation of the recipients. The funds were not spent for the benefit nor in the interest of the people of the country. It is a misappropriation of state funds for a personal benefit and gain, and by corrupt and deceptive means.

Below are selected examples from many invoices and statements the office received for this audit.

8 July 2008, for obtaining prescription glasses for a senior minister and wife Sing$6,905 and for the grandson of this minister to stay at a well known hotel for 21 days in March 2008, Sing$23,756.

In April 2008, for the medical treatment of close relative of the president Sing$50,022.

May 2008, for medical treatment of a member of parliament Sing$20,686 (this is only part of the amount spent during this year).

At different times during 2008, to the leader of certain political party, cash totalling US$13,000.

At different times in 2007, for the family of a relative of the president to meet expenses incurred in Singapore, Rf2.3 million. And for the family of another relative of the president, Rf1.4 million to meet the costs incurred in Singapore at different times during 2008.

Financial grants to private individuals (b):
Under this item, Rf50 million in 2007 and Rf53 million in 2008 were spent. In reality, these grants became part of the welfare budget, and represented about half the amount spent from Theemuge budget in those two years as government assistance and subsidies.

This expenditure includes the infamous '$US300 and return ticket' that Theemuge provided to ordinary people for medical treatment. Almost always, this assistance was provided for people to go to Trivandrum, India and Colombo, Sril Lanka for medical treatment. It became a convention that this assistance included the return ticket for the patient and carer, and $US300 on condition that invoices were provided for the expenses incurred and any remaining funds were returned after coming back to Maldives.

Although most people who received this grant were in need of welfare assistance, there were three outstanding matters. They are:

Accepting letters requesting Theemuge assistance during the public meetings of DRP in 2008. These letters were sent to the President's Office, then sent on to Theemuge where the welfare assistance requests were processed much more quickly then was normally the case. The evidence clearly shows that of the politically active people who received Theemuge welfare assistance, 60% were members of the DRP. Despite repeated requests from the Audit Office, there are missing letters requesting assistance from Theemuge in 2007 and 2008.

Funds for awards (c):
Under this item, Rf500,000 in 2007 and Rf600,000 in 2008 were spent on prizes for school competitions, buying gifts to take to parties and other celebrations that the president was invited to, and as gifts from the president during various occasions and parties that the president hosted.

Wrist watches were a common gift from the president, and over Rf10,000 was spent on them. Normally, the president receives invitations to parties from people who hold high level government positions and their family members, and from the president's family members and their close associates.

Therefore, this was a misuse of government funds which should not be used for such purposes. Most of the funds spent on these things did not provide any benefit to the general public, but provided a personal gain by means of affection, respect, and support. This is similar to the spending practices of monarchs with no accountability.

Scholarships and fellowships (d):
For scholarships and fellowships, the president spent Rf2.3 million in 2007 and Rf2.3 million in 2008 without any published set guidelines or conditions. Scholarships and fellowships were granted at the wish of the president to whoever he chose, and under whatever conditions he wanted to set. Therefore, the money was spent corruptly to obtain support and respect, and for personal gain.

Associations and community groups (e):
Clubs and associations received Rf700,000 in 2007 and Rf600,000 in 2008, and in general each assistance grant ranged between Rf5,000 and Rf30,000. However in 2008, Rf100,000 was given to a certain island's sports club that supports DRP. The island's other sports clubs did not support the DRP and failed to receive any financial assistance. There is no letter or written record indicating a request for assistance from the club concerned, and no record of the purpose the funds were to put to. The records show only that an individual was paid Rf100,000 in 2008.

Money was spent in the name of special assistance from the president, and yet not in way that would benefit the general public. Instead the money was spent to gain the affection and support of certain people, and for this reason it is corruption and misuse of government funds for personal gain.

Other expenses (f):
Rf1.5 million in 2007 and Rf2 million in 2008 were spent on the salaries and allowances for foreign workers brought to Male' in 1992 to build Theemuge and provide temporary domestic services. After Theemuge was completed in 1994, these workers were kept on until 2008. There is no approved budget from finance ministry to pay for these people. Notably, it is not clear from the (Theemuge) annual report sent to the ministry of finance that these funds were spent to pay the salaries and allowances of the foreign workers. This is misleading record keeping of government expenditure for purposes which have no allocated funds.

Recommendations
1. It is recommended to reclaim government funds that were spent over a number of years from the Theemuge budget without proper records. These funds were distributed as cash, clothes for the president and the first lady, the president's personal expenses, and the expenses for the president's adult children and their children, and for relatives of the president. Such expenses should not come from government funds.

2. In my view, the misuse of government funds from the Theemuge budget for personal gain is a matter that should be taken to court. It involves corruption, deception and breach of the people's trust.

3. I recommend that the distribution of Theemuge government funds by the president be controlled by legislation, and expenditure by Theemuge be under the same rules that apply to other government agencies.


2.4 Household expenditure

Table 4: from 2000 to 2008, Theemuge re-current expenditure excluding 'government assistance and subsidies' (in millions of rufiya)

   
11
10
9
8
7
6
5
4
3
2
1
  Expenditure type
2000 %
2000
2001
2002
2003
2004
2005
2006
2007
2008
2008 %
a Employee expenses
19%
13
13
14
14
18
23
23
23
39
22%
b Travel
6%
4
4
4
5
4
4
7
7
5
3%
c Office equiptment expenses
7%
5
5
5
6
7
9
9
11
11
6%
d Management and maintenance
4%
3
4
6
9
5
4
5
9
7
4%
e Transportation and communication
44%
31
27
28
27
28
33
33
17
15
8%
f Total (excluding government assistance and subsidies)
80%
56
53
57
61
62
73
77
67
77
43%


Table 4 shows the re-current expenditure of Theemuge from 2000 to 2008, in addtion to 'government assistance and subsidies' expenditure. Recurrent expenditure in 2000 was Rf56 million, Rf62 million in 2004, Rf67 million in 2007, and Rf77 million in 2008.

As shown in column 3, in 2007 the expediture under this category was Rf23 million for staff, Rf7 million for travel, Rf11 million for office equipment and expenses, Rf9 million for maintenance and management, and Rf17 million for transportation and communication. A total of Rf67 million.

Instead of giving a detailed breakdown of all expenditure, the above table sets out a summary for the last nine years. Below is a discussion of the significant findings of this audit and a representative sample in accordance with auditing practices.

Travel and medical expenses of the president's family:
The travel and medical expenses of the president's family members for the year 2007 was Rf2.3 million (add the Rf1.5 million for 2008 the total is Rf3.8 million). Funds for these expenses were spent from the the accounts in rows (b) 'travel expenses' - Rf 7 million, and row (e) tranportation and communication – Rf 17 million.

These expenses include medical treatments, related travel and other associated expenses for for the president's children, their spouses, their children and their servants.

From the travel expenditure of Rf7 million in 2007, Rf4 million were spent on the president's travel. The remaining Rf3 million was spent for the travels of the president's family members.

It was clear that apart from medical and related travel expenses for the children of the president, all other living expenses of the president's children were made from the Theemuge budget. However, as there is no detailed record, the amounts for the president's children's living expenses were such as food, expenses inccurred for their servants, and their travel and entertainment, cannot be ascertained.

For example, as the children's food expenses are included in the food expenses of the president as part of Theemuge budget, the amounts of expenditure on providing food for the president's children cannot be ascertained.

Including the expenses for the president's adult siblings and their family members as part of the Theemuge budget does not conform with the principles of accountability. This is not a practice in countries that are governed according to the principles of democracy. Therefore, paying all living expenses for the adult siblings of the president out of the Theemuge budget is misleading accounting, designed to gain personal benefit by misuse of power and misappropriation of government funds. Although there is no law to regulate such expenses in Maldives at the time this report was written, common sense says that such expenses cannot be considered as part of governance.

Even in places where there is a democratic monarchy, instead of including all living expenses for the members of the royal family in the royal palace budget, each member of the royal family have separately prepared budgets scrutinised by parliament. Further, Maldives is not governed by a monarchy, and living expenses for the adult siblings of the president should not be part of Theemuge budget.

Family and friends Haj (pilgrimage) trip:
In additional to the official government funding provided for common people for the annual Haj trip in 2007, the president's Haj visit in 2007 cost the government Rf1.1 million. Nineteen important people accompanied the president. This expenditure was not associated with the costs of running the government, rather it was paid to obtain the support and affection of certain people, and gain a personal benefit. The president should not be given unrestrained power to spend government funds for such matters. Such expenditure is not to the benefit of the general public.

A trip by first lady to Dubai:
In 2007, an expenditure of Rf 900,000 was made from the travel account for a trip by the first lady to Dubai, accompanied by many members of Society for Health Education (SHE). However, there is no written record indicating the purpose of this trip. Therefore, this is also a case of misuse of government funds because there is no record of the purpose of this trip and no proper appropriation of these funds. Such expenditure is contrary to the principles of accounting and accountablity.

Use of credit cards and cash expenditure:
There is evidence that in 2007 from the President's Office budget and Theemuge budget travel account, Rf3.04 million worth $US238,400, excluding the cost of tickets, were spent on official and non-official travel by the President. However, there is no written record indicating how this Rf 3.04 million was spent. Therefore, this is also a breach of accountability.

In additional to this, various credit card accounts show over Rf1.7 million was spent overseas in 2007. The credit card statements show expenditure on gold, suits, and garments. These are personal items for personal use, and therefore expenditure for such items should not be made from government funds. Obtaining such items at the expense of the Theemuge budget is a personal use of government funds.

Such expenses must be paid out of the salary, as they are not associated with the running of the government and are not for the gain and benefit of the public. Further, there is no provision or arrangement made in the government budget for such expenditure.

President and his children's phone expenses:
The president and his family's phone and internet access cost Rf93,000 per month and a total of Rf1.13 million for the year 2007. It was paid from the 'transportation and communication' budget of Theemuge. This is excluding the expenses of the President's official phones and phone use at Theemuge for administrative purposes.

Therefore, this is also misuse of government funds. That is, this expenditure is made for the children of the president, in addition to the president's own expenses, and is not within accounting and accountablity principles. The expenditure is not for the benefit of the general public.

Food expenditure:
The food expenses for the president and his adult siblings and their families (excluding food expenses for the staff of Theemuge) averaged Rf2.03 million in 2007 and 2008. This about Rf5,500 a day, which is the same as the average monthly salay at that time. This is also misuse of government funds for a personal gain.

The expenses for the adult siblings of the president and their families should not come from the government budget. In most developed democratic countries, apart from the president and the first lady, the living expenses of their adult siblings are not made from the government budget.

Expenditure on vehicles:
For the maintenance of launches and other vehicles used for the purposes of Theemuge, the cost in 2007 was Rf2.7 million, plus Rf2.2 million for fuel. These expenses were high because of the wide-ranging activities of Theemuge, which are far more expansive than required for the running of government.

Expenditure on repairs:
In 2007, the repair of buildings and other things cost Rf5.7 million. These costs were usually incurred to obtain spare parts and other things from overseas and local suppliers. Almost all of these expenditures were contrary to government procedures.

Records used for this audit indicate that all the small and large expenses of the former president and his family were made from the Theemuge budget. Below are a few selected examples from the numerous expense payments made from Theemuge budget.

May 2008, bought in Singapore 'Loro Piana' brand business suits and safari suits and materials to make suits for the former president.
May 2008, materials bought in Singapore to make dresses for the first lady.
June 2008, 'Rose Damascus' nappies for a grandchild of the former president bought by the Maldives High Commission in London and sent to Maldives by airfreight.
January 2008, 17 boxes of personal luggage belonging to the president's family members were airfreighted from London to Male'. The large expenditures include $Sing28,000 for the president's family to stay at the Grand Hyatt in Singapore for a week.

Recommendations

1. Expenditure on the personal travel of the president, first lady and their children in 2007 and 2008 and also in previous years, that were unrelated to the running of the government and had no benefit for the general public, should be reimbursed.

2. Expenditure from the president's palace should be made in compliance with government procedures.


2.5 Launch bought in 2002

On 19 June 1998, an agreement between the Maldivian Government and a German company was signed to built a yacht for the use of the president. The first agreed price to build this yacht was $US4.75 million. Funds for this agreement came from a loan of US $6.7 million borrowed from a Sri Lankan bank, and remainder from the Maldivian government budget. The debt owed to the Sri Lankan bank was paid in 2008.

In accordance with the terms of the agreement, the government paid an advance of $US3,633,300. The company that built the yacht was paid 5% of the contract price as a performance guarantee of $US237,500. As the yacht was not completed by 30/9/1999, and the company was unable to complete the yacht, this performance bond was lost. Before the yacht was completed, the company went bankrupt and the Maldivian government lost the partially built yacht.

As a result, lawyers were engaged costing $US650,000, and the Maldives Government bought the partially built yacht for DM1.2 million in German currency (about $US550,000). The partially built yacht contracted for completion by a new company formed by the people who owned the original company that went bankrupt. The Maldivian government paid them a further $US1.9 million (DM4.15 million). The new company experienced financial difficulties and the Maldivian Government then paid an additional amount of $US720,000 (510,000 euros), and the yacht was completed and brought to Male' two years after the agreed date.

There is no record in any of the government agencies to show the actual amount of money spent to build the yacht. Information gathered from various government agencies shows that a total of US$7.4 million (3.60 + 0.65 + 0.55 + 1.9 + 0.70) were spent to complete the yacht and deliver it to Male'. However, as there is no detail record of the amounts associated with the engagement of lawyers and travel costs, there is no way of ascertaining the exact cost of the yacht. From the information gathered for the audit, a yacht with an agreed price of $US4.75 million ended up costing more than $US7.4 million, which is almost twice the agreed amount.

Some significant factors in the manangement of the project
When the yacht building company was engaged, the company's financial viability was not checked and it was engaged without putting the project to tender.

A 1998 letter from the state minister for finance indicates that the finance ministry was not given the opportunity to discuss the price of the yacht. The cost and all related matters were settled by the executive director of Theemuge.

Although this project was grossly mismanaged and caused a huge loss for the government, no one took responsibility for it.

The accounting and other records for this project were kept with a level of care that was totally inappropriate for a project of this nature. No government agency had complete records of the project, and the Audit Office had to gather fragmented records from the president's office, finance ministry and Theemuge.

Although costing so much, and being delivered two years after the agreed date of completion, the speed of the yacht is nowhere near what was promised, the communication equipment does not function properly, and the view from inside the yacht is constricted. For these reasons, written documents indicate that the government was hesistant to officially accept the yacht, and it is often sitting idle in harbour.

Recommendations

1. Huge losses were incurred by the government in the process of buying this yacht, those responsible for planning and carrying out this project should be made to take responsibility for the losses and reimburse the money.

2. Establish procedures that prevent the president's palace from engaging in such procurements in the future.

3. Sell the yacht, rather than leaving it anchored in the harbour to deteriorate. Yachts lose value with age and the costs of repair increase annually.


2.6 Construction of the current Theemuge buildings

Theemuge in its current form began to be used as the presidential palace in 1994. The main construction contract was with a Japanese company. As shown in the table below, the total cost from the documented records for the construction of Theemuge is $US16.9 million or Rf207.1 million.

Table 5: Expenditure for the construction of Theemuge (in rufiya)

a Mitsui Corporation
107,494,019
b Decoration expenses
62,323,095
c Materials
19,497,490
d Employees salaries and other expenses
6,485,423
e Machinery
3,297,804
f Labour
2,849,363
g Miscellaneous
2,604,700
h Travel expenses
866,342
i Furniture
800,251
j Administrative expenses
793,580
k Household
112,983
  Total
207,125,058


Some unusual things are noticeable in the construction of Theemuge. The factors that stand out were:

Payment to the company for the construction work (a):
The agreed price for the construction of the entire building with company materials was $US9.3 million (Rf107.4 million). It was raised to $US11 million (an increase of $US1.7 million from the agreed price of $US9.3 million). There is no written record indicating why there was a price increase, no record of the changes to construction that prompted the increase, nor how the additional funds were used.

Decoration expenses (b):
Five overseas companies were engaged for the interior finishing and decoration at a cost of $US5.39 million (Rf62.3 million). To pay the companies, funds were transferred to the Maldives Government Trade Centre (MGTC) in Singapore. As a result, there is no way of determining if the five companies were actually engaged for the work. The audit office is yet to receive a copy of the contract setting out the price or any other terms of agreement for the services of these five companies.

There is no record of the Maldivian government receiving anything for the funds, nor any reason why these funds had to be paid through the MGTC in Singapore. There are no records confirming these funds were paid to the companies, nor any indication where the funds went. These are questions that remain unanswered. There appears to be no written record associated with this matter in the MGTC or in Theemuge, and repeated requests from the Audit Office for such documents have been in vain.

Materials and Machinery (c) and (d):
Although the company contracted for the construction of the building was required to carry out the work using its own materials and equipment, an additional amount of Rf19.5 million were spent from government funds importing construction materials and another Rf3 million was spent on machinery needed for the work. No records were kept of these extra materials and equipment imported, nor any record of what happened to the leftover material and equipment after the completion of the project.

Employees salaries and other expenses (d):
While the company engaged for the construction work brought its own labour force, a large number of extra foreign workers were brought to Maldives and engaged as labourers costing the government Rf6.5 million for their salaries, allowances and accommodation costs.

Administrative, travel and miscellaneous expenses (f), (g) and (h):
Administrative, travel and other miscellaneous expenses cost Rf4.2 million.

Labour (i):
Maldivian contractors were engaged to meet a shortage of the labour during the construction and instead of the company paying the contractors for the labour service, Rf2.8 million was paid by the government.

Recommendation

This project was managed carelessly. Some of the materials and equipment procured for the project went missing, and record keeping was unacceptable. Those people responsible for planning and managing this project should be made responsible for the mismanagement, and asked to repay the cost of the lost capital and missing assets.


2.7 Tangible assets purchased from the Theemuge budget

It is noticeable that the former president took a large amount tangible goods with him when he left Theemuge. The information is that the goods that his family took were things they considered their personal property.

However, there is no list of items that on display in the house, nor any record showing that anything in Theemuge was handed over to the newly elected government. This not a practice in keeping with responsible and accountable behaviour. At the very least, a list of things that were taken and those left behind should have been prepared and given to the new government. Additionally, the items that were taken must be disclosed to the representatives of the newly elected government in line with civility, transparency and accoutablity practices.

Auditing indicates that the president and his family, over a long period time, bought a large amount of tangible goods by using funds from the Theemuge budget. All these things were taken with them when they vacated Theemuge. Additionally, there is no fixed assets register for the assets that were bought for Theemuge using government funds.

Due to the careless record keeping practices at Theemuge, there is no way of ascertaining the property bought by funds from the budget, and there is no way of finding out what the president actually took with him. There is no evidence of anything left in Theemuge after their departure, that the president and his family considered 'personal' property.

Recommendation

All tangible assets bought with government funds that the former president took with him when he left Theemuge, should be claimed by the government.


2.8 Presidential allowances

As provided in section 128 of the constitution, rightful benefits for a former president must be provided in accordance with a law that is specifically passed for the purpose. Therefore, the present benefits provided to the former president are in breach of the constitution. There is no law specifically made to provide for the benefits. There are two significant factors:

1. On 10 November 2008, the day before the end of the former president's term of office, a 'secretariat of the former president' was formed with ten staff members and salaries and allowances paid from the government budget. On the staff were seven former Theemuge staff members and two ex-staff members of the president's office. Importantly, they are being paid salaries and allowances as of 10 November 2008. The details are given below.

Table 6: salaries and allowances for the employees of the 'secretariat of the former president' (monthly amounts in rufiya)

  Position and office
Salary
Allowance
Total
1 Chief Executive Officer
38,250
250
38,500
2 Executive Director
23,460
250
23,710
3 Special Assistant foreign relations
21,420
8,818
30,238
4 Director
12,197.50
250
12,447.50
5 Deputy Director
14,118.50
250
14,368.50
6 Assistant Director
13,455.50
5,632.20
19,087.70
7 Photographer
9,758
4,153.20
13,911.20
8 Supervisor Grade 2
8,304.50
1,910.90
10,215.40
9 General Services Supervisor Grade 2
11,832
4,982.80
16,814.80
  Total
152,796
26,497.10
179,293.10


2. In December 2007, the government paid Rf807,053 ($US62,805) for the president and his wife to go to Singapore for medical treatment.

In many countries, ex-presidents receive assistance and benefits to return to a normal life style after their term of office. Such benefits provided in most developed countries are on condition they not to be used for political purposes. The spirit of the former president's benefits provision in the Maldives constitution is the same, and it is also international best practice.

Recommendations

The funding for the secretariat of former president should be suspended immediately, until a law is passed providing benefits for a former president. The funds paid up until now should be reimbursed to the government.

The funding being provided to the ex-president is in breach of the constitution of Maldives. The funding currently provided is contrary to the spirit of the constitution. This funding is not for a government purpose, and it is not in the interest of the general public.

As the benefits provided to a former president in developed countries do not permit such benefits being used for political purposes. These benefits were awarded by the ex-president to himself, a day before the end of his term of office, and days after the 2008 presidential election. Arranging such thing for himself cannot be considered as in line with accountability and good governance (in the interest of the country) principles.


3. Conclusion

1. I recommend the establishment of measures to prevent the president to be able to distribute government funds for personal gain and attract support, in the name of providing assistance to the destitute. As provided in the constitution, a law should be passed that sets and regulates the president's salary and benefits. Such benefits should be separately appropriated in the budget, and the expenditure should be accounted for each year.

2. I recommend that the government funds spent by the former president for his personal use, his family members and relatives over the years, be paid back to the government.

3. In my view, the former president should be taken to court to recover the government funds that he spent for purposes other than government business and for the benefit of the general public. These non-government expenditures were for the benefit of selected people and for personal gain. They involved misuse of government funds by taking advantage of position and power, deceptive conduct, and a gross breach of the trust of the people.

4. I also recommend the benefits provided to the former president be suspended, along with those of the current president. In the absence of an enabling law, payment of these benefits is in breach of the constitution.


16 April 2009






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