THE Auditor General’s Report on Accounts of the Republic for the financial year ended December 31, 2020 has revealed that wasteful expenditure among ministries increased from K3.7 million in 2019 to K1.4 billion in 2020.
And the Auditor General’s Report on the Accounts of Parastatal Bodies and other Statutory Institutions for the financial year ended December 31, 2019 has listed the failure to collect funds amounting to K16.6 billion as the largest irregularity.
Speaking during a briefing, Thursday, Auditor General Dr Dick Sichembe said the Report on Accounts of the Republic for the financial year ended December 31, 2020 revealed that the irregularities that had increased outnumbered the irregularities which had reduced.
He explained that the irregularities that had seen an upward trend include; wasteful expenditure, failure to follow procurement procedures, unaccounted for revenue, unaccounted for funds, irregular payments, among others.
“The Report of the Auditor General on the Accounts of the Republic for the financial year ended 31st December 2020 generally reveals evident financial irregularities in Ministries, provinces and agencies, in that, the irregularities that have increased outnumber the irregularities that have reduced during the period under review, thus negating the strides made in the management of public resources. The irregularities that have seen an upward trend include wasteful expenditure; failure to follow procurement procedures; unvouched expenditure; unaccounted for revenue; unaccounted for funds; retired accountable imprest; irregular payments; failure to recover loan; and non-submission of expenditure returns,” Dr Sichembe said.
“The largest irregularity amount in the Report is wasteful expenditure which increased from K3.7 million in 2019 to K1.4 billion in 2020 representing an increase of 378 percent. This irregularity involves Ministries of Finance-head 21(K856 million in payment of interests and penalties incurred on a contract between Food Reserve Agency and Advanced African Solutions); Housing and Infrastructure (K362 million in payment of accrued interest and transfer of property tax); Transport and Communication (K153 million); general education (K32 million); Fisheries and Livestock (K9 million); Water Development Sanitation and Environment Protection (K4 million) among others.”
Dr Sichembe said deserving sectors of the economy were deprived of the much-needed resources due to wasteful expenditure.
“Wasteful expenditure incurred where government does not derive any benefit or obtains goods and services at exorbitant prices or cost. The implication of wasteful expenditure is that deserving sectors of the economy are deprived of the much-needed resource. Going forward, the office through its forensic and investigations unit will actively follow up such matters to their logical conclusion to understand the motive behind such expenditures. Where it is evident that an offence was committed arising from the wasteful expenditure, the office will engage law enforcement agencies whom we have established a memoranda of understanding to take up the matter,” he said.
Dr Sichembe revealed that the second largest irregularity was failure to follow procurement procedures which amounted to K234 million.
“The report has cited the second largest irregularity amount as failure to follow procurement procedures in amounts totalling K234 million. This irregularity increased from K504, 500 in 2019 to K234 million in 2020 representing 463 percent increase. The high jump is of great concern to us as office as it is clear of non-compliance to the Zambia Public Procurement Act and disregard of procurement guidelines in the purchases of various goods and services,” he said.
“Further, the third matter of great concern which has seen an upwards trend is unvouched expenditure which increased from K1.5 million in 2019 to K28 million in 2020. Unvouched expenditure is when payment vouchers are not availed for audit because they are either missing or are availed for audit but inadequately supported. The Ministry of Finance accounts for a significant part of this irregularity in mounts totalling K25 million.”
He said the upward trend shown in the Report was attributed to poor supervision, failure to consult the Attorney General when entering into contracts and poor contract management.
The Auditor General also noted that of great concern in the report was failure to recover loans issued through empowerment programmes especially in the Ministry of Youth, Sport and Child Development in amounts totalling K83 million.
“The upward trend shown in the Report is attributed to poor supervision, failure to consult the Attorney General when entering into contracts and poor contract management. On the other hand, the Report has also highlighted irregularities that have shown a downward trend which is commendable and these are misapplication of funds from K7 million to K531, 047; unaccounted for stores from K56 million to K4 million and undelivered materials from K24 million to K4 million,” Dr Sichembe said.
“Also of great concern in the report is failure to recover loans issued through empowerment programmes especially in the Ministry of Youth, Sport and Child Development in amounts totalling K83 million. The irregularity deprives other would-be beneficiaries from accessing the loans as the money would be tied to non- performing beneficiaries thereby frustrating a well-intended government empowerment.”
And Dr Sichembe said tax arrears owed to the Zambia Revenue Authority (ZRA) had increased from K48 billion in 2019 to K60 billion in 2020.
“On the revenue side, the Report has also highlighted tax arrears which have increased from K48 billion in 2019 to K60 billion in 2020. Tax arrears are unpaid or uncollected assessed taxes by ZRA owed to government by various tax payers. Further, loss of revenue as a result of expired customs importation of K62 million. Other revenue irregularities include unaccounted for removals in transit in amounts totalling K25 million and failure to collect tax on assessed imports of K13 million,” he said.
Meanwhile, Dr Sichembe said the Report of the Auditor General of Accounts of Parastatal Bodies and other Statutory Institutions for the financial year ended December 31, 2019 had listed the failure to collect funds amounting to K16.6 billion as the largest irregularity.
“The findings of the Report of the Auditor General of Accounts of Parastatal Bodies and Other Statutory institutions for the financial year ended 31st December 2019 generally reveals poor financial performance of parastatal bodies and statutory institutions. The Report highlights failure to collect funds in amounts totalling to K16.6 billion as the largest irregularity, followed by failure to settle/remit statutory obligations, K1 billion during the period under review,” he said.
“The failure to collect funds which include penalties amounting to K13.1 billion was due to entities such as National Pensions Scheme (NAPSA), Local Authorities Superannuation Fund (LASF), Energy Regulation Board (ERB) and Zambia Postal Services Corporation (ZAMPOST) failing to collect and remit employee contributions from several employers (K3.5 billion) and rentals. The institutions that failed to collect funds involve National Pension Scheme Authority (NAPSA) in amounts totalling K16.2 billion; Local Authorities Superannuation Fund ( LASF) amounting to K205 million; and Energy Regulation Board- management of energy funds amounting to K92 million among others. The implication of this irregularity in the case of NAPSA and LASF is the potential inability to pay workers their dues when they retire from employment.”
He said wasteful expenditure had increased from K246, 706 in 2018 to K47 million in 2019.
“The areas that have seen an upward trend from 2018 to 2019 are wasteful expenditure from K 246, 705 to K47 million; unsupported payments from K4 million to K41 million and unretired imprest from K337, 197 to K578,342; others are failure to recover loans from K2 million to K129 million; irregular payments from K5 million to K18 million; questionable payments from K1.2 million to K5 million; and failure to follow procurement procedures fromK189, 330 to K3.2 million,” said Dr Sichembe.
“Other key findings in the Report include the following: weaknesses in corporate governance; failure to produce financial statements; poor financial management and operational performance; poor management of pension funds; poor returns on investment; poor management of loans; failure to recover pension debt; poor management of power purchase agreements and energy funds; poor management of contracts and failure to adhere to applicable government policies. Some of the parastatal bodies and statutory institutions that have been cited include Zesco Limited, NAPSA, Development Bank of Zambia, Indeni and ERB.”
Dr Sichembe further said his office was in the process of auditing extractive industries and natural resources, including the management of Mukula logs.