AUDITOR General Dr Dick Sichembe says the findings in his reports are worrisome given that Zambia has to deal with a tight fiscal space caused by the debt burden and the COVID-19 pandemic.
And Price Waterhouse Coopers country associate Lyndon Lane-Poole says government institutions need to adhere to the Public Finance Management Act by not entering into contracts without approval and available funding.
Meanwhile, Price Waterhouse Coopers Kenya associate director Francis Nzau has observed that most issues in Zambia’s 2020 audit report are crosscutting with what happens in his country.
Speaking at the Insights of the Auditor General’s Report presentation, Tuesday, Dr Sichembe said it was worrisome that mismanagement had continued despite the economic problems Zambia was currently facing.
“Such findings are worrisome given that the nation has to deal with meager resources arising from severe restricted fiscal space caused by huge public debt service obligation and the negative effect of the Covid-19 pandemic,” Dr Sichembe said.
He vowed to keep exposing anyone found to be abusing public resources.
“Given these conditions, citizens and other stakeholders would rightly expect that the resources left would be applied prudently to ensure that critical social economic services such as health and education are delivered to citizens effectively. There, it becomes a concern to me as Auditor General looking at the 2020 report that despite such economic difficulties and national needs some of the people charged with responsibility of managing resources continue to abuse these resources,” said Dr Sichembe.
“However, through this forum, I wish to assure the nation that my office will not sit back and watch such abuse go on unchecked. We shall not relent and without compromise follow and scrutinize how public resources are raised and how they are applied and therefore, we shall ensure that anyone charged with the management of such resources is held accountable. And we shall expose whoever we shall find abusing public resources and ensure that where required, such people are reported to the law enforcement agencies for possible prosecution.”
And Lane-Poole wondered why some government institutions had entered into contracts without available funding as highlighted in the 2020 audit report.
“What did we see as the primary issue here is that delayed payments to contractors on loan obligations resulting in interest and penalties assessed. Interest and penalties is by far the largest issue in wasteful expenditure. There is one specific issue around US$52 million. The government had contracted for the construction of some grain shades but there was delayed payment and the contractor then came back and levied penalties to the government. You’ve got a very tight purse but how do you manage that right? Why do you get in contracts where you haven’t got the funding available? I think that is a regulation in the Public Finance Management Act. A government officer must not engage or contract with a third party without authority or approval that funds are available. But this is not necessarily happening and this is what is causing the problem,” Lane-Poole said.
He observed that while most government contracts had a clause which allowed government to levy liquidated damages, this was not being taken advantage of.
“Just before the meeting, I was conferring with the chairman of PAC. And he was mentioning the number of facts he sees, in this regard, as well is interesting being paid, penalties being levied and that being paid, government contracts are set to protect the government as all contracts even in our private lives, we protect both parties. So most government contracts have a clause that allows the government to levy liquidated damages in the event that the contractor does not does not make good on their obligations. And similarly, on the other side, if the government does not make good on their obligations, the contractor is allowed to levy interest in penalties,” he said.
“What we see is, and when you look at the findings, a large number of findings in the Ministry of Finance and Transport, wherever you got a large construction project going on, what tends to happen is delayed payments for whatever reasons those are, penalties are paid. But what we do not see are liquidated damages being charged and I think the AG and his findings is very clear on that. And asking that question very clearly, why are liquidated damages not being levied? Interests and penalties are levied and sometimes to more than the initial value of the contract and then they are paid.”
He insisted that there were clauses in contracts which protected government, but technocrats were not invoking them.
“Poor management of funding, if we know that there are significant implications for lack of payment or delayed payment, perhaps better control of management to those funding projects, but also making sure that people institute or invoke the clauses that are in these contracts to protect the government. That, I think is something that the AG makes clear and the PAC chair made it very clear. That is something we are not seeing happening is there is clauses to protect government and those clauses aren’t being invoked,” said Lane-Poole.
Meanwhile, Nzau said there was need to find solutions to the problems which African countries were facing with regards to the management of public resources.
“…So basically, those are top seven I could gather from the published reports and these cut across all the three categories of entities and we can see, they are almost similar for what we had for Zambia. Which means it could be the same issue for our African countries but the good thing is that we are here to share and see what can be done better to address these issues going forward,” said Nzau.