MVR 136.5 Million in State Advances Unrecovered from Four Contractors, Audit Finds

Four contractors have failed to return MVR 136.53 million in advance payments made for 25 terminated infrastructure projects between 2019 and 2023, with the outstanding amount remaining unrecovered as of 2026, according to a compliance audit by the Auditor General’s Office.

The audit of the Ministry of Construction, Housing and Infrastructure found that the state had disbursed MVR 180.29 million in advance payments for 25 housing, water, sewerage and land reclamation projects, with a combined contract value of MVR 1.36 billion.

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Of the total advances, only MVR 43.76 million had been recovered through deductions from contractors’ progress payments before the agreements were terminated. The remaining MVR 136.53 million, representing approximately 76 per cent of the advances, was still outstanding at the time of the audit.

The largest unrecovered amount relates to a MVR 439.99 million contract awarded to Donbez Pvt Ltd on 7 July 2022 to construct 400 housing units in Kulhudhuffushi City.  

The audit also identified an unrecovered advance payment relating to another Donbez contract, worth MVR 83.8 million. The company received MVR 12.2 million in advance to build 100 housing units in Lh. Hinnavaru on 14 August 2022. However, only MVR 4.7 million was recovered. More than 62 per cent of the advance, amounting to approximately MVR 7.8 million, remained unrecovered.

The government paid MVR 65.99 million in advances for the project, of which MVR 59.22 million remained unrecovered after the project reached only 18.74 per cent completion.

Donbez also failed to return MVR 2.19 million from a separate MVR 7.22 million advance for a project to construct 50 housing units in GA. Villingili.

Water and sewerage projects accounted for another significant portion of the outstanding advances. Fourteen terminated projects in the sector involved MVR 63.02 million in advance payments, of which MVR 51.84 million remained unrecovered. The projects were subsequently reassigned to the Male’ Water and Sewerage Company (MWSC) from Fenaka Corporation. 

The audit found that the ministry had failed to enforce advance payment guarantees or initiate recovery procedures after terminating the contracts.

According to the audit report, section 5.26 of the Public Finance Regulation (2023/R-158) requires the ministry to recover outstanding advances or call in advance payment guarantees within seven days of terminating a contract. 

Auditor General Hussain Niyazy instructed the ministry to recover the MVR 136.53 million, refer the four contractors to the Procurement Appeal Board for consideration of blacklisting, and conduct an internal investigation to establish responsibility among officials.