Reviewers:

• Rauhath Hussain, Director, Performance Audit Department
• Ahmed Salih, Director, Technical Services and Research Department
• Mohamed Ibrahim Jaleel, Manager, Performance Audit Department

Public accountability pertains to the obligations of individuals or entities entrusted with public resources to be answerable for the fiscal, managerial and program responsibilities that have entrusted to them, and to report to those who have entrusted these responsibilities. In government, accountability is fundamental—politicians are accountable to citizens for public affairs, the government is accountable to Parliament for resource management, and public servants are accountable to the government for their performance. Traditionally, accountability focused on adherence to processes, but the emphasis has shifted towards demonstrating tangible results (Roth, 1996).

Auditing began as a risk-reduction strategy for owners (principals) to ensure agents used assets properly. To address risks like distance or lack of expertise, independent third-party auditors were employed to verify the accuracy and reliability of agents' accounting. “Performance auditing is similar in its aims: It involves the examination of the performance of a public organisation or program on behalf of a client— ultimately citizens—by an independent auditor”. (Colleen at el., 2007, page 324)

The Transformative Role of Performance Auditing

Increasing concerns over government spending and efficiency became apparent in the 1960s, consequently leading to the emergence of performance audit. While Glynn (1985a) claimed that Canada was the first to adopt Value for Money (VFM) auditing, other countries like New Zealand and the UK also faced rising public expenditure and efficiency issues, prompting calls for greater accountability. In New Zealand, for example, local government inefficiencies led to special investigations, and in the UK, public dissatisfaction with rising expenditures fueled demands for more transparency (Nurul athira Abd Manaf, 2010). Further, Nurul Athira (2010) states that public agitation and declining trust in government officials pushed for more accountability, leading many governments worldwide to introduce performance audit mandates to address these concerns, thus broadening the concept of accountability beyond traditional financial and compliance auditing. “Public accountability is thus considered to be a broader concept than financial accountability…The auditor’s role would therefore seem to be that of ensuring that management processes and accountability are clearly linked” (Glynn, 1996, p129)

Role of Performance Auditing on Accountability

Performance auditing fosters accountability by providing those with governance and oversight responsibilities the insights needed to enhance performance. It uncovers hidden issues or problems by scrutinising whether legislative or executive decisions are prepared and implemented economically, efficiently, and effectively, ensuring taxpayers and citizens receive value for money. By examining these aspects, performance audits offer a comprehensive evaluation, highlighting areas that require improvement and promoting transparent, responsible governance, ultimately reinforcing public trust and accountability.

According to Barzelay (1996), performance audit is targeted towards performance improvement and performance accountability. However, these two goals often present challenges in practice, as they can sometimes be seen as competing concepts. Some argue that focusing on accountability may hinder performance improvement, while others believe both goals can be achieved simultaneously, especially when public managers are held accountable for delivering results. While there are differing views on whether performance accountability and improvement can coexist, both goals remain central to performance auditing, with the ultimate aim of improving public sector management and ensuring the responsible use of public funds. (Nurul Athira Abd Manaf, 2010)

Haliah et al., (2020) finds that in the public sector, performance audits contribute to enhancing accountability in various ways. These include improving management accountability to representative institutions, developing accountability report forms, enhancing performance indicators, facilitating performance comparisons between peer-reviewed organisations, and providing clearer, more informative presentations of information.

Further, according to Haliah et al., (2020), several studies conducted in Indonesia have shown that performance audits have a positive and significant effect on public accountability. Research by Susbiyani (2016), Rinaldi (2016), Mahmud, Mahsuni, and Junaidi (2017), Darmanto (2017), and Safitri (2019) collectively affirm that performance audits play a crucial role in enhancing transparency, efficiency, and accountability within public sector organisations.

The case of the Maldives: Performance audit of Fuvahmulah city water and sewerage system.

The performance audit of Fuvahmulah City’s water and sewerage systems played a critical role in fostering greater public sector accountability. By identifying inefficiencies and recommending improvements, it helped ensure that citizens received better services while also promoting the responsible use of public funds. The audit provided a clearer picture of how public resources were being managed, thereby enhancing transparency and accountability. Furthermore, the audit findings can serve as a foundation for future policy decisions and investments in the water and sewerage infrastructure, as well as other future projects, ensuring sustained public sector accountability.

Basic Information of Fuvahmulah City

Fuvahmulah Island, situated at coordinates 73°25´40” E, 0°17´53” S, is located in the southern part of the nation. It spans an area of 487 hectares, with dimensions of 4.1km in length and 1.1km in width. The island's coastline stretches for a total of 11km. According to the 2014 census, the population of Fuvahmulah stands at 8,579 individuals.

The existing sewerage infrastructure not only raised environmental concerns but was also deemed unsafe from a health and hygienic standpoint (MoE, 2012.). Recognising the adverse effects of the current sewerage system on public health and the environment, a project was initiated in 2015 to establish a safe water and sewerage system in Fuvahmulah City. The project was implemented through donor and government funding.

Background of the Audit Project

A performance audit was conducted on the Fuvahmulah city water and sewerage system project. The audit examined the economy, efficiency and effectiveness of the water and sewerage system project of Fuvahmulah city, evaluating whether the contractual and regulatory obligations were fulfilled by the stakeholders. It also assessed the effectiveness of the project by analysing information collected from key stakeholders. The audit generally covered the period from 2015 to 2021.

Key audit findings

Cost of Project: The total cost of the project contracts was estimated to be USD 18,331,486, which includes all expenses related to the project contracts. However, additional costs are expected for approved variation, rectification, and administrative expenses, estimated at USD 22,049,045. These addit

Quality Control: All the quality control measures planned for the project were not carried out accordingly during the design and implementation phases of the project. The Ministry has employed a design and supervision consultant for the project, however, some civil works have been inspected and approved by personals who were not approved by the client (Ministry). Furthermore, certain works were neither inspected nor approved at all. The regulator granted conditional approval for the Detailed Design Report, requiring amendments and additional information; however, it was not confirmed whether these changes were incorporated into the final report.

Environmental Compliance: The project deviated from the approved Environmental Impact Assessment (EIA) by constructing the sewerage discharge pipe in an environmentally sensitive area, which was later declared a protected site. The discharge pipe was also not established at the EIA’s required depth, which was necessary to minimise the environmental impact. During the defect liability period, the pipe was damaged due to underestimated marine conditions during the design phase, and a similar issue resurfaced, causing sewer leakage onto the reef. Additionally, some sewerage infrastructure was built in unapproved locations, leading to increased vegetation removal and greater environmental impact than initially anticipated. Further, the environmental monitoring program stipulated under the EIA was not conducted, while some of the mitigation measures were not adequately implemented.

Coordination, stakeholder engagement and defect liability period:

Due to the change in government mandate, the project was shifted to Ministry of Planning, however, important information and documents were not properly maintained or handed over. Due to the change in mandate, for four months, including three months of the Defect Liability Period, there was no institution coordinating the project, leading to ineffective monitoring and addressing of issues identified by the Supervision Consultant. Additionally, both the contractor and the operator were responsible for operating the system during this period, hindering the operator's ability to identify issues. Despite the operator's lack of action, no regulatory measures were taken against them. The Ministry of Planning and Infrastructure issued a performance certificate to the contractor, declaring the project complete without fully resolving identified issues

Resources and Training: The service provider lacks the necessary resources, including qualified staff and spare parts, to effectively operate and maintain the system. This deficiency stems from inadequate planning during the planning stage, the contractor's failure to fulfil training requirements stipulated in the contract, and the service provider's insufficient efforts to secure these resources after the construction phase. As a result, the service provider is unable to sustainably deliver services and achieve the project's objectives.

Process of Manually Carrying Raw Sewage: The project's actual costs exceeded initial estimates, including expenses for temporary solutions to manage sewer overflow. The service provider hired private parties to manually collect and dispose of sewage without a competitive bidding process, resulting in significantly higher costs compared to previous rates. Over a period of 21 months, USD 562,475 was spent on transporting sewage to the treatment plant. The procurement process during this phase was not aligned with the state's best interest and failed to adhere to sustainable development principles.

Rectification: A rectification contract worth USD 2,806,210 was issued to address ongoing issues in the city’s sewerage system and provide a permanent solution. However, at the time of audit field work closure, only 87% of the contracted work was completed within the agreed contract period. At the time of the report's issuance, not all tasks outlined in the rectification project had been completed in accordance with the contract's terms and conditions.

Operation and Sustainable Service Provision: The operator has failed to properly track operating costs, neglected maintenance and water quality testing expenses, and has not submitted financial reports. This lack of oversight has left the system management costs unclear and revenue uncollected. The reverse osmosis (RO) plant produces significantly less water than stipulated in the contract, and unresolved issues during the Defect Liability Period have resulted in significant financial losses, including an estimated USD 267,973 loss due to water leaks.

Socio-economic Impact: Untreated sewerage transportation and disposal were conducted without an environmental management plan, and the supply water quality reports were not submitted. Sampling points for monitoring supply water quality were inadequate. Additional issues included public preference for single-use plastic bottles over supplied water, a lack of trust in water safety, and insufficient public awareness efforts. The island's groundwater quality has deteriorated compared to its condition before the project was implemented. However, it was found that some members of the public still prefer using groundwater for non-potable use over the supplied water provided by the project, highlighting a gap in awareness.

Conclusion

In conclusion, the performance audit of the Fuvahmulah City water and sewerage project evaluated how public resources were utilised to achieve policy goals, with a focus on economy, efficiency, and effectiveness. The audit highlighted failures in stakeholder engagement, inadequate planning, and the lack of proper oversight during the implementation and operational phases, which led to unresolved issues and inefficient system operation. It emphasised the need for adherence to environmental standards, financial transparency, and the timely completion of contracted works. By assessing the project's cost overruns, resource deficiencies, and operational shortcomings, the audit ensured greater accountability in the use of public resources, fostering a more transparent and responsible approach to managing public sector projects. Additionally, it provided valuable insights into the social and environmental impact, underscoring the importance of sustainable service provision, quality control, and public trust.

References

1. Auditor General's Office, Republic of Maldives. (2023). Performance Audit of Fuvahmulah City Water and Sanitation Project. INTOSAI WGEA
2. Colleen, G., Waring, S., Stephen, L. and Morgan, I. (2007). "Public Sector Performance Auditing in Developing Countries." In Capable Finance Ministries: Strengthening Budget Offices, (pp 323-324). Collaborative Africa Budget Reform Initiative.
3. Darmanto, Fauzia Kartika. (2017). The Impact of Corporate Governance, Performance Audit, and Government Accounting Standard in Indonesia to The Accountability of Karanganyar Government. Muhamadiyah University of Surakarta.