The Audit Court was established in 1952 and was entrusted with the mission of keeping an eye on public and treasury funds. It is an administrative court handling financial judiciary and ex-ante administrative oversight. 

 

Evasion and overstepping of the Audit Court’s role

Despite the multiple legal texts that grant the Audit Court vast powers for the purpose of protecting public funds, political consensus inside the Cabinet often hinders the decisions of the Court and takes precedence no matter what the infringements are. 

 

Furthermore, ministers and senior officials resort to partitioning major deals so as not to subject them to the ex-ante scrutiny of the Audit Court. Such deals include:

    Contracts for works and supplies exceeding LBP 75,000,000.

    Contracts for works exceeding LBP 25,000,000.

    Procurement of plots of land worth more than LBP 100,000,000.

    Donations and contributions exceeding LBP 15,000,000.

 

Since 1999, several circulars have been issued by the Prime Minister’s Office banning partition but ministers have not abided by any of them.  On June 23, 2015, PM Tammam Salam issued circular no. 12/2015 urging all public administrations to adhere to the provisions of Article 123 of the Public Accounting Act which stipulates that ‘the proposed expenditure may not be partitioned unless the concerned authority tasked with approving the expenditure agrees that the works, supplies or services intended for procurement justify said partition.’ The circular noted that the expenditures may not be divided unless in cases of extreme and justified necessity or in the event where the merger of expenditures is not possible. 

 

Cases submitted to the Audit Court: approvals and rejections

In its report for the years 2010, 2011 and 2012, the Audit Court revealed that it gave full approval on 4303 dossiers and rejected another 509 as illustrated in Table 1. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Article 41 of the regulatory law of the Audit Court stipulates that ‘the Cabinet comes to a judgment regarding the transactions laid forth before it by justified decisions taken after listening to the Head of Audit Court. When its decisions are at odds with the opinion of the Minister of Finance or the decision of the Court, said decisions shall replace the approval of both the Audit Court and the Controller of Expenditures. In either case, the transaction shall refer back to the decision of the Cabinet.’

 

In 2010, 2011 and 2012, the Cabinet took twenty-three decisions against the decisions made by the Audit Court, in most cases without listening to the Head of the Court as dictated by the law.

 

The Cabinet decisions that contradicted the viewpoint of the Audit Court are the following:

    18 decisions concerned with requests filed by the Ministry of Public Works and Transport including: maintenance of the Rashaya-Bekfaya road, renovation of the building belonging to Ministry of Agriculture in Dawras, paving and asphalting the roads in Jbeil and Batroun, maintenance of the Cite Sportive tunnel, providing lights for the Dahr El-Baidar road, cleaning of rainwater networks, constructing a bridge above Al-Ghadder river, maintenance of the Annaya and Laqlouq road, maintenance of the Hazmieh- Sawfar road, construction of schools in Ghaboun, repairing the landslides on the Maamelteyn and Saad Nayel road,

    The Interior Ministry’s request to approve the decision of the Beirut Municipality in order to repair sidewalks and paving roads in Beirut.

 

    The Telecommunications Ministry’s request to approve a contract with Liban Post in order to sell prepaid phone cards.

 

    Three decisions concerned with requests by the Ministry of Social Affairs to renew the contracts related to the welfare and rehabilitation of the disabled and the juveniles at risk of deviation.

 

Noteworthy is the fact that the Audit Court report did not specify the value of the deals rejected by the Court but approved by the Cabinet as was the norm in previous years, a flaw that minimizes the significance of the report. 

 

Reasons for rejection

509 decisions were issued by the Audit Court in 2010, 2011 and 2012, which turned down the proposed requests. Below are some of the reasons behind the rejections:

    No terms of reference were developed for the deal; there was not a consent agreement for it and the deal value exceeded the estimated price proposed by the administration.

 

    The provisions of the terms of reference contradicted the system of tenders particularly Article 33, which reduced the element of competition.

 

    The terms of reference were not signed by the concerned authority at the municipality and the contract and proposed cost were not based on proper grounds.

 

    Breaching of the provisions of Article 4 of the terms of reference which require VAT registration.

 

    A clause was introduced into the terms of reference minimizing the competition and there appeared to be possible collusion among bidders.

 

    There were doubts about the procedures and validity of bid solicitation, which raised suspicions of collusion.

 

    The lack of seriousness of bid solicitation in terms of the many mistakes and corrections marring the study and also the main contractor’s failure to submit a document validating that he owned a mixer. 

 

    The Contracting Committee’s breaching of the principle of equality among bidders by accepting non-conforming proposals and rejecting others for unsubstantial reasons instead of cautioning bidders against them.

 

    Unjustified partition of the deal.

 

    The contractor was given additional time to complete substantial deficiencies in the file and there was a notable gap in the prices of the previous contract and the current one.

 

    The proposal of the lowest-bidding company was declined and the company was not given the chance to replace the copy of the receipt like other bidders; 

 

    The bid solicitation was declined on grounds of a possible collusion between two bidding companies out of three, which threatened competition. 

 

    The lack of respect for the principle of competition during the bidding process, resulting from not conforming to the principle of equality among bidders and the breaching of the principles of contracting as well as the partition of the deal.

 

    There remained only one bidder, which eliminated the element of competition.

 

    Competition was absent due to collusive bidding among two companies.

 

    Prices were illogically high and there was no proof of the removal of the barriers which prevented the implementation of the project  contracted out in 2004. 

 

    The lack of a legal basis and the likelihood that the requested increase was carried out before it was presented to the Audit Court control.

 

    The lack of a legal basis, for the 15% increase has become a periodic routine in several deals of the municipality and the future period is laden with errors and raises questions about the works that the company will carry out during said period. 

 

Foreign-funded Projects

The report dedicated a special section for the projects fully or partially funded by foreign loans and stopped at several junctures including:

    Granting the Council for Development and Reconstruction the capacity to sign domestic and foreign loans implies that the Ministry of Finance has ceded its powers to a public institution and subsequently leads to lack of control over loan accounts and to failure to determine these loans accurately. The report drew the conclusion that it was necessary to restrict private loans to the Ministry of Finance and the Ministry of State for Administrative Reform on account of the actual needs of public administrations and by virtue of a Cabinet authorization. The concerned minister shall raise to the Cabinet a well-grounded loan request accompanied by a feasibility study. 

 

    Most loan agreements have shown that parties from outside the administration are handling project management and that contracts are being signed with non-public employees who receive salaries far higher than civil servants do, although the latter have all the skills that qualify them to carry out the proposed projects and can seek foreign expertise, when needed and within strict conditions. The tasks of those employees should be clear and non-conflicting with those of the civil servants. 

 

    The examination of several loans has indicated that their expected economic feasibility in terms of enhanced performance and higher productivity has not been realized. For example, the report brought up the USD 19.9 million loan obtained by the Ministry of Finance from the World Bank in 1997 and the USD 5.3 million loan that followed in 2004 for the purpose of ‘implementing the technical assistance project to improve financial management.’ Despite the loan value, which was supposed to enhance financial management for roughly twenty years, the Finance Ministry submitted to the Audit Court a draft consent agreement between the ministry and private companies in order to help finalize the ‘mission account’ and the ‘closure of accounts’ between 1993 and 2010, thus implying that the loan did not achieve its intended purpose. 

 

    The educational development project at the Ministry of Education and Higher Education which was implemented thanks to two loans, the first worth USD 44.6 million and the second USD 40 million, was run by an 11-member team, which raises questions over the role of both the ministry’s employees and the Center for Educational Research and Development whose central task is to develop the education sector. Above all, have these projects contributed in lifting the public education sector up and what are the milestones achieved?

 

    Keeping foreign-funded projects beyond ex-vante scrutiny even when foreign funding does not exceed 20% of the total value of the project as is the case with the social economic program to support the return of the displaced to Mount Lebanon. This program was worth USD 1.650 million, the largest part of which, USD 1.5 million, was funded by the Lebanese state whereas USD 150,000 were covered by the UNDP, which contracted with non-public employees and offered them benefits many times greater -than those given to the servants in the public sector. 

 

    The UNDP carried out a program aimed at strengthening the capacities of the Ministry of Environment between 2010 and 2011 with the state paying LBP 1.4 billion for the program, LBP 425 million of which were earmarked for the salaries of employees and advisors, although, according to a report by the Ministry’s Director General, the Ministry ‘has human resources with advanced education and high competencies and expertise’, thus calling into question the need to employ a team at such an enormous cost.

 

The Audit Court report, which was written a few years late failed to expose full details of the Court’s functions and activities, reflecting once again the financial and administrative laxity marring the Lebanese State. Although lacking thoroughness, some believe that the report is better than nothing.