Asian Journal of Government Audit
By Aminath Fashwa, Manager, Financial & Compliance Audit
State-Owned Enterprises & Financial Institutions, - SAI Maldives
Asian Journal of Government Audit
By Aminath Fashwa, Manager, Financial & Compliance Audit
State-Owned Enterprises & Financial Institutions, - SAI Maldives
In the orchestration of public service delivery, procurement is the rhythm that sustains development. It is the bridge between policy and implementation, between aspiration and infrastructure. Yet, when procurement falters, the consequences reverberate across budgets, timelines, and public trust. The audit of the Blues Housing Project offers a poignant case study of how procurement, when left unchecked, can drift from harmony into dissonance.
The Blues Housing Project was launched in June 2013 as a flagship initiative by the Government of Maldives to provide affordable housing for personnel of the Maldives Police Service. To manage and oversee the project, the government entrusted the Police Cooperative Society (POLCO), a corporative entity established to enhance the welfare of police officers and their families. POLCO was responsible for administering the procurement process, managing contracts, and ensuring the delivery of housing units in alignment with the project’s social objectives. Spanning over a decade, the project’s scale and ambition were significant, yet its execution was flawed by procurement irregularities, contract mismanagement, and financial oversight failures. Even before the audit was initiated, the Blues Housing Project had become a subject of significant public concern. Media reports and citizens complaints highlighted delays, cost escalations, and a lack of transparency, prompting calls for independent scrutiny and accountability. These public concerns were a key factor in the decision to launch a comprehensive audit.
These challenges prompted a comprehensive audit to evaluate the integrity of procurement practices, the effectiveness of contract administration, and the extent to which the project delivered value for moneyand upheld public accountability. The audit covered the period from the project’s inception in 2013 through November 2024, encompassing all major contractual phases, financial transactions, and implementation milestones.
Public procurement represents a significant portion of government expenditure and is inherently vulnerable to inefficiencies, mismanagement, and corruption. Procurement audits serve as both watchdogs and guides, ensuring adherence to legal frameworks while evaluating whether procurement decisions deliver intended outcomes. The audit of the Blues Housing Project exemplifies this duality, applying a structured methodology grounded in international public sector auditing standards to uncover systemic weaknesses.
At the outset of the audit, a major challenge was the absence of proper record-keeping and project specific financial tracking. When the audit was initiated, neither POLCO nor the implementing agencies could provide a consolidated statement of how much had been spent on the project to date. Records were fragmented, incomplete, and not maintained in a manner that allowed for straightforward reconciliation. Though inconsistent with the role of auditors, we had to compile the entire financial picture from scratch, reconciling payment vouchers, bank statements, and contract amendments across multiple sources. This painstaking process was essential to establish a reliable baseline for cost analysis, benchmarking, and the identification of irregularities.
The audit adopted a multi-branched methodology grounded in international public sector auditing standards, combining compliance, performance, and financial audit techniques. A central focus was the compilation and analysis of project cost statements. The audit team reconstructed the project’s financial course by reviewing payment vouchers, contract amendments, and expenditure reports. This revealed a total project expenditure of USD 71 million, more than double the original estimate.
To assess cost efficiency, the audit benchmarked the Blues Housing Project’s construction costs against prevailing industry standards. As of the date of the audit, the project had incurred a total expenditure of USD 71 million for a built-up area of 573,332 square feet. This translates to an average cost of approximately USD 120 per square foot, way above the industry average for similar projects in the Maldives of USD 84 to USD 97 per square foot. This means the Blues Housing Project’s cost per square foot was 23% to 42% higher than the industry benchmark. The audit attributed this significant variance to repeated contract amendments, lack of competitive tendering, and inadequate cost controls. This benchmarking analysis enabled the audit to quantify the extent of cost overruns and wastage, underscoring the need for stronger procurement oversight and adherence to industry standards in future projects
Effective procurement is the backbone of public project delivery, but when processes are circumvented or manipulated, the risks to value for money and integrity multiply. The audit uncovered several significant weaknesses in the project’s procurement and tendering, particularly in how contracts were awarded and managed.
The audit’s review of procurement documentation and stakeholder interviews revealed significant gaps in tendering processes. The original contract, valued at USD 37.6 million, was awarded without competitive bidding or submission to the Maldives National Tender Board, violating national requirements. Contractual revisions were frequent and lacked adequate justification, contributing to cost inflation and extended timelines.
A critical finding was the linking of all major subcontractors to a single beneficial owner, raising concerns about conflicts of interest, reduced competition, and compromised procurement integrity. Related-party transactions amounting to over USD 40.8 million highlighted the need for enhanced due diligence and transparency in contractor selection.
A thorough financial analysis was essential to quantify the true extent of irregularities and inefficiencies in the Blues Housing Project. By reconciling payments, advances, and contract amendments, the audit identified significant financial mismanagement and areas where public funds were put at risk. Financial reconciliation played a central role, involving cross-verification of disbursed payments against approved budgets and actual work completed. The audit identified overpayments of USD 1.3 million for incomplete works, with repayment delayed by five years and executed at a rate far below the agreed interest for delayed payments. Additionally, excessive advances totalling USD 8 million, which was more than double the agreed amount, were disbursed without proper documentation or contractual basis.
Elevators procurement was particularly problematic, revealing that over USD 1.8 million was paid for only seven elevators, far exceeding market rate of USD 454,000, and indicating poor planning and potential wastage.
Transparency in public procurement is foundational to good governance. In the case of the Blues Housing Project, transparency failures were at the heart of many of the project’s most serious issues. The audit therefore placed special emphasis on evaluating the availability and completeness of procurement documentation, the clarity of contract amendments, and the traceability of financial decisions. This focus revealed that several procurement actions lacked proper documentation, and contract variations were frequently approved without sufficient justification.
The audit’s findings were presented at Public Accounts Committee (PAC) hearings, drawing significant public and media attention. Extensive coverage amplified calls for accountability and reform, with stakeholders demanding stricter enforcement of procurement regulations and greater transparency in future projects.
Value for money (VFM) in public procurement is not solely about securing the lowest price. It encompasses the quality of goods and services delivered, timeliness of execution, sustainability of results, and long-term impact on beneficiaries. Although the initial cost estimates appeared reasonable, the audit revealed that the final expenditure nearly doubled due to delays, contract reassignments, and scope changes. In addition, the audit identified significant gaps in performance monitoring and noted the absence of enforcement mechanisms such as penalty clauses for delays. These methodological steps led to the conclusion that weak planning and the lack of performance-based contracting had contributed to inflated costs and diminished project outcomes. As a result, the audit recommended strengthening pre-tender planning, enforcing contractual accountability, and institutionalising post-project evaluations to ensure that future public investments deliver measurable and sustainable value.
The audit’s most enduring contribution lies in its recommendations for reform. In response to these findings, the audit proposed a series of forward-looking recommendations aimed at strengthening public procurement governance. These included the development of standardised procurement templates, mandatory documentation protocols, and the integration of risk-based planning approaches. Additionally, the audit emphasised the need for targeted capacity-building initiatives for procurement officers, focusing on contract management, financial accountability, and ethical decision-making.
By translating audit insights into actionable reforms, institutions can move beyond reactive compliance and embrace proactive stewardship. This shift is essential to ensure that public procurement not only adheres to legal standards, but also delivers sustainable value to citizens, particularly in large-scale infrastructure projects where the stakes are high and the impact is long-lasting.
The audit of the Blues Housing Project demonstrates how a methodologically sound procurement audit can serve as a powerful instrument for public sector reform. By applying a structured approach that combined document analysis and review, financial reconciliation, stakeholder engagement, and benchmarking, the audit provided a comprehensive evaluation of procurement integrity and performance. It movedbeyond identifying isolated issues to uncover systemic weaknesses and propose actionable reforms. In doing so, it reinforced the critical role of procurement audits not only in detecting non-compliance, but in guiding institutions toward better governance, improved accountability, and sustainable value for money. As governments continue to invest in large-scale infrastructure and social programmes, audits of this calibre are essential to ensure that public resources are managed with transparency, discipline, and a commitment to public interest.