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					REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF THE FIJI ISLANDS – SEPTEMBER 2004
SPECIAL INESTIGATIONS REPORT 1/2004



Section 02                               Purchase/Trade In of Government Vehicles
                                         (Tender P10/02) – Government Supplies
                                         Department and Ministry of Finance
                                         This audit was undertaken after receiving a memorandum from the Solicitor
                                         General’s Office to the Permanent Secretary of Finance and copied to the Office of
                                         the Auditor General with regards to a statement of claim filed by Niranjans
                                         Autoport claiming the sum of $59,000 from the Government.

                                         The memorandum revealed that the government had failed to honour an
                                         undertaking into the trading in of 19 government vehicles to Niranjans Autoport
                                         resulting in the company filing of writ. Also a further sum totalling $36,900 was
                                         claimed by Nivis Motors as a result of the same breach of trade-in agreement.



                                                            Table of Contents

2.1          BACKGROUND ............................................................................................................................ 1
2.2          AUDIT OBJECTIVES AND SCOPE ............................................................................................. 2
2.3          LINES OF INQUIRY ..................................................................................................................... 2
2.4          PROCEDURES FOR PURCHASING GOVERNMENT VEHICLES............................................. 2
2.5          DEPARTMENT OF GOVERNMENT SUPPLIES ......................................................................... 2
             2.5.1        Purchases above the Price Ceiling ................................................................................ 2
             2.5.2        Breach of Sale Agreement by Government ................................................................... 5
2.6          MINISTRY OF FINANCE.............................................................................................................. 7
             2.6.1        No Proper Arrangements over Trade-In of Motor Vehicles ........................................... 7
             2.6.2        Consideration for Recommendation in Board of Survey Reports.................................. 9
             2.6.3        Delay in Payment of Suppliers..................................................................................... 11
             2.6.4        Replacement Vehicles Not Similar to Original Vehicles .............................................. 13
2.7          CONCLUSION............................................................................................................................ 14
APPENDIX 1:                   Description of 67 Vehicles Intended for Purchase .................................................. 15
APPENDIX 2:                   Details of Government Vehicles Intended For Trade-In .......................................... 16
APPENDIX 3:                   Losses as a Result of Non Trade-In ........................................................................ 17
APPENDIX 4:                   Results of Questionnaires Distributed To Various Ministries and Departments...... 18




2.1           BACKGROUND

In 2002 Ministry of Finance had written to the Department of Government Supplies to call tenders for
the supply of sixty seven new government vehicles1. As part of the tender agreement, thirty nine
existing government vehicles would be traded-in for the new vehicles.2 The tender was called by
Government Supplies Department (Tender ref. P10/02) on 8th February 2002 and closed on 15th
February 2002.


      1
          Refer to Appendix 1 for description of the 67 vehicles intended for purchase
      2
          Refer to Appendix 2 for a list of the vehicles intended for trade-in
Ministry of Finance & Government Supplies - Purchase/Trade-In of Government Vehicles                                        Section 02: Page 1
REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF THE FIJI ISLANDS – SEPTEMBER 2004
SPECIAL INESTIGATIONS REPORT 1/2004

Two suppliers namely Niranjans Autoport and Nivis Motors were selected by the Tender Board. The
suppliers took into account the value of the old vehicles to be traded-in which were listed in the tender.

The Tender Board however did not honour the agreement with the two suppliers. As a result,
Niranjans Autoport filed a suit of $56,000 and Nivis Motors claimed a payment of $36,900.

This audit examined the procedures applied and arrangements made to purchase the 67 vehicles as
well as the trading in of the 39 vehicles by the Ministry of Finance and the Department of Government
Supplies through the Major Tenders Board.


2.2     AUDIT OBJECTIVES AND SCOPE

The objective of this audit was to closely scrutinise the purchases of motor vehicles with regards to
Tender P10/02 to determine whether proper purchasing procedures were complied with and to
ascertain why the sale agreement was breached by Government. The audit also analysed the
arrangements made by Ministry of Finance with regards to the trade-in.


2.3     LINES OF INQUIRY

The audit focussed on two key department’s role in this purchase, namely Ministry of Finance and
Government Supplies Department.


2.4     PROCEDURES FOR PURCHASING GOVERNMENT VEHICLES

The procedures governing the procurement of government vehicles is provided by Cabinet Decision of
24 March 1998 [CP (98) 73]. In addition, procedures relating to the invitation to tender, receipt of
tenders and evaluation of tenders are set out in Instruction 47 to 50 of the Supplies and Services
Instructions.

In line with Cabinet Decision of 24 March 1998, government vehicles are currently purchased through
the process of competitive quotations. The procedure requires Ministries and Departments to seek
quotations from suppliers and submit them to the Ministry of Finance which is entrusted with the task
of evaluating the quotations and selecting the successful supplier. After their evaluation, the Ministry
of Finance recommends to the Major Tenders Board the successful supplier to be awarded the
purchase contract.

The tender procedure however requires that the bidders for the supply of government vehicles to place
their quotations in a locked Ministry of Finance Tender Box. The box is then opened by the Chairman
and the Secretary of the Major Tender Board in the presence of the bidders.


2.5     DEPARTMENT OF GOVERNMENT SUPPLIES
2.5.1 Purchases above the Price Ceiling

Cabinet agreed the following standardization of the types of vehicles to be purchased for government
use:


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SPECIAL INESTIGATIONS REPORT 1/2004

i)         for the Prime Minister a fully loaded four wheel drive above 3000cc engine be the standard
           vehicle;
ii)        for the wife of the Prime Minister, a sedan up to 2500cc engine with a ceiling of $35,000 tax free
           price;
iii)       for Ministers and Attorney General, Leader of the Opposition etc. a 4WD long wheel base or any
           car other than 4 WD up to 3 litre engine with a cap of $40,000 duty free price;
iv)        for Ministers of State, a sedan or 4 wheel drive up to 2,800cc engine with a ceiling of $35, 000
           duty free price;
v)         for Permanent Secretaries and officers at equivalent level, a sedan up to 2000cc engine with a
           ceiling of $30,000 duty free price;
vi)        regional offices of Ministries and Departments in rural areas whose officers require travelling
           through gravel road or rugged terrain should be allocated with only 1 4WD at any one time. For
           these offices which are entitled to 4 WD, there should be a ceiling of $25,000 and an engine of up
           to 2.8 litre;
vii)       other Government vehicles would be a sedan or station wagon up to 1800cc with a ceiling of
           $20,000 duty free price.3

Despite the above requirement, the Major Tender Board approved the purchase of part of the 67
vehicles whose prices exceeded the ceiling price.

TABLE 2.1:               VEHICLE PRICES EXCEEDING THE PRICE CEILING

 Description of Vehicle              Quantity   Intended User                 Price         Price       Amount
                                                                             Ceiling      Charged      Exceeded
                                                                           (Duty free)   (Duty free)
                                                                                $             $
 4 WD LWB or car up to 3 ltr                5   Ministers                       40,000     43,950.00       $19,750
                                                                                                        ($3,950x 5)
 4 WD or car up to 2800cc                   2   Assistant Ministers            35,000     39,816.93      $9,633.86
                                                                                                       (4,816.93x2)
 Sedan car 3 ltrs                           1   Permanent Secretaries          30,000     37,585.04       $7,585.04
 4WD Engine up to 2.8 ltrs                 16   Ministries & Departments       25,000     37,329.00       $197,264
                                                                                                       (12,329x 16)
 Sedan car semi loaded 1.6-2.0              1   Ministries & Departments       20,000     30,250.00        $10,250
 manual
 4 WD Semi-loaded                           1   Ministries & Departments       25,000     49,317.83      24,317.83
 Ambulance with equipment                   3   Ministries & Departments       25,000     56,132.58      31.132.58
 Twin Cabs                                 12   Ministries & Departments       25,000     28,600.00         93,200
                                                                                                         (3,600 x2)
 Short Wheel Base                           7   Ministries & Departments       25,000     32,195.00         50,365
                                                                                                        (7,195 x 7)
 Semi loaded car 1.3-1.8 ltr.              11   Ministries & Departments       20,000     22,000.00        22, 000
 engine
                                                                                                       (2,000 x 11)
 Total Amount Exceeded                                                                                  415,498.31

The matter of concern in this case is the fact that the ceiling price laid out in the Cabinet Decision of
1998 is obsolete. The ceiling prices were set five years ago and factors such as inflation, popularity of
vehicle models and change in tax rates have increased costs of vehicles.



       3
           Cabinet Decision 27/98
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REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF THE FIJI ISLANDS – SEPTEMBER 2004
SPECIAL INESTIGATIONS REPORT 1/2004

This leaves no bench mark against which the suppliers’ bid price can be compared. It is evident that
the Major Tenders Board did not take the above requirement into consideration when approving the
purchases.

Recommendations

•   The Technical Committee should obtain from the Ministry of Finance the annual price
    ceiling as required by Clause d (ix) in the Cabinet Decision of 1998 to be set annually after
    the conduct of a market survey.

•   This should be used as a benchmark for considering the maximum price to be paid for the
    purchase of a vehicle.

Management Comments

Since the implementation of Cabinet Decision CP (98)73 in 1998, there have been some major
developments/changes that have affected strict compliance with some of the clauses as discussed below.

Clause (e) states “that the tender process be abolished and the Ministry of Finance be given the flexibility to
purchase vehicles that are economical, reliable and cheap through the process of competitive quotations.” The
Ministry of Finance had been complying with this clause until the end of 2001. At the beginning of 2002, when
the Ministry was about to purchase first lot of vehicles from 2002 vehicle allocation, the Auditor-General
intervened with a recommendation that vehicles should be purchased through the tender process. As a result of
this intervention and on the instruction of the Minister for Finance and National Planning, the Ministry reverted
to the tender process for the purchase of vehicles. And since then we are using the tender process for buying
vehicles with a few exception when quotation process had been used, for example, vehicle for the H.E. the
President.

Clause d(ix) is closely linked to clause (e) which means one has to read both clauses together to be able to make
out the intention behind clause d(ix). Clause d(ix) has more do with the quotation process rather than the tender
process. In other words if one is removed or changed it eliminates the other. A price ceiling will, therefore, not
serve the same purpose now that the quotation process has been replaced by the tender process.

It is also pointed out that the prices of different categories of vehicles as set out in Cabinet Decision are
supposed to be duty and tax free whereas in fact Government is not exempted from paying duty and taxes on
vehicles purchased by it. Further, prices keep changing, as often as every shipment when old models are
replaced by new and better models, there is a currency fluctuation or simply due to increase in production costs
of the vehicles.

Clause (f) states that departmental garages are to be re-organised on a commercial basis and be allowed to bid
for general repairs and maintenance. This has not happened and needs further in-depth study to ascertain its
viability, given the challenge of competition with commercial garages in providing this service.

Clause (h) states that all vehicles over 3 years are to be subjected to roadworthiness test and those vehicles that
fail the test should be taken off the road. This has since been taken over by the Land Transport authority Act
under which all vehicles over 1 year are required to undergo the roadworthiness test. Government has not been
able to fully comply with this due to financial constraints and it is considering some dispensation from this
provision on its vehicles

In recognition of the facts presented, particularly the change from quotation to tender process, it should not be
too difficult to understand that setting and maintaining annual price ceiling as required by clause d(ix) will serve
very little purpose.




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SPECIAL INESTIGATIONS REPORT 1/2004

2.5.2 Breach of Sale Agreement by Government

A total of 67 vehicles were approved for purchases under Head 50 (Miscellaneous Expenses) in the
first lot of vehicle purchase in 2002 and 39 vehicles were to be traded in.4

The following were agreed with respect to the trade-in of the vehicles to the two companies:

TABLE 2.2:              DETAILS OF AGREEMENT WITH NIRANJANS AUTOPORT AND NIVIS MOTORS

    Company                   Vehicles Accepted      Value             Purchase price of new vehicles
                                 for trade-in                          (inclusive of trade-in amount)
    Nivis Motors                      20                   $44,500     LPO 954904                 270,800
                                                                       LPO 603045                 108,400
                                                                       LPO 608048                 709,400
                                                                       Total                   $1,148,600
    Niranjans Autoport                19                   $69,000     LPO 954905                  47,780
                                                                       LPO 954906                 266,445
                                                                       LPO 954920                  53,800
                                                                       LPO 954921                 127,000
                                                                       Total                     $495,025
    Total                             39               $113,500                                $1,643,625

However, Government Supplies department breached the sale agreement by not trading in the required
number of vehicles. The following were noted in this respect:

•         The Department traded-in only four of the vehicles to the two companies. Details of the trade-in
          are tabulated below:

TABLE 2.3:              ACTUAL NUMBER OF VEHICLES TRADED-IN TO NIRANJANS AND NIVIS MOTORS

    Company                    Actual Vehicles     Details of Vehicle                     Value
                                   Traded                                                 $
    Niranjans Autoport                1            GL745- Government Printing               10,000
    Nivis Motors                      3            GM 558- Home Affairs                      7,000
                                                   GL 654- Regional Development                300
                                                   GL 552- Regional Development                300
    Total                              4                                                    17,600

•         Sixteen of the vehicles agreed for trade-in purposes were auctioned by the Department in which a
          total of $56,050 was received and deposited as General Revenue. Details of the vehicles auctioned
          were as follows:

TABLE 2.4:              VEHICLES AUCTIONED BY GOVERNMENT SUPPLIES DEPARTMENT

    Trade-In Company           Vehicle        Auction Price          Auction No.      Revenue
                              Auctioned             $                                Receipt No.
    Nivis Motors               GM 112                 5,900             05/02          287371
                               GK 397                 3,400             05/02          287371
                               GL 879                 4,000             05/02          287371
                               GL 420                 7,000             05/02          287371
                               GJ 635                 1,000             05/02          287371
                               GK 300                 3,700             05/02          287371
                               GK 301                 5,000             05/02          287371

      4
          Internal Memo dated 24/09/03 by Mr. Bashir Ali
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REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF THE FIJI ISLANDS – SEPTEMBER 2004
SPECIAL INESTIGATIONS REPORT 1/2004

    Trade-In Company     Vehicle      Auction Price    Auction No.      Revenue
                        Auctioned           $                          Receipt No.
                         GL 878               5,500       05/02          287371
                          Total             $35,500
    Niranjan Autoport    GM 260               3,700       03/02          126977
                         GK 051               1,100       02/03          287371
                         GK142                1,450       03/02          126977
                         GK 621               1,000       03/02          126977
                         GK 809                 800       05/02          287357
                         GL 855               7,200       05/02          287357
                         GL 943               5,100       03/02          126977
                         GK 160                 200       02/03          287371
                          Total             $20,550

•      Two of the vehicles were transferred to other Departments. This included vehicle registration
       numbers GL 628 which was transferred from Regional Development to PWD and GM 311 which
       was still retained after trade in decision by the Legislature. Both vehicles were supposed to be
       traded in to Nivis Motors.

•      Vehicle registration number GM 578 belonging to Local Government which was supposed to be
       traded in to Nivis Motors was instead traded in to Asco Motors for $7,500.

In addition, fourteen of the vehicles which were supposed to have been traded-in were still being used
by various Departments and Ministries, not being released under the purchase agreement.

The breach of the purchase agreement resulted in Niranjans Autoport filing a suit against the
government for the sum of $59,000 as the Department traded in only one of the nineteen vehicles
agreed for trade-in. In addition Nivis Motors claimed for the sum of $36,900 due to the Department
trading in only three of the twenty vehicles.

The anomaly is greatly indicative of responsible officers’ laxity in ensuring that such legal agreement
is honoured. Furthermore, it also reveals lack of proper communication and co-ordination between the
Government Supplies Department and the Ministry of Finance to ensure that the purchase agreement is
adhered to.

Recommendations

•      Appropriate disciplinary action should be taken against officer(s) who approved the
       auctioning of the vehicles, transfer of the vehicles to other Departments and trading –in of
       the vehicle to Asco Motors.

•      Proper arrangements should be made with Ministries/Departments as well as with the
       Ministry of Finance with respect of vehicles to be traded-in to ensure that the vehicles are
       provided on time for such purpose.

Management Comments

First of all the agreement was honoured albeit there was a year’s delay in doing so. In way of background, the
Ministry decided to trade-in 39 vehicles with the first lot of purchase of new vehicles in 2002 in an effort to
reduce the total costs of the new vehicles which will then enable it to buy more vehicles with the savings made to
meet the growing need to replace old and uneconomical vehicles in the Ministries/departments. Clause n allows
trading-in of old vehicles when buying new replacement vehicles. The trade-in values were determined by the
car dealers consistent with Instruction 65 of Supplies and Services Instructions and Government Stores
Instructions, 1982 which reads “A Head of Department may with the approval of the Permanent Secretary for
Finance, dispose of public stores (referred to in this instruction as “old stores”), in transacting the purchase of
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replacement (referred to in this instruction as “new stores”), in return for a value offered by the supplier of such
new stores.”

If we summarise all the information in respect of trade-in, as captured in your report, the result would look like
this.

    (a)      Number identified for trade-in                                                              39
    (b)      Number transferred to other Departments or retained by the owner Departments                16
    (c )     Number traded-in                                                                             5
    (d)      Total money derived from auction sale and trade-in and credited to revenue             $73,500
    (e)      Total money that would have been derived if all vehicles had been trade-in            $108,000
    (f)      Total trade-in value of vehicles still with Departments                                $41,100
    (g)      Total of (d) and (f)                                                                  $114,600

There was delay in paying Niranjan’s Autoport and Nivis Motors Ltd the money government owed them but both
were paid and Niranjans Autoport Ltd withdrew legal action against the Ministry. The Ministry therefore did
honour fully its obligations under the sale agreement although we agree that it should not have taken us one year
to do so.

We further agree that Government Supplies Department should not have auctioned the vehicles earmarked for
trade-in. However, upon becoming aware of this, we held meetings with them with a view to ensuring that there
is no repeat of this problem in future. Government Supplies Department accepted that they should not have
auctioned the vehicles without our approval and gave assurance that this will not be repeated. Thus, the matter
had been dealt with and given there has been no repeat of the problem in the past two (2) years, we are satisfied
that no further action is required on your recommendation.

Further OAG Comments

The audit could not establish why the two companies chose to continue to accept the terms of the
purchase agreement despite the one year delay in the trade-in of government vehicles.



2.6         MINISTRY OF FINANCE
2.6.1 No Proper Arrangements over Trade-In of Motor Vehicles

A total of forty six motor vehicles were initially provided by the Ministry of Finance to be considered
for trade-in.

The Ministry of Finance did not make proper arrangements to ensure the vehicles were available for
trade-in. As a result, most of the vehicles in the list of trade-in were not released by some Departments
and Ministries. This led to Government Supplies Department’s not trading-in the required number of
vehicles to Niranjans and Nivis Motors resulting in a writ filed against the government.

The following were noted to signify no proper arrangements were made:

•      Five companies had tendered for the purchase. The companies were to value the old vehicles in
       order to determine the trade-in prices of these old vehicles. However, not all the five companies
       were able to carry out the valuations because:

       1.    some of the vehicles had been auctioned by Government Supplies Department.
       2.    a few of the vehicles were already written off.

Refer to the following table:

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TABLE 2.5:               VEHICLES AUCTIONED OR WRITTEN OFF BEFORE TRADE-IN

    Vehicle       Comments

    GL 630        The vehicle had already been auctioned, thus valuation could not be carried out by Asco Motors, Niranjans and
                  Eurocars.
    GL 672        The vehicle had already been auctioned by government supplies, thus could not be valued by Eurocars,
                  Niranjans and Asco Motors
    GL 750        The vehicle had already been auctioned by government supplies, thus could not be valued by Eurocars ,
                  Niranjans and Asco Motors
    GM 138        The vehicle had already been written off, thus could not be valued by Eurocars and Niranjans.
    GL 893        The vehicle had already been auctioned by government supplies, thus could not be valued by Eurocars and
                  Niranjans.

In addition, some of the vehicles were not with the Department or Ministry at the time the valuation.

•         A questionnaire issued to the various Departments and Ministries noted the following
          observations:

          1.   Most of the Departments and Ministries were not informed in writing of the decision to trade-
               in their old vehicles. A few of the Departments/Ministries revealed that they were only
               informed verbally whilst most of them revealed that they were not informed at all. As a result
               most of the vehicles were not released for trade-in.5

          2.   It was evident that the Ministry of Finance did not carry out an analysis of the vehicle needs
               of the Departments and Ministries whose vehicles had been selected for trade-in. Most of the
               Department and Ministries did not release their vehicles due to shortage of vehicles. The
               following Departments did not release their vehicles.

TABLE 2.6:               DEPARTMENTS WHICH DID NOT RELEASE THEIR VEHICLES FOR TRADE-IN

    Vehicle       Department                Trade-in
                                             Value
                                               $
    GK 188        Lands                          300
    GL 931        Parliament                     500
    GK 137        Mineral Resources              300
    GL 896        Fisheries and Forests        5,500
    GM 513        Labour                       4,000
    GI039         Health                         500
    GJ 335        Health                       1,000
    GL 001        Health                       6,000
    GM 109        Health                       4,000
    GL 941        PWD                          5,000
    GM 292        Met Services Nadi            8,000
    GL 721        Education                    1,000
    GM 591        Mineral Resources            5,000

The anomaly clearly indicates that there was no proper arrangements and coordination between the
Ministry of Finance and the various Departments and Ministries to facilitate this transaction.




      5
          Refer to Appendix 4 for details
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Recommendation

The Ministry of Finance should ensure that proper arrangements are made with
Departments/Ministries over the trading-in of government vehicles. Departments should be
informed well in advance of the trade-in so that the vehicles are made available for inspection by
the car dealers and provided for trade-in on time.

Management Comments

It seems this conclusion has been reached largely on the basis of the feedback received through a questionnaire
issued to Ministries/Departments by your office. The result had not been verified with our views on it. It is
further pointed out that 2002 was the first year, since the implementation of the Cabinet Decision in question, the
Ministry had offered such a large number of vehicles for trade-in when buying new ones. This was done with the
intention that if we can reduce the cost of new vehicles we will be able to replace more written-off vehicle than
possible otherwise. Every year the requests for replacement vehicles had far exceeded the number that budget
allocation allows us to replace.

Ministries/Departments were informed which of their vehicles will be traded–in and their agreement obtained.
They do not recommend which vehicle should be written-off. A Board of Survey recommends which vehicles
should be written-off and the manner in which they should be disposed. The Ministry of Finance on receiving
the Board of Survey report makes the final decision as to whether the vehicle should be written-off or repaired.
If it decides to write-off a particular vehicle it will also decide the manner in which it should be disposed. In this
case, it decided that some of the written-off vehicles should be traded-in and clause n of Cabinet Decision and
Supplies and Services Instructions 65 allow this.

However, we encountered difficulties when the Ministries/Departments came back to say that they need to retain
some of the vehicles identified for trade-in due to shortage of vehicles. We tried our best to accommodate their
request and in doing so, some of the vehicles earmarked for trade-in were retained by Ministries/Departments
and consequently not trade-in. We learnt a few lessons from this experience and were able to manage better the
subsequent purchase of vehicles involving trade-in.

It is reiterated that the Ministries/Departments were consulted fully and we are checking out why some of them
had said through the questionnaire that they are not consulted. It is likely that the questionnaires were
completed by some junior officers who had no knowledge of what had happened at the time.

The trade-in was done with best of intentions and at the end of the process we benefited as explained with facts
in our comment under paragraph 4.2.



2.6.2 Consideration for Recommendation in Board of Survey Reports

A board of survey shall examine any public stores that have been reported to be damaged, defective or
otherwise unserviceable or obsolete and shall recommend that such public stores should be disposed
off in one or more of the following ways:

a)        sale by public auction;
b)        sale by tender after public advertisement;
c)        transfer to another department;
d)        defacing, dumping or destruction;
e)        in any other manner.6

Questionnaires issued to various Departments and Ministries found that most of the Board of Survey
reports submitted to Ministry of Finance recommended those vehicles identified for trade-in to be
written off and be disposed through public auction as the vehicles were uneconomical to repair.
     6
         Supplies and Services Instructions 101(1)
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Despite this recommendation, the vehicles were not considered for auction by the Ministry of Finance
but were earmarked for trade-in.

The Government Supplies Department and the Ministry of Finance later abandoned the idea to trade-in
some of the vehicles and auctioned them instead. Refer to the following table:

TABLE 2.7:           VEHICLES AUCTIONED BY GOVERNMENT SUPPLIES DEPARTMENT

    Department/Ministry                       Vehicle   Estimated Cost      Auction       Trade-in
                                                           of Repair         price         Price
                                                               $               $             $
    Ministry of Education                     GL 855             20,000          7,200         5,000
    Department of National Planning           GL 943             20,000          5,100         5,000
    Department of Lands                       GK 300             15,000          3,700           300
                                              GK 301             15,000          5,000           300
    Department of Town and Country Planning   GL 420              9,412          7,000           300
    ITC                                       GL 878             12,000          5,500         1,200
    Public Works Department                   GK 809             25,000            800         1,000

As can be seen from the above table, auctioning of the vehicles by Government Supplies Department
was more profitable as the government was able to sell the vehicles at a much higher price than if it
was traded-in.

This is a clear indication of uncertainty on the course of action to take for the disposal of these
vehicles. Furthermore it also shows the lack of proper planning by the Ministry of Finance to ensure
that the most economical option for the disposal of government vehicles is taken.

Recommendations

•      Ministry of Finance should consider the recommendation made by the department’s Board
       of Survey reports.

•      Ministry of Finance and Government Supplies Department should closely communicate on
       the most economical options available in treating vehicles which are uneconomical to repair.

Management Comments

The report states that questions issued to Ministries/Departments found that most of the Board of Survey reports
submitted to Finance recommended those vehicles among the list of trade-in to be written off and be disposed
through public auction, yet the vehicles were earmarked for trade-in despite the recommendation made by the
various Ministries/Departments. There was a good reason why they Ministry of Finance decided to trade-in
some of the vehicles recommended in the Board of Survey to be written-off and auctioned.

First of all the Ministry of Finance has the powers to change the recommendation as to the method of disposal of
any written-off stores if it considers necessary do so. In this case the decision to trade-in was considered
necessary to enable it to buy more vehicles than it would otherwise be able to buy with the limited funds
available in the budget for purchase of vehicles. Statistics show that about 70 percent of motor vehicles have
reached or well passed the replacement age and if all these vehicles were to be replaced at once we need close to
$40 million.

It is pointed out that in most cases offers made for vehicles put on auction sale are below the reserve price as a
result of which the reserve price is revised downward several times before the vehicle eventually gets sold. In
some cases reserve prices had to be reduced by more than 300 percent to attract a buyer in the auction sale. So
your conclusion that written-off vehicles disposed through auction sale fetch a higher return is not entirely
correct. In fact examples could be provided where trade-in prices have been higher than the reserve price. We
Ministry of Finance & Government Supplies - Purchase/Trade-In of Government Vehicles         Section 02: Page 10
REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF THE FIJI ISLANDS – SEPTEMBER 2004
SPECIAL INESTIGATIONS REPORT 1/2004

even tried to sell a vehicle through the tender process but did not receive a single offer. We then ended up
trading-in the vehicle at price well below the reserve price. In many cases the reserve value has proved
unrealistic and out of tune with current value of second-hand vehicles in the open competitive market
environment.



2.6.3 Delay in Payment of Suppliers

A total of $4 million was provided under Head 50 (Miscellaneous) in 2002 to cater for the
purchases/trade-in of government vehicles. A total of $59,000 was to be paid to Niranjans Autoport
and $36,900 to Nivis Motors for the trading-in of the 39 government vehicles.

It was noted that there were a great deal of disagreement and confusion between the Ministry of
Finance and the Department of Government Supplies on to the settlement of the amounts to the two
suppliers. A request for the payment of $36,900 was made by Nivis Motor to the Permanent Secretary
of Ministry of Finance in a letter dated 23 June 2003.

A chronology of events following this is as follows:

•      In a letter dated 24 June 2003, the Permanent Secretary of Finance informed the Controller of
       Government Supplies that the sum of $36,900 outstanding to Nivis Motors being the value of the
       trade-in of old vehicles to purchase new vehicles was to be paid by Government Supplies
       Department.

•      In reply, the Department of Government Supplies informed the Permanent Secretary of Finance
       that his Department had no obligation to pay Nivis Motors the sum of $36,900 due to the
       following reasons;

       a)     The prices of the vehicle quoted by the company in its tender document were exclusive of
              the trade-in values of the vehicles in question which were the prices at which the new
              vehicles were paid for.
       b)     The vehicles listed by Nivis Motors and forwarded to Ministry of Finance were not inclusive
              of the company’s tender.

•      In addition the Department of Government Supplies stated that sixteen of the vehicles that were to
       be traded-in had been auctioned and receipts from the auction sales had been credited to the
       consolidated revenue account. Thirteen of the vehicles were still with the Departments. Details of
       this are as follows:

TABLE 2.8:            RECEIPTS FROM AUCTION SALE AND VEHICLES STILL WITH THE DEPARTMENTS

    Details                                                Amount
                                                             $
    Auction Sale (16 vehicles)                              56,050
    Trade-in Value of 13 vehicles still with Departments    41,100
    Total                                                   97,150

The Department was unable to make the payment since the Department did not have any provision for
this. Thus it requested the Ministry of Finance to meet the payments as follows.

1. $56,050 receipts from the auction revenue.
2. $39,850 from the Ministry’s vehicle purchase allocation since the Departments have not released
   the vehicles to be traded in.

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During this period of correspondences between the Government Supplies Department and the Ministry
of Finance, Niranjans Autoport Ltd filed a writ of summons on 5th July 2003 against the government.

The Solicitor General’s Office informed the Ministry of Finance of the writ of summons filed by
Niranjans.7 The Solicitor General requested the Ministry of Finance to:

a)        answer each and every allegation in the Statement of Claim.
b)        provide the Solicitor General’s office with any other materials which may be of assistance in the
          matter.
c)        name of a liaison officer who can be contacted for details.

In a memorandum dated 30th September 2003 from the Solicitor General’s Office to the Permanent
Secretary of Finance it was revealed that after liaising with the Ministry’s Administrative Officer
(Vehicle Control Unit):

1. that the Ministry does not have defence to the claim;
2. that the Ministry intends to settle the matter out of court;
3. that the Ministry needs more time to make arrangements in relation to the sums owed.

It was further noted that despite three reminders being sent not a single reply was received in writing
from the Ministry of Finance at least to clarify the Ministry’s position so as to enable the Solicitor
General’s office to liaise with the plaintiff’s counsel.

It is appalling to note that whilst allocation is provided to cater for the purchase/trade-in of government
vehicles there were still delays in the payment to the two suppliers. In addition whilst the Solicitor
General’s Office made every effort to try and settle the payment to the two suppliers the Ministry was
not at all co-operative, continuing to delay the payment.

In a letter dated 1st October 2003, the Permanent Secretary of Finance informed the Solicitor General
of the Ministry’s agreement to settle the amount claimed by Niranjans. Payments to the above
suppliers were made on 2nd October 2003, more than a year after the issue of the Local Purchase
Orders.

Recommendations

•        Officers responsible for the delay in the payment to the suppliers should be disciplined as
         these incidences tarnish the image of the public sector.
•        The Ministry of Finance should take more pro-active action in providing information
         required by the Solicitor General’s Office over such cases.

Management Comments

The delay of one year in settling the claim of two (2) car dealers accounts for vehicles that were earmarked but
not traded-in is not disputed. This is an isolated case and not a norm that all payments are inordinately delayed.
The payment was made without the intervention of the court and this isolated event has not negatively affected
business relationship between the company and the Ministry. Officers responsible for the delay in making the
payment could be disciplined only if it is substantiated that the “image of the public sector had been tarnished by
their actions”.




     7
         Letter dated 11 August 2003
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2.6.4 Replacement Vehicles Not Similar to Original Vehicles

Under the replacement policy, the replacement vehicles should be the same type as the one replaced.8

However, despite the above requirement several Departments were replaced with a different type of
vehicle. Refer to the following table for details:

TABLE 2.9:           REPLACEMENT VEHICLES NOT SIMILAR TO THE ORIGINAL VEHICLES

 Department                         Vehicle traded-in       Replacement Vehicles

 Director of Public Prosecution     Hyundai Elantra 1.6     Mitsubishi Pajero
 ITC                                Mitsubishi Lancer       Mazda 323
 Local Government                   Mitsubishi Pajero       Toyota Prado L5 120
 Home Affairs                       Toyota Vienta           Mitsubishi, Wagon

In addition two departments were not provided with replacement vehicles although their vehicles were
provided for trade-in. This included the following.

TABLE 2.10:          DEPARTMENTS WHICH DID NOT RECEIVE REPLACEMENT VEHICLES

 Department           Vehicle Not      Vehicle Type
                      Replaced
 Lands                GJ 635           Holden (SW)
 Health               GI 039           Toyota Car
                      GI 335           Toyota Landcruiser
                      GL 001           Mitsubishi Pajero
                      GK 487           Stella Car
                      GK 051           Dhaihatsu Charade
                      GM 109           Mazda Panel Van

The above anomalies again reveal lack of proper planning in the trading in of government vehicles. It
also indicates great laxity on the part of responsible officers to ensure that the requirements of laid
down policies are followed.

Recommendation

The Ministry should ensure that proper arrangements are made over trading-in of Government
vehicles and policies surrounding them are adhered to.

Management Comments

The provision in Cabinet Decision that “the replacement vehicles should be of the same type as the one
replaced” should be read with the standardisation clause (d) (i) – (vii) which in most cases takes precedence.

It is important to understand first what exactly is meant by “same type of vehicle.” If this means exactly the
same in all aspects by engine capacity, make, model and all the rest of the features then there would be a conflict
between the two clauses. An example to illustrate this point is where the vehicle to be replaced has an engine
capacity of 4 litre but the entitlement of the officer is 3 litre or the officer is entitled to a four-wheel drive vehicle
whereas the vehicle to be replaced is a sedan car. Models and makes also change and as such it would not be
possible to replace a vehicle if one of the same make and model is not available in the market. Therefore,
adherence to clause m will only be possible if it is not in conflict with other clauses, especially clause (d).


   8
       Cabinet Decision Paper( 98) 73 paragraph (m)
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SPECIAL INESTIGATIONS REPORT 1/2004




2.7     CONCLUSION

The findings in this report indicate serious breach of the sale agreement with regards to the trade-in of
39 vehicles in 2002.

The breaches resulted in Niranjans Autoport filing a writ in the sum of $59,000 against the government
and Nivis Motors also claiming the sum of $36,900.

The report also found that there were lack of proper communication between the Ministry of Finance,
the Government Supplies Department and the various Departments with regards to the trade-ins.




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SPECIAL INESTIGATIONS REPORT 1/2004



APPENDIX 1:              Description of 67 Vehicles Intended for Purchase

 Description                                    Quantity

 4 WD LWB or car up to 3 litre engine                  5
 4 WD or car up to 2800 cc engine semi loaded          2
 Sedan Car up to 3 litre                               1
 4 WD engine up to 2.8 litre                          16
 Sedan car semi loaded 1.6-2.0 manual                  1
 4 WD Semi loaded                                      1
 Ambulance with equipment                              3
 Twin Cabs 4 X 4                                      12
 Mini Bus 10 Seater                                    2
 Mini Bus 12 Seater                                    2
 Mini Bus 8 Seater                                     2
 Short Wheel Base                                      7
 Single Cabs                                           2
 Semi Loaded car 1.3                                  11
 Total                                                67




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SPECIAL INESTIGATIONS REPORT 1/2004



APPENDIX 2:            Details of Government Vehicles Intended For Trade-In

 Vehicle   Vehicle Type             Year Purchased   Department/ Ministry

 GM 598    Mitsubishi Pajero             1978        Local Government
 GM 558    Toyota Vieta-Sedan            1998        Home Affairs
 GM 311    Nissan Petrol                 1996        Legislature
 GM 112    Magn a Elite                  1999        Ombudsman
 GL 896    Toyota Landcruiser            1995        Fisheries and Forests
 GM 260    Hyandai Elantra               1995        DPP
 GM 513    Mitsubishi Pajero             1998        Labour
 GK 487    Stella Car                    1986        Health
 GK 397    Mitsubishi Pajero             1989        Health
 GI 039    Toyota Car                    1979        Health
 GJ 335    Toyota Landcruiser            1981        Health
 GK 051    Dhaihatsu Charade             1989        Health
 GL 001    Mitsubishi Pajero             1989        Health
 GM 109    Mazda Pannel Van              1995        Health
 GL 941    Mazda 626                     1993        PWD
 GL 628    Toyota Landcruiser            1991        Regional Development
 GL 654    Mitsubishi Pajero             1991        Regional Development
 GL 552    Rocky Daihatsu                1992        Regional Development
 GL 387    Daihatsu Rocky                1992        Regional Development
 GL 250    Mitsubishi Pajero             1992        Regional Development
 GK 142    Mazda Sedan                   1984        PWD
 GK 160    Mazda Utility                 1983        PWD
 GK 621    Toyota Sedan                  1987        PWD
 GK 809    Nissan Twin Cab               1988        PWD
 GM 292    Sonata Hyundai Sedan          1995        Meteorological Services
 GL 750    Hyundai Sonata                1992        Foreign Affairs
 GL 630    Mitsubishi Pajero             1990        Foreign Affairs
 GL 672    Mazda Closed Van              1992        Foreign Affairs
 GM 138    Nissan Station Wagon          1994        Education
 GM 379    Toyota Sedan                  1997        Education
 GL 721    Toyota Land cruiser           1990        Education
 GL 855    Twin Cab                      1992        Education
 GL 879    Mitsubishi Pajero             1992        PSC
 GL 420    Mitsubishi Pajero             1989        Town and Country Planning
 GL 893    Twin Cab                      1992        Energy
 GL 943    Mazda 626 Sedan               1993        National Planning
 GL 931    Mazda Mini Bus                1996        Parliament
 GJ 635    Station Wagon                 1981        Lands
 GK 300    Toyota Land cruiser           1986        Lands
 GK 188    Rocky                         1985        Lands
 GK 301    Toyota Land cruiser           1985        Lands
 GL 878    Mitsubishi Lancer             1993        ITC
 GM 591    Ranger Rover                  1998        Mineral Resources
 GM 137    Rocky Daihatsu                1984        Mineral Resources
 GL 745    Toyota Cab                    1992        Government Printing




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REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF THE FIJI ISLANDS – SEPTEMBER 2004
SPECIAL INESTIGATIONS REPORT 1/2004



APPENDIX 3:                Losses as a Result of Non Trade-In

 Reason of Non Trade-In                      Details of Vehicle Not Traded-In     Value
                                                                                    $
 Auctioned                                   GM 112 - Ombudsman                    6,500
                                             GK 397 - Health                         300
                                             GL 879 - PSC                          3,000
                                             GL 420 - Town and Country Planning      300
                                             GJ 635 - Lands                          300
                                             GK 300 - Lands                          300
                                             GK 301 - Lands                          300
                                             GL 878 - ITC                          1,200
                                             GM 260 - DPP                          7,000
                                             GK 051 - Health                       2,000
                                             GK 142 - PWD                          1,000
                                             GK 621 - PWD                          1,000
                                             GK 809 - PWD                          1,000
                                             GL 855 - Education                    5,000
                                             GL 943 - National Planning            5,000
                                             GK 160 - PWD                            500
                                             Total                                32,750
 Vehicles still with the Department          GK 188 - Lands                          300
                                             GL 931 - Parliament                     500
                                             GK 137 - Mineral Resources              300
                                             GL 896 - Fisheries and Forest         5,500
                                             GM 513 - Labour                       4,000
                                             GI 039 - Health                         500
                                             GJ 335 - Health                       1,000
                                             GL 001 - Health                       6,000
                                             GM 109 - Health                       4,000
                                             GL 941 - PWD                          5,000
                                             GM 292 - Met Services- Nadi           8,000
                                             GL 721 - Education                    1,000
                                             GM 591 - Mineral Resources            5,000
                                             Total                                41,100
 Vehicles transferred to other Departments   GL 626- Regional Development          1,000
                                             GL 250- Regional Development            300
                                             GM 311- Legislature                   9,000
                                             Total                                10,300
 Vehicle Traded-in to Asco Motors            GM 578- Local Government              7,500
 Total                                                                            91,650




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SPECIAL INESTIGATIONS REPORT 1/2004



APPENDIX 4:                 Results of Questionnaires                 Distributed       To     Various
                            Ministries and Departments

 Ministry/ Department                Vehicle Reg.   Was the Department
                                         No.        informed of the Trade-In ?
 DPP’s Office                          GM 260       No
 Ministry of Education                 GL 855       Yes
                                       GL 721       Yes
 Ministry of Finance                   GL 943       Yes
 Department of Mineral Resources       GK 137       No
                                       GK 300       No
                                       GK 301       No
                                       GK 188       No
                                       GJ 635       No
 Ministry of Local Government          GM 578       Yes
 Town & Country Planning               GL 420       No
 Ministry of Health                    GI 039       No
                                       GJ 335       No
                                       GL 001       No
                                       GK 397       No
                                       GK 487       No
                                       GK 051       No
                                       GM 109       No
 ITC Services                          GL 878       No
 Ministry of Home Affairs              GM 558       No




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