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NATIONAL ASSEMBLY HANSARD 30 June 2016 42-74
PARLIAMENT OF ZIMBABWE
Thursday 30th June, 2016
The National Assembly met at a Quarter-past Two O’clock p.m.
(THE ACTING SPEAKER in the Chair)
BUSINESS OF THE HOUSE
HON. RUNGANI: I move that Orders of the Day, Numbers 1 to 5 be stood over until Order of the Day, Number 6 has been disposed of.
HON. GONESE: I second.
Motion put and agreed to.
THIRD REPORT OF THE PUBLIC ACCOUNTS COMMITTEE
ON THE FINDINGS BY THE AUDITOR GENERAL ON 2014 APPROPRIATION ACCOUNTS FOR MINISTRY OF FINANCE
AND ECONOMIC DEVELOPMENT
HON. MPARIWA: I move the motion in my name that this
House takes note and adopts the Third Report of the Public Accounts
Committee on the findings by the Auditor General on 2014 Appropriation Accounts for Ministry of Finance and Economic Development and other Statements under its purview.
HON. CHIBAYA: I second.
HON. MPARIWA: Thank you Hon. Speaker for giving me this
opportunity to present the Third Report of the Public Accounts
Committee, on the findings by the Auditor General on the 2014 Appropriation Accounts for the Ministry of Finance and Economic Development and other Statements under its purview.
The Public Accounts Committee examined the Ministry of Finance and Economic Development accounting and management practices based on the findings of the Auditor General on the Ministry’s 2014 Appropriation Account and other Statements under its purview. In view of the central role played by Treasury in ensuring full accountability, regularity and propriety in the handling and expenditure of public resources as provided in the Public Finance Management Act, the Ministry of Finance and Economic Development should lead by example by ensuring that it observes timelines in producing accounts for audit, it produces clean audits and in the event of any observations raised during audits, it responds and acts promptly on audit findings.
It is with regret that the Public Accounts Committee noted that as custodians of public funds, the Ministry has not been able to live up to these expectations during the last three years as demonstrated by late submission of consolidated accounts and other statements for audit and failure to respond to and act on audit findings. Some of the issues raised in this Report had been outstanding since 2013.
The Committee however, notes that the appointment of a new
Accountant General in the Ministry of Finance and Economic Development is promising a new dispensation within the Ministry. When the Ministry appeared before the Committee, he demonstrated unwavering commitment to change the way things were being done within the Ministry and eventually across all line Ministries.
He expressed the view that he expected nothing less than professional conduct among the accountants within his department. The Committee is pleased to report to the House that some of the observations raised in the 2014 Auditor General’s Annual Report on the
Ministry of Finance and Economic Development’s Appropriation accounts and other statements were being addressed to the satisfaction of the Committee.
Below is a summary of key findings, observations and recommendations by the Committee.
Section 299 of the Constitution of Zimbabwe Amendment No. 20 of 2013 states as follows:
(1) Parliament must monitor and oversee expenditure by State and all Commissions and institutions and agencies of Government at every level, including statutory bodies, Government controlled entities, provincial and metropolitan councils and local authorities, in order to ensure that-
- All revenue is accounted for;
- All expenditure has been properly incurred; and
- Any limits and conditions on appropriations have been observed.
Section 309 (2) (a) mandates the Auditor General to audit accounts, financial systems and financial management by all public institutions. National Assembly Standing Order No. 16 provides for the Public Accounts Committee and mandates it to examine the sums granted by Parliament to meet public expenditure and such other accounts laid before the National Assembly.
It reports whether such public funds have been managed and expended as authorised by Parliament. It is within this mandate that the Committee examined the accounts and other statements under the purview of the Ministry of Finance and Economic Development as reported by the Auditor General in her annual report for the financial year ended December, 31, 2014.
In undertaking its oversight role, the Committee expects the Ministry of Finance and Economic Development to implement the recommendations and put measures in place to prevent the recurrences of the observations raised on the Ministry’s accounts and other statements under its purview.
The Committee held two oral evidence sessions with Mr W.
Manungo, the Permanent Secretary for the Ministry of Finance and Economic Development and other senior officials within the Ministry. It considered written and oral submissions received from the Ministry and has come up with this report with findings, observations and recommendations for take note and adoption by the House.
4.0 FINDINGS AND OBSERVATIONS BY THE COMMITTEE
4.1 THE PUBLIC FINANCE MANAGEMENT SYSYEM
The Government of Zimbabwe introduced the Public Finance
Management System (PFMS) in 1999. This is a networked computer based system which allows Ministries to carry out accounting and financial transactions. The system is managed centrally by the Ministry of Finance and Economic Development and as a result, allows Treasury access to line Ministries’ management information and be in a position to control, monitor and supervise the management of public funds. The system however was rendered ineffective during the hyperinflationary era as it failed to cope with the escalating figures.
Following the introduction of the multicurrency system, there were renewed efforts to get the system back on track. Since 2009, there have been a number of challenges which the audit drew attention to from year to year. From 2009 to 2011 the system experienced constant down time due to connectivity challenges. As a result, certain transactions were done outside the system with the intention to upload when the System was up but sometimes never got uploaded. The other challenge was that some outlying Government stations were not connected and as a result, they had to transmit transactions done manually to the nearest input location. In this environment, reconciliations of the Sub Paymaster General Accounts with the PFMS had proved to be a nightmare for the majority of Ministries.
During the 2014 Annual Audit, the Office of the Auditor General carried out an audit exercise to determine the effectiveness of the general information technology controls of the PFMS. The findings are highlighted below.
4.1.1 Officials granted access to PFMS SAP ALL Profile
System outside the official job descriptions.
The System Application Products in data processing (SAP) ALL profile grants unlimited access to the system including all functional areas and Basic Security Administration. Audit sought assurance that access was granted based on business need and restricted to a limited number of users who were being monitored closely. Audit found out that a senior official in the Accountant General’s Office was granted access to the system which enabled him to create and delete accounting documents, which was not in line with his job description.
The Accountant General however, assured the Committee during oral evidence that indeed access was granted based on business need and currently access was now limited to a limited number of users. He informed the Committee that access was granted to the Director PFMS, the Deputy Director PFMS and the PFMS Technical Manager in the
Ministry of Information Communication Technology and Courier
The official in question was the Acting Accountant General and was granted access on the basis of a perceived need. It was envisaged that should the need arise for the Accountant General to authorise changes in the system, he would be able to effect such changes. The Ministry had however acknowledged the control weaknesses associated with such a decision. As corrective measure, the Ministry withdrew access by all users with effect from 18 May, 2015 and currently access will temporarily be granted for specified transactions approved by the Accountant General. The Ministry had also put in place procedures which were availed to the Committee as evidence, which require user Ministries to formally request and justify granting of user profile and before such access is granted, requests are scrutinised to ensure consistency with the user’s job descriptions and rule out any conflict of roles with an existing profile for the same users. The Committee was satisfied with the measures taken to address the audit finding.
4.1.2 Audit Module not enabled in the new version of the SAP system (EHP7)
The Audit Information System is used to record user activities on the SAP application system in audit logs (trails). Audit found out that in March 2014, when the SAP system was upgraded from ECC6.0 to EHP7, the Audit Module was not enabled within the SAP system. The risk is that if the audit information system is not activated to enable recording of activities and their nature, possible violation or violation attempts may not be detected in a timely manner and there would be no trail of what took place. The Accountant General advised the Committee that the audit log for workstation identification was not activated due to low storage space on existing hardware and they had limited resources to fund the purchase of the additional servers required for capacity expansion.
In order to address the finding, the Ministry with the assistance from African Development Bank (AfDB), had ordered two super servers. The procurement process was reportedly underway. It was also the view of the Ministry that with the current scenario, it was still possible for Audit to generate and print reports that have complete audit trail. In addition, Ministries also prepared reconciliations which auditors can still refer to. However, the Auditor General pointed out that such individual modules prepared would not meet audit requirements and in many cases Ministries are not up to date with reconciliations, hence cannot be relied upon.
22.214.171.124 On the basis of the submissions received, the Committee recommends that Treasury should purchase the additional servers to allow the activation of the Audit Module within the System by 30th September, 2016.
4.1.3 Absence of supporting documentation to track
changes in the SAP System to ascertain appropriateness and approval by Management
A change management process includes programme modifications, emergency changes, tracking and reporting, testing and approval of new and revised software. The SAP application system has the capacity to generate system changes reports and there was an upgrade of the system from version ECC6.0 to EHP7 in March 2014. There were no supporting documentation for changes made to ascertain appropriateness and approval by Management. This may promote invalid or inappropriate changes into the production environment, resulting in inappropriate modifications to system programmes, applications and data. The Accountant General acknowledged the finding and admitted that there was no supporting document for changes made and the process was therefore not adhered to. He assured the Committee that future changes will be subject to formal approval procedures. As a matter of process, he highlighted that for any system upgrades, the Director PFMS will initiate and justify the proposed changes and the Deputy Accountant General (Accounting Services) will recommend changes for the
Accountant General’s approval. When successfully implemented, the
Director PFMS will recommend acceptance to the Deputy Accountant
General and the Accountant General will sign off. In addition, the
Accountant General directed Internal Audit to independently review the process. Thereafter, the SAP Transport System will effect changes to the system.
126.96.36.199 The Committee was satisfied with the measures taken by the Ministry to address the audit finding. It however recommended that Internal Auditors involved in the change process should not be the ones to carry out the audit in the areas they were involved in as that would amount to self-review.
4.1.4 Failure by the Central Computing Service to maintain the
98% system availability as stated in the Ministry’s Departmental
Integrated Performance Agreement (DIPA)
System availability is the probability that a system will work and as required when required to perform the intended tasks and activity. System monitoring entails periodical assessment of security, information threats, vulnerabilities and communicating the security logs (audit trails) for continuous process improvements. According to the Ministry’s DIPA, the system should be functional 98% of the System uptime. The audit observed that the Central Computing Services had not been able to maintain the stipulated uptime for the System. Furthermore, the licence for the Solarwinds Network Monitoring Tool (for monitoring network availability) had expired and hence the tool was not functional at the time of audit. The risk associated with this finding is that the network problems may go undetected if the network is not being reviewed.
The Accountant General acknowledged that at the time of Audit, system availability was below the 98% target but currently the target was reportedly being maintained and the Solarwinds Network Monitoring Tool was up and running. He added that during times when the Solarwinds System is not functional, they still make use of the bandwidth monitor and PFMS application tools to monitor system availability. When there are connectivity issues for critical payment transaction, Ministries would go to the nearest connectivity point to effect payments. For revenue, they resort to manual receipting and subsequently capture the data when connectivity is available. The
Ministry had also opened provincial offices in Bulawayo, Masvingo,
Gweru and Mutare to provide technical support to provincial users. The Committee observed that adequate measures had been taken to address the observation.
4.1.5 I.T. Security Policy
The Information Security Policy communicates how an
organisation plans to protect its physical and information assets. It serves to set a standard for the security procedures to be followed. Audit sought assurance that the policy had been approved by Management and communicated to all staff members to ensure that they were aware of their security responsibilities. Audit also sought assurance that staff had signed off acknowledgement forms as evidence of having read the policy. However, though the Ministry had an IT Security Policy in place, it did not address the following aspects as recommended by best practises:
- It was not endorsed by Management;
- Review periods were not specified;
- It did not specify how the policy would be communicated to users;
- There was no evidence to show that the policy was communicated to users during the period under review;
(e)There was no Management statement to support the goals and principles of IT;
- Data and Information Ownership was not stated;
- Consequences of Information Security Policy violations were not clearly stated; and
- The Business Continuity Policy was not endorsed by the management.
The absence of an approved documentation may imply that
Management’s commitment to the implementation of data security practices and guidelines is low. The Accountant General advised the Committee that the finding had been addressed as the policy document was now in place. He indicated that they will extract the relevant sections and share these with users through circulars and the system inbox. It is intended that relevant staff members will sign off and retain the extracted sections of the policy document. Copies of the signed off acknowledgements will be kept on personal files as the policy now includes best practices benchmarks and review timeframes. The finding was therefore, addressed to the Committee’s satisfaction.
4.1.6 Upload of expenditure by Ministry of Foreign Affairs in the SAP System after the 13th period of one month after the end of a financial year
All expenditure transactions by Government Ministries and Departments are processed through the SAP system. Uploading of expenditure involves capturing accounting transactions which were processed outside the system. Audit observed that some Ministries, in particular, Foreign Affairs and Home Affairs continued to post prior year (2014) expenditures in the SAP system up to as late as March 2015, two months after the stipulated 13th period of January 31, 2015. It was observed that the 13th period was reopened for the Ministry of Foreign Affairs after applying to Treasury. This was contrary to the standard 13th period of one month after the end of the financial year. Thus, at the time of Audit in March 12, 2015, Foreign Missions expenditures for October to December 2014 were still being captured at the Ministry’s Head Office.
The risk of this finding is that failure to close the 13th period by the due date will result in Ministries failing to submit accounts on time, others may also introduce new expenditures resulting in understating the Appropriation Accounts. The Accountant General advised the
Committee that due to the number of Foreign Missions under Foreign Affairs, a dispensation was granted to the Ministry to account for expenditure for the previous year. He assured the Committee that going forward, all adjustments after the 13th period will be done in the 14th period, 15th period for internal audit adjustments and 16th for external audit adjustments.
In his view, this approach is an improvement in that for each period, a trial balance can be extracted without distortions to previous periods. Furthermore, he advised the Committee that they will extract cut-off periods to include 14th, 15th and 16th periods to enable them to extract a correct trial balance at each period end. The Authority to open after the year end rest with the Accountant General’s office and Ministries could not unilaterally input data relevant for the closed periods.
188.8.131.52 The Committee recommends that the Accountant
General’s Office, going forward, should enforce the cut off periods in line with best practices. In this regard the Ministry of Foreign Affairs should observe the 13th period cut off deadline and close its books of accounts for the current year by 31st January, 2017.
4.1.7 Failure by the System to display asset register for the
Ministries of Finance and Economic Development; Information
Communication Technology, Postal and Courier Services and
The SAP system maintains a register of assets for Ministries and Government Departments. The system could not display asset registers therefore audit could not verify the assets for the Ministries of Finance and Economic Development, Information Communication Technology, Postal and Courier Services and Foreign Affairs, in the system. Assets for the Ministry of Defence could be displayed in the system but only those acquired from 2009 to date. Assets for all Ministries bought prior to 2009 were therefore, not in the system at the time of audit. The audit further revealed that the problem with asset upload was a configuration problem affecting assets purchased prior to the introduction of the multicurrency system. The risk associated with this finding is that if some assets are not recorded in the system the integrity and completeness of asset records becomes compromised and unreliable.
The Accountant General acknowledged the finding. He pointed out that where a Ministry had to make adjustments of any kind after the 13th period, the system could only display the asset register after a depreciation run has been carried out. This was not done for the ministries in question when the audit was carried out. He advised the Committee that the Ministry was working on improving the system design with a view to separate expenditures from commitments. In addition, he pointed out that Government operates on cash basis accounting and all assets bought since dollarization, have been captured in the system at cost. A physical record was being maintained, but does not include values for assets bought before dollarization. He assured the
Committee that Ministries had complete manual records of all assets that they held prior to dollarization without the original costs being reflected but for assets after dollarization, the costs of such are included in the assets registers.
184.108.40.206 The Committee observed that maintenance of up to date
assets registers was a challenge in a number of Ministries. It therefore, recommends training on maintenance of asset registers across Ministries by 30th September, 2016.
220.127.116.11 It also recommends that all accounting officers should
closely monitor this area and ensure asset registers are checked for completeness and accuracy by January 31st, every year.
4.1.8 Variance observed between the 2013 returns
submitted by line Ministries and those by Treasury as well as balances in the SAP System
The 2013 returns submitted by some line Ministries had different figures from those submitted by the Treasury and balances in the SAP system. Registers for Public Financial Assets were not being maintained in the system. Expenditures for Lending and Equity only appeared in the year the payments were made by Ministries. However, repayments were not deducted from the original payments made through the system as only manual records were being maintained. In addition, the Ministry of Finance made direct payments to service providers such as CMED (Pvt) Ltd, NetOne and TelOne. In some instances documents pertaining to such transactions were not availed to line Ministries, thereby resulting in differences between Treasury records and those of line Ministries. If up to date records are not maintained in the system, the completeness and reliability of Public Financial Assets may be compromised.
The Accountant General concurred that Public Financial Assets were not properly recorded by line Ministries. As a corrective measure, the Ministry had created a manual Public Financial Asset Register which was availed to the Committee as evidence. The Accountant General pointed out that a Comprehensive Loans Management Module was not yet available on the PFM system, but they intend to investigate the possibility of using the newly established Debt Management System for managing all public financial assets. The Ministry is using the normal payments system which they are familiar with since they are not trained. He advised the Committee that training would be provided during 2016 on the standard way of recording loans in the Public Financial Assets Register with a view to migrating to the new system.
18.104.22.168 The Committee took note of the undertakings made by the Accountant General and recommends that training should be undertaken by the first half of 2016 to avoid recurrences in the next round of audits.
4.2 FINDINGS ON MINISTRY OF FINANCE’S
APPROPRIATION ACCOUNT (VOTE 5)
4.2.1 Direct payments to Service Providers
Treasury made direct payments amounting to $179 816 213 to service providers on behalf of line Ministries. Treasury informed the Committee that such payments were made on the strength of confirmation by Directors of Finance in line Ministries, service providers and the Zimbabwe Revenue Authority (ZIMRA). On the other hand, line Ministries alleged that such payments were made without their knowledge and as a result, they were not able to capture the payments on their books. The challenge posed by direct payments is that they violate the principle of double entry in that only the PFMS reflects the transactions while Ministries sub-Paymaster General accounts are not charged with the expenditure.
The Accountant General explained to the Committee that direct payments were occasioned by the misalignment between consumption of utility services by line ministries and Treasury capacity to pay for such services. At the end, utility providers were not able to discharge their mandate and also meet tax obligations with ZIMRA. The Ministry provided documentation exchanged between line Ministries, Service providers and ZIMRA which enabled Treasury to effect the payments through set offs.
22.214.171.124 The Committee appreciates the difficult financial situation Government is currently facing which necessitated direct payments. It recommends that Treasury must formulate procedures for handling
direct payments to facilitate proper and systematic capturing of such transactions and curb recurrences of the audit observation in future. This should be done by 31st September 2016.
4.2.2 Expenditure reversals by line Ministries after Treasury
failed to transfer funds to line Ministries’ Sub PMG bank accounts to meet expenditure already posted in the System
Treasury failed to transfer cash to line Ministries Sub PMG bank accounts to meet expenditure that had already been posted. Line Ministries were instructed to reverse all unfunded releases as at December 31, 2014. However, the Ministry of Finance had no documentation for those unfunded expenditures. As a result of such reversals, the total expenditure for the year may be misstated if the
Ministry fails to account for the total expenditure reversals for the year.
The Accountant General advised the Committee that budget releases were done in anticipation of revenue inflows which did not materialise. Treasury monitored and ensured unpaid (open) items were reversed during the 13th period. The expenditure was then charged on the subsequent budget when releases were received. The Committee was satisfied with the action taken to address the finding.
4.2.3 Misappropriation of funds
Some Ministry officials were alleged to have connived with suppliers and third parties and defrauded the Government of substantial amounts of money. The Permanent Secretary informed the Committee that among the officials at the centre of defrauding Government, were a
Principal Director, a Deputy Accountant General, an Acting Deputy
Accountant General, 2 Chief Accountants and 5 other members of staff.
The Committee was also informed by the Secretary that seven of the officials were dismissed on February 1, 2016 in terms of
Administration procedures after the Courts had found them not guilty. One case was still being finalised and two cases were being handled by the Public Service Commission. As a control measure, the Accounting staff have been directed to take leave days regularly in order to minimize collusion.
126.96.36.199 The Committee expressed concern that this case could be a tip of the iceberg and Government might be losing funds that are in critical supply to fraudulent activities by officials. The Committee recommends Treasury to come up with a risk management framework by 31st September, 2016, which will allow close monitoring of high risk areas and curb losses through fraudulent activities.
188.8.131.52 Given the central role played by the Accountant General’s Office, the Civil Service Commission should, by 31st September, 2016, fill in the critical vacancies occasioned by this incident. The staff is critical in ensuring that audit recommendations across line Ministries, parastatals and local authorities are acted upon.
4.2.4 Use of cash before banking in violation of Treasury
The Auditor General observed that cash amounting to $20 035 was expended before it was banked in violation of Treasury Instructions. Given that Treasury is charged with the crafting of these guidelines, it is unfortunate that they were found flouting their own rules. Fraudulent activities may also be perpetrated by Ministry officials and cash may not be accounted for. The Accounting Officer admitted that failure to bank receipts in full was not procedural and in violation of standing regulations. He assured the Committee that the use of cash before banking had been stopped following the observation raised by Audit.
4.2.5 Documentation of systems by the Accountant General’s Office: failure to review Treasury Instructions after the introduction of the multi-currency system.
The Treasury Instructions, which give guidelines to user Ministries on how to Account for public funds have not been updated since the introduction of multi-currency system. In the absence of documented guidelines the integrity of the financial system is compromised as public finances will be exposed to arbitrary decisions and in some cases criminal activities. The Accountant General admitted that the Treasury
Instructions were outdated but pointed out that they were still relevant.
As a corrective measure, he advised the Committee that a new set of Treasury Instructions had been drafted and would be finalised after receiving feedback from all stakeholders during the second quarter of 2016.
184.108.40.206 The Committee recommends that the new regulations should be operational by 31st June, 2016 as the Ministry indicated.
4.2.6 Failure to revalue Government assets from the
Zimbabwean dollar to the United States dollar
Government assets have not been revalued from the Zimbabwean dollar to the United States dollar resulting in the non-disclosure or distortion of the true value of the assets in the Government records. The Accountant General advised the Committee that the issue of revaluation was not because of a lack of capacity, but a matter of accounting principle where the Government of Zimbabwe was still using cash basis accounting.
220.127.116.11 Given that some Ministries and Government departments had non-current assets at the introduction of the multicurrency system, the Committee recommends that Treasury should by 31st September, 2016, provide guidance to fund managers to enable them to revalue noncurrent assets that were in Zimbabwean dollar currency.
4.3 PROGESS IN IMPLEMENTATION OF PRIOR
4.3.1 Non-disclosure of Public Financial Assets
The Ministry had no Public Financial Assets Register with details of loans and investments paid to parastatals, private sector and other organisations since 2009. The Accountant General advised the Committee that Treasury had challenges in locating a consolidated public financial assets register and in order to address the long outstanding observation, Treasury was compiling a new consolidated register. The Audit however noted a big improvement in the quality of return submitted for 2014.
18.104.22.168 The Committee recommends that the PFMS should be configured to capture all payments made for equity and lending by 31st September, 2016.
4.3.2 STATEMENTS OF PUBLIC FINANCIAL ASSETS
22.214.171.124 Incomplete Accounting Records for Public Financial
Treasury did not keep proper records of accounts such as the ledger/register for Public Financial Assets that show the amounts disbursed from loan appropriations, net amounts outstanding, recoveries of loans and adjustments made during the year. There was no evidence suggesting that the Statement of Public Financial Assets was checked and verified in line with good international practice. The statements might have errors and/or omissions due to poor maintenance of records resulting in the misstatement of the Public Financial Assets and failure to effectively monitor the Account. The Accountant General advised the Committee that Treasury had challenges in locating the consolidated public financial assets register; however, they are currently compiling a new register from audited records. The Office of the Auditor General advised the Committee that the yearend return for 2015 showed some improvements.
126.96.36.199 As in the above observation, the Committee recommends that the PFMS should be configured by 31st September, 2016, to capture take-on balances, loans, investments, recoveries and adjustments to ensure proper accountability of public financial assets.
4.3.3 Opening take on balances of $549 128 116 which did not agree with closing balance of $554 128 116 as at December 31, 2012
The opening balance of $549 128 116 did not agree with the closing balance of $554 128 116. This anomaly has been observed over a number of years and the adjusted opening balance was not supported by any documentary evidence. It was observed that registers/ledgers of the Public Financial Assets were not being maintained in the Public Finance Management system.
Expenditure for lending and equity only appeared in the year the payments were made resulting in loss of accounting information. The Accountant General informed the Committee that Treasury does not directly pay debtors as payments are done through parent Ministries. It is therefore, the responsibility of each Accounting Officer to ensure that balances are reconciled to debtors.
188.8.131.52 The Committee recommends that all payments for equity and lending must, with immediate effect, be made through the system and line Ministries should be advised of payments done through IDBZ to enable them to record such loans.
184.108.40.206 Ministry of Finance should speed up the process of compiling a new consolidated register for public financial assets and ensures that it’s available by the end of 2016 and going forward, ensures that reconciliation by line Ministries are timeously carried out.
4.3.4 Net Variances of $324 670 068 between the balances
reflected on the returns from line Ministries and those from
Treasury rendering Statement on Public Financial Assets unreliable
There were variances between the balances reflected on the returns from Line Ministries and those from Treasury. The balances as per line Ministries was $619 666 596 against $294 996 528 on the Treasury return, resulting in a net difference of $324 670 068. In some instances the Ministry of Finance and Economic Development made direct payments to State Enterprises and documents pertaining to such transactions were not availed to line Ministries, resulting in differences between Treasury balances and those of line Ministries.
Consequently, line Ministries’ Appropriation Account expenditure figures on lending and equity totaled $62 308 950 whereas Treasury had total expenditure on lending and equity of $93 996 024. This resulted in a variance of $31 687 074.The Accountant General attributed the variance to NDF debtors that were erroneously included in the return ($43 764 888). There were further differences in equity valuations of $30 039 171; capital transfers of $231 051 316 and previous period adjustment of $19 814 693. The Audit Office would however verify the balances which were said to have caused the variances in the next audit.
220.127.116.11 Ministry of Finance should instruct line Ministries to ensure that all State Enterprises provide up to date returns to their parent Ministries by 31st January, 2017.
4.3.5 National Railways of Zimbabwe loans worth$5 025 000 written off without supporting documentation
An adjustment of $5 025 000 against loans issued to National
Railways of Zimbabwe was not supported by documentary evidence. There is risk that loans may be written-off without authority thereby prejudicing public resources. The Accountant General informed the Committee that the loan was not written off, but was transferred to National Development Fund (NDF) and as such, NDF had records pertaining to the loan in question. Again the Audit Office would verify the evidence during the audit of NDF.
4.3.6 Revenue Collection and Debt Recovery: Farmers’
World Debt worth $11 833 433
The Government paid a total of $11 833 443 to China Exim Bank in respect of a debt owed by a private company called the Farmers’ World after it failed to meet its obligations. The Auditor General failed to establish action taken by Treasury to recover the money from beneficiaries of the farm equipment, and the role of the Farmers’ World in recovering the outstanding amounts. Loan agreements and other supporting documents pertaining to the China Exim Bank and Farmers’ World loan facility were not availed for audit examination. Furthermore, the Committee noted under Ministry of Agriculture, Mechanisation and
Irrigation Development that there was another loan advanced to Farmers
World in 2014 amounting to $11 566 00 which brings the total figure to
$23 million . Again there were no loan agreements relating to the debt.
In the absence of contractual documentation, there is risk that Government may fail to recover the loaned amounts thereby prejudicing public funds. It was said the loans were paid on behalf of beneficiaries of agricultural machinery, equipment and implements. The Accountant General advised the Committee that the loan was inherited from RBZ debt and payment to China Exim Bank was important for Government to retain the country’s credit worthiness with the Bank and ensure continued lines of credit. As part of efforts to recover the funds from Farmers’ World, the matter had been referred to Attorney General Office for guidance.
18.104.22.168 In the Committee’s view public resources cannot be used to meet obligations of a private nature and as such, Government must, with immediate effect, institute measures to recover the debt from either
Farmers’ World or from beneficiaries of farm machinery and implements. Treasury should by 31st September, 2016, explain fully to the Committee why Farmers World was advanced the latter loan reported in 2014 when it was failing to pay back the initial loan and also report on progress made towards recovery of the debt.
4.4 STATEMENT OF RECEIPTS AND DISBURSEMENTS
4.4.1 Variances between line Ministries returns, Consolidated Treasury return and PFMS figures
Comparison of the balances disclosed in the Treasury Consolidated return and line Ministries returns showed significant differences as follows; take-on balance had variances of $149 627 463, collections differed by $15 776 749, payments to the Main Exchequer Account had
a difference of $15 557 026 and payments to ‘Other Accounts’ had a variance of $383 425 686. Furthermore, total Disbursements to the Main Exchequer Account by line Ministries differed with balances in the PFM system by $28 510 787.
The Statement of Receipts and Disbursements was rendered inaccurate and unreliable as a result of unreconciled variances. The Accountant General attributed failure by officers to produce accurate returns, to lack of training. He advised the Committee that accounting staff in his department were trained during the year 2015 and the variances were reconciled later on. The Audit Office would verify the evidence during the 2015 audits.
4.5 PROGRESS IN IMPLEMENTATION OF PRIOR
4.5.1 Discrepancies in opening and closing balances
The Statement of Receipts and Disbursements had an opening balance of $39 401 027 which was at variance with the audited closing balance of $28 010 429 as at December 31, 2011 resulting in a variance of $11 390 598. The Accountant General advised the Committee that the 2013 return was compiled and submitted for audit before the 2012 audited return was available, however the variances have been reconciled and the revised return has been submitted to the Audit. The
Audit will verify the accuracy of the reconciliations during audits.
4.5.2 Collection and disbursements balances
There were significant variances in revenue collection and disbursements balances between Ministries and Treasury figures. Treasury reported total collections of $3 886 629 810 while Ministries reported collections totaling $3 767 653 638 giving a variance of $118 976 163. Disbursements to the Exchequer Account had a difference of
$112 315 933 between the Ministries’ figure of $3 284 074 086 and the Treasury figure of $3 396 390 019.
The Accountant General informed the Committee that the variances have been reconciled and submitted to the Audit office. The
Public Service Labour and Social Welfare (Highlands National Training Centre) has devised a training programme with emphasis on Receipts and Disbursements return. The training will be rolled out to all Accounting staff when funding is secured.
4.6 NATIONAL DEVELOPMENT FUND 2013
4.6.1 Revenue Collection and Recovery: Variances in Accounts receivables figures
The Fund disclosed $103 390 032 as accounts receivables in the financial statements while the balance from confirmations from the projects being managed by IDBZ, Zimbabwe Economic Trade Revival
Facility (ZETREF) and Farmers’ World debt amounted to $221 205 034. This resulted in a variance of $117 815 002. There is a risk that public funds may not be properly accounted for and the financial statement may therefore be materially misstated. According to the Accountant General’s response the accounts receivable ledger for each debtor and the accounts receivables control were not being maintained. The variances were therefore, caused by the co-mingling of NDF and PSIP funds.
22.214.171.124 The Committee recommends that the Ministry, by 31st September, 2016, should put in place measures to avoid the co-mingling of the NDF and PSIP funds.
4.6.2 Investments worth $18 068 044 in Interfin Bank
currently under curatorship
The financial statements had an amount of $18 068 044 that was invested with Interfin bank meant for Zimbabwe Economic and trade Revival Fund (ZETREF). The bank was placed under curatorship and later, it was recommended for liquidation. The Fund did not submit a claim to the liquidator in respect of this investment to ensure that the Fund received some residual payments as the investment was not secured.
There is risk of loss of the whole investment as it was not secured and a claim was not lodged with the liquidator. The Accountant General in his response pointed out that the claim was lodged with the liquidator on June 4, 2015 after notification from the liquidator. NDF is expected to receive up to $2 million as resolved from the creditors’ meeting held by the liquidator.
The Committee expressed concern on whether due diligence was done by Government before such investment decisions were made.
Furthermore, though the collapsing of the bank was linked to some criminal activities by the Bank managers, it was disheartening to note that no prosecutions were effected in that regard and no attempt was made to recover public funds from individual mangers implicated in the matter.
4.6.3 Failure to reconcile funds invested in CABS worth $11
098 575 with the Bank figure reflected on the investment certificate The financial statement had an investment with CABS amounting to $11 098 575 while an investment certificate from the bank disclosed an investment of $10 717 500 giving a variance of $381 074. The implication of this finding is that financial statements may be misstated hence leading to wrong decisions being made on the basis of the figures. The Accountant General informed the Committee that the Fund had two investments of $10 million and $339 293 for which two separate deal notes were issued. The Bank only confirmed to the auditors the $10 million investment. The Ministry has communicated with the bank to interlink the investments portfolios. The Audit would verify the evidence during the next audit.
4.6.4 Non- Recovery of outstanding project loans
Out of a total of $70 460 000 loaned out to various institutions through the IDBZ Bank since year 2010, only an amount of $21 628 420 had been repaid at the time of audit. The Accountant General advised that the entities will require major policy reforms aimed at improving their income generating capacity. Notably, NRZ got $5 million, Civil
Aviation Authority of Zimbabwe $18,1 million; ZINWA $7million and
Registrar General’s Office $3,5 million and had not made a single contribution towards repayment. ZINARA got $10, 3 million and had paid back $1, 7 million. Going forward, every entity benefiting from the fiscus will be required to set up a sinking fund with clear indications on repayments.
126.96.36.199 Given that IDBZ Bank was not a going concern as an entity, the Committee failed to understand why Government was not disbanding it. The Committee recommends that Treasury should by 31st September, 2016, provide an explanation to the Committee why it was maintaining IDBZ given its perennial financial woes.
188.8.131.52 Furthermore, of the institutions highlighted, save for the Registrar General’s Office and ZINARA, all had going concern issues and government should with immediate effect, stop lending funds to non-performing entities.
184.108.40.206 Government should with immediate effect institute recoveries from entities such as ZINARA since it was collecting a lot of revenue.
4.6.5. Governance Issues- Non provision of information for the Zimbabwe Economic Trade Revival Facility (ZETREF)
Under the ZETREF facility, the Zimbabwe government contributed
$20 million while Afri-Exim Bank contributed $50 million. Interfin Bank was the implementing agent for the Zimbabwe Government while the Afri-Exim Bank was to administer the $50 million. Interfin Bank went bankrupt before disbursing the loans to beneficiaries and to date the money is yet to be recovered. The Fund managers failed to avail for audit crucial documents such as the facility agreement with implementing agencies, beneficiaries, bank statements and monitoring reports to enable the Auditor General to verify trade receivables and interest receivables, amounting to $12 699 810 and $566 819 respectively. Failure to avail information results in limitation of scope and financial statements may be materially misstated. The Accountant General informed the Committee that the agreements were between the participating banks and the respective beneficiaries. The banks have those agreements in place.
220.127.116.11 The Committee called for closer scrutiny of such facility as it has a potential to worsen the debt situation of the country. It therefore, recommends that the Minister of Finance should provide a full report on the status of the facility to the Committee by 31st September,
4.6.6 Mixing NDF and PSIP in one IDBZ Account Disbursements made by the Fund to the IDBZ for on-lending to various implementing agents were mixed with Treasury funds intended for PSIP projects in one IDBZ bank account. The Fund managers alleged that IDBZ bank could have assumed that the money came from the same source; the Ministry of Finance and Economic Development. The mixing of the funds makes it difficult to account and report separately for the usage and repayments of those funds. The Accountant General pointed out that the Bank had been instructed to open separate accounts
for PSIP and NDF. Evidence would be verified in the next audit.
4.6.7 Outstanding Farmers’ World debt
Government of Zimbabwe assumed a Farmers’ World debt amounting to $1 142 407 (including Interest) which resulted from a payment of $970 000 loan borrowed from the China Exim Bank in March 2010. The Reserve Bank of Zimbabwe, the original guarantor, was unable to repay the debt. It was alleged that the Government later assumed the guarantor status. This was also another loan to Farmers World apart from the $23 million reported earlier on. The debt was again in respect of agricultural machinery, equipment and implements that were imported from China by Farmers’ World Company. The Ministry did not avail guarantor letters for audit examination and the debt was not included in the list of contingent liabilities.
There is risk that the Fund may fail to recover money paid on behalf of beneficiaries of agricultural machinery, equipment and implements from either Farmers’ World or beneficiaries. In his response the Accountant General advised the Committee that the National
Development Fund has handed over the debt to the Attorney General’s department for legal advice.
18.104.22.168 The Committee recommends that government should with
immediate effect, institute recoveries of the debt from either Farmers’ World or the beneficiaries of the agricultural machinery.
4.7 SENIOR OFFICERS HOUSING FUND 2014
4.7.1 Operating the Fund without Accounting Officer’s
Instructions and Administrative Procedure Manual
The Fund was operating without the Accounting Officer’s Instructions and administrative procedures manual. The absence of the manual makes it difficult to effectively administer the Fund and to implement controls that protect the resources of the Fund. The
Accountant General advised the Committee that the Senior Officers
Housing Fund Accounting Officer’s Instructions for the fund had since been signed and was now in place. The evidence would be verified in the next audit.
4.7.2 Variances of $248 960 between the opening balance of the accumulated Fund and the prior year’s closing balance
The opening Accumulated Fund figure of $8 825 343 disclosed in
the financial statement differed from audited closing balances of $8 576 383. This resulted in a variance of $248 960 that was not supported by documentary evidence. The Accountant General informed the Committee that the excel spread sheet were not up to date creating differences in the closing and opening balances. The Ministry has managed to post the entire monthly recoveries to individual debtors’ ledger accounts. Again, the evidence would be verified in the next audit.
4.7.3 Revenue Recovery and Collection: Senior officers received loans in excess of the $20 000 limit stipulated in the Inter
Seven senior officers received loans in excess of the maximum loan limit of $20 000 per disbursement as stipulated in the Inter
Ministerial Guidelines for the Senior Officers’ Housing Scheme (section 2.3). The excess payments totaled $120 000. Failure to observe the loan limit set in the Ministerial guidelines may result in unfair distribution of resources. Other senior officers may be deprived of the funding as resources will be limited. The Accountant General assured the
Committee that there was now adherence to the limit as specified in the Accounting Officers Instructions.
4.7.4 Bank withdrawals unaccounted for
The fund withdrew $1 437 852 from its bank account for disbursements to loan beneficiaries. However, only $1 413 500 was distributed to beneficiaries, leaving $24 352 unaccounted for. The
Fund’s financial resources may be used for purposes not in line with its objectives thereby prejudicing potential beneficiaries. The Accountant General indicated that the $24 352 in question was paid towards workshop expenses and travel and subsistence allowances. He pointed out that the funding organisation, UNDP, had preferred to deposit the workshop support funds into the Ministry account and the latter pay the hotel directly. As for the travel and subsistence allowances, Treasury had delayed releasing funds. He indicated that the Ministry had since reimbursed the Fund.
22.214.171.124 The Committee noted with concern that the Fund like other funds in line Ministries, had been prone to abuse, hence there was need for better control and supervision by accounting officers. The
Committee recommends that going forward, all those found to violate
Fund resources should be penalized in terms of section 91 of the Public Finance Management Act.
4.7.5 Records failing to differentiate debtors falling within one year and those over one year
The Auditor General could not verify the correctness of the debtors’ figures falling due within one year ($949 417) and those falling due after one year ($8 178 028) disclosed in the Fund’s financial statements. The figures could not be traced to the ledger and cashbook submitted for audit. There is risk that the Fund’s resources may not be properly accounted for and this could lead to loss of public resources. The Accountant General informed the Committee that the Ministry of Finance has engaged the Ministry of Local Government, Public works and National Housing, which currently manages the National Housing Fund and General Civil Services Housing Fund and the supplier of the software which is used. The supplier is agreeable to extend the license to the Ministry of Finance by January 01, 2016. Evidence would be verified in the next audit.
4.7.6 Inadequate security for housing loans disbursed to senior officers
Housing Loan borrowers did not surrender title deeds to the Fund as security for loans disbursed to them since the inception of the Fund in 2006. The Fund may suffer losses should the borrower default in making the loan repayment. The Accountant General informed the Committee that the requirement was not complied with, but they have since directed that this be complied with.
126.96.36.199 The Committee recommends that Ministry of Finance should examine the functions of the Fund from a governance point of view in that the Committee noted that it was inappropriate for the fund to be administered by potential beneficiaries. The Ministry should provide an explanation by 31st September, 2016.
4.8 STATE ENTERPRISES RESTRUCTURING AGENCY
(SERA) FUND 2014
4.8.1 Governance Issues: Failure to renew contract of employment
The contract of employment of one of the Fund’s employees expired on December 1, 2013. However, 10 months after the expiry of the contract, the contract had not been renewed although the employee was still rendering services and being paid. The Fund may incur unauthorised employment cost if employees are allowed to continue working without signing employment contracts. The Accountant General indicated that the matter has been regularised and all SERA staff has valid employment contracts.
188.8.131.52 The Committee however, questioned the relevance of
SERA considering that there was no progress in the reform of Parastatals regardless of its existence. It also raised questions as to whether there was value for money in coming up with such an entity as there were already Boards and Ministries exercising oversight function over Parastatals. The Ministry should therefore fully justify the continued existence of SERA by 31st September, 2016.
5.1 As the overall custodian of public funds, the Ministry of Finance and Economic Development has a responsibility to conduct its affairs in accordance with the highest standards of public administration and public accounting. The errors and omissions highlighted in the Audit reports examined by the Public Accounts Committee for the period from 2009 to 2014 constitute a serious breakdown of overall control and management.
Your Committee was however encouraged by the extent to which the senior staff of the Ministry exhibited a determination to get to grips with the situation and to ensure that all the Auditor Generals observations were dealt with before the next Audit.
HON. CROSS: The Ministry of Finance and Economic Development, in Zimbabwe controls the budget. Mr. Speaker Sir, can we have some quiet. - [HON. MEMBERS: Inaudible interjections.] –
THE ACTING SPEAKER: Hon. Members, can we have order in
the House. Earlier on, I have actually requested for those Members who are so anxious to talk, can you do the honourable thing to move outside of the House and do your business, then after you have finished you are so much welcome to come back. Please can you give chance to the people who would want to debate?
HON. CROSS: Mr. Speaker Sir, the Ministry of Finance and Economic Development in Zimbabwe controls a budget of about US$6b, that makes it ten times the size of Delta Corporation, ten times the size of T.M. Supermarkets, ten times the size of OK Bazaars Group, it makes it the single biggest financial institution in the country. Its assets exceed the combined assets of all the commercial banks in the country and therefore, the manner in which the accounts of this Ministry are conducted is of critical importance to us as a nation.
I want to highlight the following points raised by the Committee Chairperson in her report today. The first is this, that regarding the accumulated assets of the Government of Zimbabwe, up to 2009 - the Government only has a physical record of the assets. It has no idea what the value is – [HON. MEMBERS: Inaudible interjections.] –
THE ACTING SPEAKER: Hon. Members!
HON. CROSS: Mr. Speaker Sir this does not involve small money; this represents many billions of dollars. I cannot understand how any organisation can operate because we are now some seven years after 2009 and we still do not have the value of the assets in our books in
- This is a matter which requires the urgent attention of Government. It is not a small matter, it is a major issue.
The next thing Mr. Speaker Sir, is that we have been informed time and time again, of the difficulties Government had in terms of controlling direct payments to creditors on behalf of line ministries. In the year we examined the US$190m was paid direct to creditors by the Ministry of Finance and Economic Development. We found discrepancies in the way in which these funds have been disbursed. We found discrepancies in the accounts of the line ministries concerned. We found payments unrecorded and we found substantial problems in line ministries as to how they account for this type of activity. We urged the Ministry of Finance and Economic Development not to do this but to insist on paying through the line ministry so that the funds can be properly accounted for.
I think they are trying to get on top of this but we still see these problems persisting today. When it comes to debt record and reconciliations, I just point out to the House that we approved to the Debt Assumption Bill in March, 2015, that amounted to US$1.3b with interest payments of another US$400m totaling US$1.7b altogether. Until now, the ministry has not been able to reconcile these debts and we still do not have a final record of the debts which are due by
Government under this account. This points to poor record keeping at the Reserve Bank, it points to a chaotic transfer of the records across to Ministry of Finance and Economic Development. It points to a lack of capacity in the ministry to deal with these kinds of issues.
Mr. Speaker, I am not dealing with millions of dollars, I am talking about billions and members of this House needs to understand what a thousand million dollars looks like. It is a substantial sum of money; it is an enormous sum of money in any country. In addition to this, in the
Auditor General’s Report, we found that the Accountant General’s Office in the past had been grossly understaffed, undermanned and under trained. The new Accountant General which has being appointed in the last six months is doing a fantastic job and I am deeply grateful to the people who were responsible for the recruitment of a really top official to occupy this post. His predecessor had to be dismissed for maladministration. This new person is in fact beginning to make a substantial impact on the accounting activities of the Ministry of Finance.
It points Mr. Speaker Sir, to the need to strengthen our civil service; we need to make sure that they have adequate staff for their responsibilities. We need to make sure that they are properly remunerated. I understand that the Accountant General receives a basic salary which is less than I earn as a Member of Parliament. Mr. Speaker, if you pay peanuts, you get monkeys. There is no doubt in my mind that our top civil servants, our key technicians are under remunerated and we need to do something about it. If we dismiss five solders, we could improve these conditions of service without an additional cost to us. I just point out that a lot of our expenditure is on unproductive labour, these are key positions.
Finally on training, you need to provide adequate training to the people you are employing in these key positions. When it comes to the misappropriation of funds, I have been in this Committee now for 8 years and time and time again we have seen misappropriation of funds not on a small scale but on a large scale. This misappropriation in the Ministry of Finance will involve millions of dollars. The staff was dismissed after the prosecuting authorities failed to gain a conviction in a court of law.
So, these individuals walked away from the Ministry of Finance scot free, they did not serve time; the only penalty that they incurred was that they lost their jobs. There was no recovery of funds and this point to the problem of prosecution of corruption; it is very difficult to prosecute corruption. We must find a way to recover funds and to make sure that the perpetrators are properly punished for what they are doing.
In respect to the Farmers World debt, this is a tip of the iceberg, it involves about US$12m. We were unable to discover who owns this company. How can they be given a substantial sum of money, this is a substantial sum of money, US$12m is more than half the budget of this National Assembly for twelve months. It is more than the total salary bill for Parliament and yet this loan was made to Farmers World and no attempt has been made either to identify who was involved or to recover the money from the company.
Mr. Speaker, any Chief Executive who did not follow up a debt of this magnitude would be fired instantly. In this case here Manungo, I think the Secretary for the Ministry of Finance, must be brought to account. He must explain why this matter has not been pursued. I say this is the tip of the iceberg more than US$200m of the Debt Assumption Bill was involved in this kind of activity and these funds have simply vanished.
Then there is a large discrepancy between line ministries and the
Ministry of Finance. When I read the Auditor’s report and I saw the amounts amounting to US$500m mari yakawanda, US$500m could not be reconciled. I asked the Accountant General, what on earth are you doing; if you cannot reconcile large sums like this? On the receipts on
US$3.8b, there was nearly US$200m which could not be accounted for.
This is no small money, this is big money, aggregate this, we are talking about US$2b – US$4b.
There is the extraordinary use of IDBZ, I do not know why the Ministry is using the Infrastructure Development Bank of Zimbabwe to handle very large disbursements of funds. There seems to be no proper accounting, the bank does not seem to have the expertise to deal with this and as a result our national debt may be understated. There is the question of the money we made available to Interfin, just three months before it went to liquidation.
Mr. Speaker, the directors of Interfin walked away from that bank with a US$100m of depositors’ funds and US$23m of that was our money. They have not been held accountable, there has not been any prosecution, and there is absolutely no follow up whatsoever, expect a liquidator who has attempted to recover the funds from the assets of the company. The directors have not been brought to account and I just ask, how much longer are we going to tolerate this kind of thing? If I was to steal a cow from a farmer in the rural areas, I would go to jail for 9 years. Here we have got board of directors who have stolen a $100 million of public funds and they have not been brought to account this is just impossible.
Finally, Mr. Speaker Sir, there is the issue of the Senior Officers Housing Fund Time and time again, I have pointed to this House that there over 100 of these funds being operated by Government. In each case they have a two page Constitution and the permanent secretary is the accounting officer. In this case here, the people who control this fund have in fact benefited from it. US$837 million went through these accounts last year. US$837 million ,that is more than 12% of the national budget. It is more than the budget for education.
Now, what do we do about this? First, I want to suggest to this House that we adopt this Report now. We adopt it unanimously, there should be no divisions over this particular Report. The second thing is we must insist of follow up, the Minister must receive this Report from Parliament together with our recommendations and he must be held to account in following up. Finally, I want to suggest the Public Accounts Committee in October this year, holds another meeting on this particular Report and ask Mr. Manungo and his senior staff to come and tell us what they done about cleaning up this mess. I thank you. – [HON.
MEMBERS: Hear, hear.]-
HON. NDUNA: Thank you Mr. Speaker Sir. Hon. Members are urging to talk about artisanal miners. However, that point has been well ventilated, I stick to accountability. I need to support the mover of this Report and the seconder. I need to take you to the Constitution as to why and how we are listening and trying to adhere to the Report that has been tabled in the House by Hon. Mpariwa.
Section 9, talks to the issue of Good Governance, quoted verbatim
Mr. Speaker ‘The State must adopt and implement policies and legislation to develop efficiency, competence, accountability, transparency, personal integrity and financial probity in all institutions and agencies of Government at every level and in every public institution and in particular -(a) appointment to public offices must be made primarily on merit; (b) measures must be taken to expose, combat eradicate all forms of corruption and abuse of power by those holding political and public offices.’ Then (2) which is the final one on section 9 says ‘the State must ensure that all institutions and agencies of Government at every level, in particular Commissions and other bodies established by or under this Constitution, are provided with adequate resources and facilities to enable them to carry out their functions conscientiously, fairly, honestly and efficiently’. Mr. Speaker Sir.
As I debate on this motion, I want to say how and why we arrive at a Report such as the one we have heard which is riddled and pregnant with a lot of irregularities. It is the issue that she well ventilated and touched on that borders on issues to do with appointment of people in positions of authority that are of no financial integrity. I will reiterate the point that we need as Parliament to legislate in the Constitution the appointment of boards and public officers Mr. Speaker Sir, that we get to know that it is the right people that are in positions of authority - that we do not have recurrence and continued recurrence of funds misappropriated. As we speak Mr. Speaker Sir.
THE ACTING SPEAKER: Order. The owner of the following vehicle AAV 4597 could you please go and remove the vehicle because it is blocking other vehicles.
HON. NDUNA: Thank you Mr. Speaker Sir. I want to take you closer to home, in particular Chegutu West, in the Town Council of Chegutu. One time when I was addressing mourners I asked the councilors and the council officials to look beyond just the human face the nice body and such like when they are appointed or when they recruit the particular people that are responsible for handling finances. I asked them to look at the history of somebody, not to just to look at the facial features and the long hair, short hair, good ears, big ears and big tummy. They went against all that advise and appointed one Mhaka who was at NOCZIM who once misappropriated funds there, they got him to cater for funds at Chegutu Town Council.
In no time we hear there has been misappropriation of funds in a place where there is barely any services that are rendered for what the residents are paying for. You will find that what is legislated or what is agreed upon is a charge of $10.00 for water. You will find that the billing that goes to the residents is for $20.00. Even after this irregular billing, you will find that the municipality goes after residents with summons in order to incarcerate them and arrest them, based on a bill that is unfounded. In no time, we then find that the police and the law enforcement agencies are after this person that the council went against all credible advice to put in a position of authority - in particular in a financial position, at the helm of Chegutu Municipality.
How do we get to that? We have got an entity such as CMED which Hon. Mpariwa also touched on. It is operating as we speak, on auto pilot. How did it get there? One time we were talking about a $3 million fuel issue that was at CMED, I will not touch on that. Arising from that, you then get a whole Loss Control Officer being relieved of his duties at CMED because the perpetrator of the loss of the US$ 3 million was the person who was leading CMED, that was the boss to this manager who is the Loss Control Officer. Coupled with that Mr.
Speaker Sir, your Committee brought to it this Loss Control Officer and also called the Director of Finance to come before the Committee. Mr. Speaker Sir, as I speak today, those two people were thrown out of their place of employment. How do we have an entity such as CMED valued as it is, in large sums, operating without a Loss Control Officer or a Financial Director? We come here and wait for audit results; obviously what is going to come out is an audit result which is riddled with a lot of irregularities.
Mr. Speaker Sir, I will leave CMED now. I will move on to places such as Ministry of Transport and Infrastructural Development because the person before you is your Committee Chairperson to the Portfolio
Committee on Transport and Infrastructural Development. We have 10 Provinces Mr. Speaker Sir, which have provincial road engineers working on an acting capacity. How can you have a provincial road engineer who is working on an acting capacity and is supposed to look after magnitudes of bills of US dollars? You want them to make far reaching and permanent decisions, but you have them in semi-permanent positions of acting capacity yet you expect an audit which reflects a flawless financial system. We cannot have that Mr. Speaker Sir.
As Hon. Mpariwa presented the report, she touched on a loan of US$5million that was given to NRZ. Mr. Speaker Sir, the department or parastatal that we are talking about is endowed with ubiquitous minerals and claims, both within this country and outside. They inherited these minerals from Rhodes and Rhodesia. I am talking about what is available Mr. Speaker Sir. What is left is optimal excavation, resource mobilisation and extraction of these minerals so that departments and parastatals like NRZ can be resuscitated, restructured so that they operate optimally without asking for US$5million. It sounds meager as compared to what NRZ owns. Yes, it still needs to be accounted for but it is my fervent prayer that departments that are endowed with all these resources should be engaged in resource extraction so that they can capitalise these departments primarily and then capitalise Zimbabwe in general in a secondary way.
Mr. Speaker Sir, the issue to do with ownership of resources also resides with the local authorities. The local authorities that we were talking about yesterday and that I alluded to earlier are endowed with a lot of resources. Even before they go and get loans from Government and other sectors, they should look within themselves because they are empowered and they have got the power, even to enrich other sectors. They have land within their locality which is embedded with mineral wealth, which they should utilise optimally. In the utilisation and extraction of those minerals, they should engage those locals that are in those areas.
What comes to mind immediately, without any shadow of doubt, are artisanal miners Mr. Speaker Sir – [Laughter.] – they are the ones that are holding the economy, this is the new normal…
Hon. Nduna having been speaking to the gallery.
THE ACTING SPEAKER (HON. MUTOMBA): Order, address
the Chair Hon. Member.
HON. NDUNA: Thank you for the protection Mr. Speaker Sir. Mr. Speaker Sir, not looking at you does not mean I am not addressing you.
THE ACTING SPEAKER: Address the Chair.
HON. NDUNA: Sometimes I get carried away Mr. Speaker Sir. THE ACTING SPEAKER: You should not.
HON. NDUNA: I want to look and see if some artisanal miners are also in this House Mr. Speaker Sir. However, I have seen that it is the proponents of artisanal mining that are in this House. Once again, I want to thank you for allowing your Committee on Public Finance to bring out a very important motion and report that has ventilated a lot of key issues that we should take on board. I immensely want to say, their recommendations are very key if we can take them on board for the good governance and order of the people of Zimbabwe. I thank you.
HON. MARIDADI: Thank you Mr. Speaker. I had prepared a very elaborate presentation in anticipation of a very heated debate.
However, what I have discovered is that the report is very good. The Chairperson of the Portfolio Committee on Public Accounts has done justice to her presentation and the recommendations are selfexplanatory. I shall not belabour this House by getting into detail.
Mr. Speaker Sir, the Public Accounts Committee is one of the key Committees of this House. Allow me Mr. Speaker to quote very briefly from the Holy Bible. The Holy Bible talks about dishonesty. If you read Genesis 27, Verses 1 to 29; “What if my father touches me, he will see that I am trying to trick him and then he will curse me instead of blessing me” – [AN HON. MEMBER: I receive.] – How we react to a moral dilemma often exposes our real motives. I will leave that Mr.
Speaker and I will explain why I have quoted that verse – [AN HON. MEMBER: Go deeper papa.] – When you speak of the Holy Bible and people make fun of it, it is very unfortunate. Mr. Speaker Sir, I will leave this aside and go on to my presentation.
The Auditor-General’s Office is a creation of the Constitution of
Zimbabwe and it is accountable to Parliament. The Auditor-General sits in the Public Accounts Committee as a technical person to give technical advice. Year-in-year-out, the Auditor-General produces this book – [Hon. Maridadi shows out the Auditor-General’s Annual Report Book] – and gives us recommendations. However, the recommendations by the Auditor-General have never been implemented. I think one very refreshing thing about what is happening in the Ministry of Finance and Economic Development now is that, they have engaged a very progressive Accountant-General. A very progressive man who has effected a lot of changes and the Ministry of Finance and Economic Development is beginning to look well because of the gentleman they engaged.
Mr. Speaker Sir, let me briefly go on to talk about four key pillars of this Government. In brief, I will talk about local authorities, stateowned enterprises, Government and the private sector. There is a narrative report that was referred to by Hon. Minister Kasukuwere yesterday and the day before on local authorities. It makes very sad reading. What is happening in our local authorities makes very sad reading, needless to say that local authorities are at the core face of
Government service delivery. People communicate with Government through local authorities and state enterprises.
I will then go to State owned enterprises. In Zimbabwe, we have more than 85 parastatals or State owned enterprises. Not one of them has made a profit in the last 10 years. State owned enterprises are supposed to participate in business at a profit and they are supposed to declare dividend to Government. Not one of them has declared a dividend to Government since 2000 and Mr. Speaker, that is a cause for concern. What then happens is that in order for State enterprises to be kept afloat, they go back to Government for bail out. I am talking of the NRZ. The NRZ recently got a loan of US$5 million. The Chairperson of the Portfolio Committee on Transport, Hon. Nduna here, spoke about how that money has gone down the drain because NRZ is not in a position to be able to utilise that money, make a profit and pay back to
I will talk about ZUPCO. Mr. Speaker if you want to see the development or otherwise of a country, you see it by the type of public transport that is available in that country. Zimbabwe’s soul public transporter in urban areas was ZUPCO. ZUPCO is an architect of public transport from the 1960s and it existed until the 80s. ZUPCO, Mr. Speaker, to all intents and purposes is dead. What worries me about the death of ZUPCO, Mr. Speaker, is that there was a lady presiding over ZUPCO as Chairperson for the past 25 years. Mr. Speaker, the same lady has been appointed substantive Chairperson of Air Zimbabwe. What is it that she has done at ZUPCO that we like so much that she must go and do at Air Zimbabwe? I will leave that.
I will talk about Government departments. Mr. Speaker, I went through this audit report painstakingly and I came up with this document here, which I can make available to Members of Parliament. I want to go through it Ministry by Ministry. Mr. Speaker, there is not a Ministry where there is an accounting officer who has not been caught by the
Auditor General off side. Ministry of Industry and Commerce issued loans without signing loan agreements. ZISCO Steel - US$11 633 012 respectively. Ministry of Agriculture, Mechanisation and Irrigation
Development’s loan agreement to Farmers World, debt for 2014, US$11566000 and in 2013, US$11 833 000.
I want to put the issue of Farmers World into perspective. As Government or as Parliament, we were not able to know who the owners of Farmers World are. So, what has happened, Mr. Speaker, is that there is a group of people that call themselves Farmer’s World. They have borrowed money from China Bank, US$11 million. They have not been able to give that money back to the bank and our Government has paid that loan on behalf of farmers World to the tune of US$11 556 000. What it means is that this is tax payers money which has been used to liquidate a debt of private citizens, private people, to the tune of US$11 million.
Mr. Speaker, needless to say what US$11 million could do for nurses that are not going to receive their salary at the end of this month; needless to say what US$5 million would do for this Parliament which is unable to go for outreach programmes because of lack of resources. I will leave that aside. I will continue with the Ministry of Agriculture, Mechanisation and Irrigation Development and let me talk of big sums of money only. Absence of source documents to substantiate the aggregate variance in revenue amounting to US$3 million. What it means is that there is US$3 million missing from the Ministry of Agriculture, Mechanisation and Irrigation Development which cannot be accounted for.
I will go to another large sum. Minister of Local Government, Public Works and National Housing. They made payments of US$11 million, but the US$11 million was not supported by documents. So US$11 million was given by the Ministry, but there were no documents
to support it.
Mr. Speaker, I could go on and on. What is important at this juncture is to go to the recommendations of the Portfolio Committee on Public Accounts and say, I would recommend two extra things. In other jurisdictions like in Kenya and in Uganda, people from the Prosecutor General’s office sit in the Public Accounts Committee and officers from fraud squad also sit in the Public Accounts Committee. When issues of potential fraud are raised, there is no need to go to the police and make a report because the police will then start investigating straight away.
What happens in our case is that when you have a report like the one that I have presented here, somebody must then go to the ZRP and make a report and then action will follow, but in other jurisdictions, you do not have to make a report. Straight away, there are police officers that sit on that Committee and as soon as the Public Committees are done analysing the report of the Auditor General, action is taken. The Ministry of Home Affairs comes in and the Zimbabwe Anti Corruption Commission comes in.
The other issue I want to talk about is about banks like Interfin. Interfin Bank was used by this Government as a conduit to do financial transactions on behalf of Government. A lot of money was put into Interfin Bank and Interfin Bank was declared technically solvent. What it means is that, Government money was swallowed in Interfin Bank.
The Ministry of Finance and Economic Development is the regulator of financial institutions in Zimbabwe. How did they put money into a bank which would collapse in three months time? I do not understand it.
That is one aspect.
The second aspect is that when banks collapse, they are put under judicial management. People lose their money, their deposits. People lose houses, but if you look, if you see the sponsors of that bank, the share holders of that bank, they still have their houses, they still have their cars and so on. Mr. Speaker, this is very worrying. What it means is that I could get three Members of Parliament here, we form our bank, we comply with the requirements of the Reserve Bank. We form our bank, we mob deposits from people out there and five years later, the bank goes under. We have US$200 million, we share it amongst ourselves and people have lost their money. What it means is that the Reserve Bank, as the controller of the financial institutions is not doing a very good job.
The other issue is of the Infrastructure Development bank of
Zimbabwe. Mr. Speaker, the Infrastructure Development Bank of Zimbabwe (IDBZ) is technically insolvent as we speak. For the life of me, Government continues to trade using IDBZ. IDBZ is technically solvent, but Government continues to put millions and millions of dollars for financial transactions through this bank which Government knows is technically solvent. I do not know what Government is trying to achieve. This is money from the people that Government should look
Mr. Speaker, without further ado, I think my recommendation is that, let us adopt the report by the Portfolio Committee on Public Accounts and let us adopt the recommendations which have timelines for June, July and September and on that note Mr. Speaker Sir, I rest my case. I thank you.
HON. MATUKE: I move that the debate do now adjourn.
HON. MUKWANGWARIWA: I second.
Motion put and agreed to.
Debate to resume: Tuesday, 19th July, 2016.
On the motion of HON. MATUKE seconded by HON.
MANGAMI, the House adjourned at Twenty Three Minutes to Four o’clock p.m. until Tuesday, 19th July, 2016.