Exposed: Govt officials turn State-entities into feeding troughs

LIVINGSTONE MARUFU

Government officials have turned State-owned entities into feeding troughs with the latest reports from the Acting  Auditor General ,Rheah Kujinga revealing that the companies have lax internal controls, which allow the officials to embezzle millions of dollars.

According to the report, the majority of government entities are losing millions of dollars because they fail to maintain track of invoices,  bank account registries, unvouched  expenses and supporting documentation.

In order to increase accountability and transparency, Kujinga   gave State entities instructions to fortify their internal controls and address the issues brought up by her office.

“In this report there are instances of weak internal controls as evidenced by unsupported expenditure, non-alignment of accounting policies and processes with reporting framework [accounting standards], outdated accounting manuals, non-compliance with tax laws and regulations, non-performance of bank reconciliations, and absence of internal audit arrangements.

“Late submission of financial statements creates gaps for accountability and results in limitation of scope due to lapse of time documents cannot be located. In this regard, I urge boards to pay attention to matters that I have raised so as to improve transparency and accountability by strengthening their internal audit units / arrangements.

“Revenue collection and debt recovery I have noted issues of revenue leakages, long outstanding debts and deposits not received on time which contributed to net liability position with a potential risk of threatening sustainability of service.

I have raised 31 issues on revenue collection and 26 entities had report on going concern matters arising from continued operating losses / deficit, under capitalisation and liquidity challenges,” Kujinga said adding that these conditions, if not addressed, may cast significant doubt on the entities’ ability to continue operating as a going concern.

This coincides with the National Building Society’s loss of close to US$8m after purchasing land for US$11m, only to have the valuers later estimate  the  site’s worth at  US$3.3m

Kujinga questioned the efficacy of the building society’s due diligence processes when selecting contractors for housing projects.

 “The Society made an upfront purchase price of US$11m for the delivery of 400 housing units to a contractor on the Newmara project.

The land was subsequently valued at US$3.3m resulting in a loss of about US$7.8m.

The contractor breached the terms of the agreement by failing to obtain the necessary permits, approvals and consents and failing to construct and deliver the 400 units,” she said.

According to the audit, the contractor only completed 153 out of the agreed 400 housing units with structural flaws.

The rot in parastatals continued as Tobacco Industry and Marketing Board only recovered US$10 000 from US$50 000 it was owed by the suppliers with the balance of US$40 000 yet to be paid in the short term period.

The audit  also  revealed that State entities continue to pay board members  who do not  show up for meetings and  employees  who had resigned years back.

Additionally, Kujinga brought up more than 20 concerns about the mishandling of  assets by 15 State organizations.

According to Kujinga, the majority of these problems are primarily related to poor asset record keeping, a failure to exercise due diligence  when making investments and maintenance of assets  continues to be a challenge and  could jeopardise service delivery.

“I have seen an increase in procurement issues from 20 to  33 issues in this report with the majority of my findings centred on non-delivery of goods and services, non-declaration of interest during procurement evaluation, procurements which had insufficient supporting documentation for instances with no invoices and quotations.

 “There may be a need to strengthen the due diligence processes to include evaluation of capacity to deliver goods to be procured,” Kujinga said.

She added:”I was not provided with evidence to support that cabinet approvals were obtained for the foreign trips of Forestry Commission officials that management undertook in June 2022.The total amount involved for the air tickets were US$2770 and other related costs amounted to US$1785.”

Furthermore, the Commission was not making enough money to support its operations, which meant that PAYE and NSSA deductions were not being made on time. For example, in 2022, all payments for the months of June through September were made three to six months after the deadline.

Bank reconciliations were not being completed by the Forestry Commission on time; in several cases, they were carried out six months after the deadline.

This was against the Commission’s accounting processes handbook, which stipulates that monthly bank reconciliation statements must be prepared.

 The Acting Auditor General also found out that there was no evidence at Health Service Commission to support that fuel reconciliations were being prepared on time to confirm the fuel stock position.

“Variances of 380 litres [100 litres petrol and 280 litres diesel] were noted between fuel received and fuel recorded in the fuel stock sheets. This was contrary to the Commission’s accounting procedure manual as well as Section 104 [1] of the Public Finance Management [Treasury Instructions] of 2019 which requires preparation of fuel reconciliations.

 “The Commission should prepare fuel reconciliations on time,” she said.

The Commission’s internal controls over debt management were inadequate. As a result, the Commission had long outstanding trade receivables amounting to ZWL$2.56m  which were over 365 days as at December 31, 2023. I was not availed evidence in the form of letters of demand that follow-up of debts was conducted.

“Concerted efforts should be made to recover the outstanding debts,” Kujinga said.

The Sports and Recreation  Commission processed director’s benefits amounting to ZWL$1.2bn which included housing allowance, school fees allowance and entertainment allowance outside the payroll.

“As a result, the benefits were not subjected to Pay As You Earn in line with section 8 (1) f of Income Tax Act [Chapter 23:06] which requires benefits gained form employment to be subjected to tax.

“All benefits paid to staff members including directors should be subjected to Pay As You Earn taxed in compliance with the tax regulations,” Kujinga said.

According to the Acting Auditor General’s report, the Zimbabwe Media Commission signed a contract to pay ZWL$205.5m  for the purchase of two Fortuners and seven Toyota Hilux GD 6.

She stated that although an eight-week delivery period was agreed upon, the provider had only delivered three of the six  motor vehicles  that were still pending delivery.

 Additionally, AFC Leasing Company signed agreements to hire farming equipment with a number of farmers for the year that ended on December 31, 2023.

About 16 equipment hire agreements were not signed on the company’s behalf, according to Kujinga, who examined a sample of the 20 contracts.

CMED experienced network connectivity challenges at Marondera station as a result 674 litres of fuel were not captured into Coupon Management System (CMS) during the 2021 financial period.

“The majority of the coupons redeemed were captured into the system after 90 days. This was in contravention of CMED Fuels Accounting Manual which requires that redeemed coupons should be captured into the coupon management system on a daily basis. In addition, the current scanners were not portable as they were attached to the central processing unit (CPU), which was far away from the administration office,” she said.

Kujinga said the issues she  raised in this report if not addressed, service delivery, achievement of mandates and efforts made to enhance transparency and accountability through the various instruments that had been put in place such as the Public Entities Corporate Governance Act [Chapter 10:31], Public Procurement and Disposal of public assets Act [Chapter 22:23] may be compromised.

In order to increase transparency, accountability, sound corporate governance, and service delivery, the Acting Auditor General advised those in charge of governance and management to pay attention to the audit findings that are still pending.

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