The Scale of Misappropriations in the Metro Has Reached 1.2 Billion AMD: State Audit Office

The State Audit Office of the Republic of Armenia has summarized the findings of the audit conducted at the Yerevan Metro named after Karen Demirchyan, according to the press service of the State Audit Office.

The audit evaluated the legality and efficiency of financial and economic activities, revealing systemic violations in procurement processes. The total scale of misappropriations amounted to 1.2 billion AMD.

It was found that expenses had been consistently incurred for the repair of outdated wagons that had exceeded their operational lifespan, when it would have been possible to acquire new, modern wagons within the aforementioned budget. Notably, during the period from 2011 to 2018, repairs and procurement of spare parts for outdated wagons produced in the 1980s cost around 8.5 billion AMD, averaging about 300 million AMD per wagon, while it was possible to purchase modern, energy-saving European-produced wagons requiring less frequent repairs for approximately 600 million AMD.

Other findings of the audit include a contract signed in 2016 with a contractor from Russia that has a representative office in Armenia for the repair of wagons, and subsequent contracts in the following years. The company failed to fulfill its contractual obligations or delivered poor quality work, yet the results were accepted by the Metro, and payments were made. As a result of these and other violations, the company generated a revenue of 1.2 billion AMD, ensuring at least 677 million AMD in excess profit.

There are substantial suspicions that the company failed to pay taxes amounting to at least 128 million AMD due to the acquisition of unverified goods (services were not provided in the corresponding volume, but acquisition documents exist). Purchases from the company during 2017-2018 were conducted in violation of the RA Law on Procurement, without following any procurement procedures.

The Metro made purchases amounting to 674 million AMD from two Georgian and three newly established Russian companies without adhering to the procurement procedures and legal grounds (the items were not included in the procurement plan or the expenditure estimates approved by the board of directors). The market value of the purchased goods worth 511 million AMD amounted to only 274 million AMD. In total, procurements amounting to 1.7 billion AMD were conducted without any procurement procedures.

Employees of the Metro branch simultaneously worked in a company founded by a related person of the branch manager, providing services to the Metro worth 43,215 thousand AMD, resulting in a profit of 39,464.2 thousand AMD. Purchases from this company were made without competitive procedures or were conducted with violations. Employees from another division of the company simultaneously worked in a company that provided services worth 10,130 thousand AMD to the Metro, yielding a profit of 9,001.3 thousand AMD. The procurement was conducted with procedural violations.

This includes the acquisition of services related to the replacement of systems monitoring the silence of escalator balustrades, the supply of safety brushes for escalators, and related computer services with time-synchronizing features.

The air conditioning motors supplied to the Metro by the aforementioned company were outdated and used; however, they were accepted by the company, resulting in at least 3.0 million AMD in property damage to the Metro. The procurement of expensive LED lights resulted in inefficient spending of 31.0 million AMD, where the same results could have been achieved with a smaller amount of expenditure.

During the warranty period, 7,711.2 thousand AMD worth of defective LED lights should have been replaced or repaired by the supplying company, but the company did not fulfill its obligations.

The State Audit Office has made recommendations for the modernization of the Metro’s infrastructure. Due to the presence of information indicating apparent criminal activity, the results have been forwarded to the Prosecutor General's Office of the Republic of Armenia.