Finance inspectors uncover irregularities in public contracts awarded to bankrupt firms

Morocco’s General Inspectorate of Finance (IGF) has finalized a series of investigative audit reports uncovering serious irregularities in public procurement contracts awarded to bankrupt companies, according to well-informed Hespress sources.

The audits, conducted over several months, focused on stalled public contracts involving firms undergoing judicial liquidation. The findings point to potential violations of public procurement laws and procedures, notably a failure to activate provisions that allow for the automatic termination of contracts with insolvent companies.

Sources revealed that IGF auditors identified troubling data indicating hesitation among public sector spending authorities to enforce Article 31 of Decree No. 2.01.2332.

The decree outlines the general administrative clauses applicable to service contracts involving studies and supervision of public works. Specifically, it grants contracting authorities the right to terminate a contract without compensation if the contractor enters judicial liquidation.

The auditors found that many officials neglected to apply this legal mechanism, which could have shielded public institutions from unforeseen financial burdens linked to failed contracts. As a result, senior public officials and procurement officers may face administrative penalties for their inaction and mismanagement.

Further investigations showed that no requests were submitted by liquidation trustees (“syndics”) of the bankrupt companies to continue executing the contracts—a requirement that must be backed by a special judicial authorization. Auditors also highlighted a lack of project oversight and failure to enforce contract timelines, with internal audits in the implicated institutions either ignoring or downplaying the extent of mismanagement.

The findings emphasized that project documentation lacked necessary follow-up on deliverables, such as provisional and final delivery reports or formal service orders. These omissions compromised the state’s ability to enforce contractual performance and protect its financial interests.

The IGF’s inspections are part of broader efforts to promote transparency and accountability in public procurement, aiming to correct systemic flaws and improve administrative performance within public institutions.

The investigation comes amid rising business bankruptcies in Morocco. A recent report by Allianz Trade projected a continued increase in insolvencies, with bankruptcies in 2024 expected to surpass the 16,100 recorded in 2023—up 13% from the previous year. The report identified prolonged payment delays, residual impacts from the COVID-19 pandemic, climate-related disruptions, and inflation as key factors fueling the trend.

IGF auditors further noted failures by spending authorities and public officials to comply with regulations regarding the execution and payment stages of contracts with firms under liquidation. The issue was particularly acute in projects segmented into phases, where disbursements are contingent upon strict documentation—requirements that were often overlooked.

The watchdog’s work underscores the urgent need for improved procurement governance to ensure the integrity of public spending and the successful completion of infrastructure projects across the country.