THE Appropriation Accounts and Miscellaneous Funds for the year ended 2013, recently released by Auditor-General Mildred Chiri, show government ministries continue with a culture of bad corporate governance leading to the loss of millions of dollars in public funds.
The audit revealed a variance of US$410 million between the exchequer bank account and the Public Finance Management System (PFMS) records.
Chiri’s report noted that weak internal control systems in most ministries resulted in a lot of unsupported payments. She said government could have made “losses resulting from suspected fraudulent activities” involving amounts ranging from US$3 000 to US$3,5 million.
“Governance weaknesses were observed in areas of internal control, record-keeping, diversion of resources from Fund Accounts to parent ministries, reconciliation of the sub-paymaster general accounts and management of government property and records,” said Chiri in her executive summary.
Section 49 of the Public Management Act requires public entities to keep full records of their financial affairs for accountability and transparency purposes, but Chiri said “quite a number of ministries and funds did not produce asset registers, cash books and ledgers for audit, an indication that they did not maintain the same”.
She said some ministries diverted money from fund accounts to meet appropriation account expenditures of parent ministries, causing unauthorised excess expenditure.
“This also had an effect of increasing the ministries’ votes without parliamentary approval,” she said.
On revenue collection and debt recovery, the “audit revealed significant variances totalling US$409 262 306 between exchequer bank accounts and PFMS records”.
Failure by ministries to maintain proper accounting records meant that amounts disclosed under revenue and debtors were rendered unreliable.
“Furthermore, audit revealed that a total of US$33,3 million was advanced by government to three parastatals as loans without signing loan agreements. In addition to compromising accountability and transparency the absence of an agreement outlining obligations of each party may render the recoverability of the loans difficult,” said Chiri.
She pointed out that some ministries were also flouting procurement regulations by breaking formal and informal tender procedures, failing to purchase to best advantage, paying before the supply of goods and purchasing over priced goods and services.
Some ministries, she said, were paying suppliers without prerequisite supporting documents such as invoices, receipts and delivery notes.
“These deficiencies if not addressed would continue to drain government of critical resources,” said Chiri.
The Auditor-General noted most ministries had partly implemented previous years audit recommendations.
She, however, said if the recommendations are fully implemented, “accountability, transparency, corporate governance, efficiency and effectiveness of operations by ministries would improve”.
Among the ministries whose books were not in order was the Ministry of Finance and Economic Development, whose balance of deposits by receivers of revenue on the exchequer account was
US$3 521 414 706 whereas SAP (a government accounting system) had a total of US$3 940 677 112 as at December 31, 2012. The variance between the two totals was US$419 262 406, attributed to failure to carry out cumulative reconciliations.
Officials from the ministry attributed the variance to timing differences as treasury uses bank statements which are online whereas the SAP system is recorded manually.
The ministry also failed to avail financial records of transfers to the paymaster general account of treasury orders amounting to US$3 499 320 653, raising fears that the transfers may have been misstated.
Treasury failed to provide a breakdown of figures for exchange rate gains/losses amounting to US$5 million, while there was a variance of US$9,7 million between transfers to the exchequer account and the balance on the statement of receipts and disbursements, among other anomalies.
The Auditor-General queried the Office of the President and Cabinet’s internal replacement policy on cellphones and laptops, which states that cellphones be changed after every six months while laptops are replaced after three years. some officers had received new cellphones before the six months was up.
Chiri also highlighted that for the second year running, the Ministry of Mines and Mining Development has used funds from the Mining Development Fund to meet expenditure of the appropriation account, mostly on travelling and subsistence allowances.
The ministry used US$3,4 million from the fund to meet appropriation account expenditure.
The records of ministries of Foreign Affairs, Transport and Infrastructural Development, Health and Child Care, Youth, Indigenisation and Economic Empowerment and Water Resources Development and Management were in shambles, making it easy for fraudsters to take advantage.
Some ministries such as Home Affairs and Justice overspent.
None of the 33 ministries and 40 fund accounts, which were audited, passed the good corporate governance test as they were all guilty of failing to keep proper accounts and following proper tender procedures, an indication of how rotten the government systems are.
Previous Auditor-General reports have highlighted the same anomalies, but government — critically short of funds and struggling to meet its public service salary obligations as the country’s economic crisis continues to bite — has failed to take crucial corrective action to promote a culture of good corporate governance.