Forensic audit unearths Psmas financial abuses

ZIMBABWE’S largest medical aid society by subscriber base, Premier Service Medical Aid Society (Psmas) and its subsidiary Premier Service Medical Aid Investment (PSMI) splurged about US$9 million on luxury motor vehicles between 2009 and 2013, a forensic audit has revealed.

Hazel Ndebele

A forensic audit draft report on the utilisation of Psmas funds dated February 20 2015, done by Ernst and Young, reveals that Psmas board members, executives and middle managers benefitted from excessive splurging on luxury vehicles.

The report also says that Psmas bought a second-hand Toyota Land Cruiser Prado from Oppah Muchinguri for US$60 000.
“We requested for but were not availed with the agreement of sale between Muchinguri and Psmas, according to the asset register, the vehicle was recorded as a Psmas pool vehicle.”

During the period under review, Psmas purchased vehicles worth US$6 709 973, while PSMI spent US$1 882 649. The auditors noted that all motor vehicles purchased during the period were not reflected in any of the annual budgets on file and yet they were all approved by former Psmas chief executive Cuthbert Dube.

In 2009, a total of US$157 509 was spent on the purchase of cars for executives and in 2010, another US$2 million was spent on cars for executives, marketing department and pool vehicles.

In 2011, US$2 230 643 was used for the purchase of pool vehicles and cars for board members, executives and middle managers.

Psmas further bought cars worth US$574 973 in 2012 and US$1 735 136 in 2013. Cars purchased for executives and marketing managers include five Toyota Land Cruiser 200 Series VX, four Toyota Land Cruiser Prado VXL, eight Isuzu KB300 D-TEQ double-cab 4×2, two Toyota Hilux 3.0 litre, a single Chevrolet Cruze, two Mercedes-Benz Elegance 50, a Mercedes-Benz S600 LWB and a Mini Cooper.

The executives, who received the cars included Cuthbert Dube, Enock Chitekedza, Augustine Khoza, Nicholas Munyonga, Cosmas Mukwesha, Richard Mutasa, Anna Mutengwa, Ralphael Paradzayi and Juliana Sabarauta.
For its middle managers, Psmas sourced three quotations from Toyota Motors, Croco Motors and Eftrade Ventures (Pvt) Limited.

Psmas then selected Eftrade as the preferred supplier although the company was not part of its approved suppliers. Eftrade, according to the report, altered the requisition and increased costs.

“We noted that the initial requisition from Psmas was for 61 vehicles (three Toyota Hilux 30, 4×4 Raiders, 18 Toyota Hilux 4×2 Raiders, 27 Toyota Corollas 1,33L manual, three Toyota Hilux single-cab 4×2, eight Toyota Avanzas and two Toyota Fortuners for a total price of US$1 848 400,” reads the report.

“However, Eftrade changed the vehicle models and revised prices to US$2 630 624 for the purchase of 51 vehicles (18 Toyota Hilux 25 litre, three Toyota Fortuners , 27 Chevrolet Cruzes and two Toyota Hilux 3,0 litre and a single Toyota Raider).”

According to the report, acting group finance executive, Shingi Muchinenyika told auditors that vehicles worth US$195 361 paid for by Psmas had not been delivered. The vehicles are yet to be delivered and are deemed as “work in progress”.

The company’s records were also observed to be in shambles.

“At the time of our investigation, we noted that the electronic register did not have complete data for some fields, for example, information relating to asset user, asset purchase price and title deed reference for buildings and vehicle registration numbers for vehicles,” states the report.

Eleven Psmas executives, including Dube, splurged US$22,8 million in “executive allowances” outside the payroll and evaded tax, resulting in the company coughing up US$9 million to the Zimbabwe Revenue Authority (Zimra), according to the signed off audit by Ernst and Young Advisory Services (Private) Limited director, David Gwande.

In all, Psmas executives received US$86,9 million in salaries, bonuses and allowances between 2009 and 2013 at a time the company owed creditors US$119 million and was struggling to pay its workers. The report conducted between October 2014 and February 2015 says Dube, his driver, two secretaries, and 11 executives shared US$22 888 281,28 outside the payroll between 2012 and 2013. The executives also shared US$24 million in allowances and US$7 million in bonuses through the payroll.

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