Illegal Car Hire Agreement Almost Fleeced Taxpayers of K1 million

The Madang Provincial Government and Madang business person Catherine Kila, have been hit with a withering judgement delivered by Justice Canning over an illegal car hire agreement, that almost cost the taxpayer K1 million.

According to Canning J’s judgement the contract was signed on 1 December 2013 by Rama Marisan, the Deputy Governor of Madang Province. The other party to the contract was  Catherine Kila acting for CJ Transport and Hire Cars. CJ Transport & Hire Cars is a business named registered to Catherine Vagi Kila.

In his decision Justice Canning noted that Rama Marisan signed on behalf of the Madang Office of Deputy Governor. The office is not a legal entity that can be party to a lawful contract.

Canning also notes ‘there is no evidence of adherence to the public tender requirements of the Public Finances (Management) Act or any tender procedures, giving rise to the reasonable inference that the contract is tainted with impropriety’. He goes on to observe ‘the terms of the contract are so vague and ambiguous as to be incapable of giving rise to liability’.

This of course raises a question why would Madang’s Deputy Governor, Rama Marisan sign a contract, without lawful authority that would obligate in vague terms the government to lease cars from CJ Transport & Hire Cars, outside of normal tender processes? Canning’s view is that the reasonable inference to draw is that impropriety was involved.

Justice Canning also reserve some notable comment for the ‘shilly-shallying of Madang Provincial Government and the various lawyers who have acted on its behalf’.

He observes: ‘This case is yet another example of what I said many times during my ten years as resident Judge for Madang Province: Madang Provincial Government is poorly represented, and the interests of the People of Madang are routinely not properly protected, in court proceedings against Madang Provincial Government’. Canning continues ‘As it has turned out, Madang Provincial Government has not lost this case. But that is the exception to the rule. And it has not avoided losing because of the dexterity and diligence of the succession of different private law firms it has had representing it, which have been dithering in their defence of the provincial government, highlighted by their failure to appear and assist the Court at the critical time when submissions were made’.

The provincial government he observes requires ‘a properly resourced Legal Office, staffed with a cadre of competent and committed lawyers’.

This decision raises the question initially prompted by the Commission of Inquiry into the Department of Finance. How much taxpayer money is needlessly lost owing to brazenly illegal attempts by nefarious individuals and their political contacts to mount damage claims against the state, that have no merit, which nonetheless are paid out on due to the incompetence of the government, or in some cases due to the connivance of public officials in these vexatious claims.

This case also points to a reocurring issue documented on PNGi previously. Namely, car hire agreements appear time and time again as a commercial mechanism where significant public funds are paid into the hand of private actors, without there being evidence of actual services being provided, or agreements being reached in compliance with public tender requirements.

In October 2017, we revealed the Konebada Petroleum Park Authority was spending massive amounts of money on car hire, K2.8 million in 2016 alone. The government has ordered that institution be wound up, but the process has yet to be completed.

Image: In 2016 the Konebada Petroleum Park Authority spent over K2.8m on hire cars

In May 2018, PNGi revealed a similar problem afflicting the Conservation and Environment Protection Authority. CEPA spent over K1 million on hire cars in 2017. Most of that money went to Port Moresby based car hires businesses, despite CEPA owning a fleet of vehicles for its managers and executives. In one case, K48,990 was paid for a replacement hire car while an office vehicle went in for service!

Image: The Conservation and Environment Protection Agency spent over K1m on hire cars in 2017

PNGi has also set out the findings of Auditor General Office (AGO) reporting. This reporting reveals how the hire car curse is afflicting Provincial governments right across the country.

The AGO notes that a lack of competitive tendering, unregistered business names, exaggerated hire periods and inflated rates are all being exploited to drain government budgets and enrich corrupt officials and their wantoks (relatives). According to the AGO the amounts of money involved runs into the millions of Kina.

In East Sepik [p60] “payments totalling K2,803,690 were made to private car companies for hire of vehicles. In the absence of proper procurement procedures, these vehicle hire companies appeared to be handpicked thus resulting in the excessive and unjustifiable hire costs”.

In West New Britain [p200], “payments for private vehicle hires during the year totalling K2,042,986 noted as being too excessive and lacked appropriate supporting documents including required three written quotations and proper supplier invoices”.

In four instances, the auditor found payment vouchers and relevant supporting documents for vehicle hires totalling K929,547 were completely missing from the files.

“Consequently, I am unable to ascertain the legitimacy and validity as well as proper authorization of the claims presented for payment”.

In Oro [p166] “payments for vehicle hires during the year totalling K2,505,041 made to a Gee Hire Cars and its associated business G27 Limited. Divisional Heads were approving vehicle hires from the entity although many of the divisions had divisional vehicles that could have been utilised for their own needs and purposes”.

In Sandaun [p176 and 177], “vehicle hire payments totalling K1,068,627 paid to vehicle hire companies and individuals were pre-engaged bypassing proper procurement procedure resulting in such excessive vehicle hire costs”.

In Western Highlands [p207] the total sum involved was rather less, but the same procedural and record keeping problems were noted:

A total expenditure of K238,712 was incurred on private vehicle hires. The payments were not supported with three written quotations, suppliers invoices, payments were made from wrong budget votes; no consideration was given to the daily rates charge, numbers of days hired and genuine purposes for the hires”. 

In Madang [p111] we don’t know the total amount expended but the Auditor notes, “excessive expenses were incurred on vehicle hire as there was no control over the hiring of vehicles and the genuiness and economical purpose of hire could not be determined due to lack of supporting documentations or if paid were for services already rendered and as such there were no deliberation on the purpose of hire, number of days hired, rate charge and approval obtained from the appropriate authority”.

In Enga [p82], excessive expenditure on vehicle hires was just one example of a “lack of adequate controls over expenditure appropriation which resulted to large amount of expenses on motor vehicle purchases and private hires and increasing associated costs on fuel and maintenance”.

For East New Britain [p47] the Auditor General again does not record the total amount spent on vehicle hire but he does highlight two specific payments that could not be validated:

Two (2) payment vouchers in respect of payments of K15,000 and K9,100 paid to a Joe Paraide and Alanda Trading Limited for truck and vehicle hires were missing from files and as such, I could not ascertain the validity as well as proper authorization of the claims presented for payment.

Similarly, in Morobe [p125] the Audit report does not disclose the total amount spent on vehicle hire but does highlight a particular payment that aroused suspicion.

“An advance payment of K40,000 was made to Prime Travel Services for travel expenses including airfares, vehicle hire and accommodation for officers of the Provincial Government. These payments were seen to be non-compliance to requirements of proper procurement procedures and the requirement for acquittal stipulated in the Public Finances (Management) Act”.

Cleary the problem of vehicle hires being used to unlawfully drain the public purse and steal money is one that extends right across the country. Addressing it effectively could save millions of Kina at a time when education and health services in particular desperately need the money.