Retention funds cost Zim millions

Source: Retention funds cost Zim millions – DailyNews Live

Gift Phiri      16 April 2017

HARARE – Zimbabwe could be losing millions of dollars through misuse of
retained funds by various government departments who are withholding 100
percent of the cash they are collecting from the public in a side pocket.

This comes after Zimbabwe National Roads Administration (Zinara) retained
the highest amount of $204,6 million it collected last year, followed by
the Home Affairs ministry – which oversees the police – retaining $59,3
million,  according to the Parliament Budget Office’s analysis of
statutory and retention funds tabled in the National Assembly on April 5.

Home Affairs permanent secretary Melusi Matshiya told the parliamentary
portfolio committee on Home Affairs probing the 2017 National Budget, that
the various departments under his ministry, including the police,
Registrar-General’s Office and Immigration, had properly accounted for the
retention funds.

The Registrar-General’s Office retained $27 million last year, while the
Immigration department retained $1,2 million.

“Treasury gave us the authority to retain funds, they get our audit
reports and they have confidence in us,” he said.

“Those police officers found on the wrong side of the law have been
prosecuted and some even committed suicide after they were found to have
abused funds, but the fees collected are audited to the extent that last
year but one we got a clean audit report.”

He said the Home Affairs ministry was battling to raise $87 million from
fees and fines in order to shore up the ministry’s “meagre” 2017 budget
allocation of $384 million.

The Auditor-General Mildred Chiri has already raised a red flag over lack
of transparency and accountability with regards to most of these statutory
and retention funds.

This comes amid calls for the country to revert back to the old system
where all revenues were deposited into the Consolidated Revenue Fund
(CRF), and all allocations and disbursements were made from these subject
to the permission of Parliament through the budget process.

Most of the retention funds in Zimbabwe were created as a survival tactic
during the peak of government fiscal challenges caused by the Reserve Bank
of Zimbabwe printing so much of the local currency in 2007-8 that
inflation hit an annual rate of almost 500 billion percent.

This was to allow government departments to retain part of their revenue
to fund critical operations during the hyperinflationary era where a
slightest lag in releasing funds from the CRF would significantly
compromise government operations and service delivery due to the rapid
loss of value for money.

Treasury authorised, albeit without legal backing, certain departments to
retain all collected funds to finance critical areas such as
capitalisation.

But the proliferation of these funds and reports of lack of transparency
in the use of the funds is now a matter of concern, according to
Parliament’s Budget Office.

It reported that the combined revenues collected by government
institutions or departments outside the budget could have well reached
over $1 billion in 2016, had they been properly and accurately accounted
for.

“This includes revenues from fines and user charges collected by the
Zimbabwe Republic Police, Zinara, Environmental Management Agency,
Judicial Services Commission and the Registrar General’s Office, among
many other government agencies,” the analysis said.

This comes at a time when Zimbabwe’s budget has remained static at $4
billion annually as fiscal revenues continue to dwindle, at a time the
budget deficit is exploding.

“This situation has eroded the stimulus power of the budget to propel the
economy and move the country to middle income status,” the office said.

“The increase in cases of abuse of public funds justifies calls for
Treasury to be the only department entrusted with the responsibility to
manage public resources.

“It has also been noted that a lot of money is spent on nonessential goods
and services at the expense of critical issues. This is the highest level
of disservice to the citizens and taxpayers when privileged departments
splash on luxuries like cars whilst critical service provision like health
delivery are underfunded to the extent of failing to provide basic
painkillers.

“It defeats the whole purpose and is illogical for the same institutions
with retention funds to then look up to treasury for financial support
especially for salaries. Universities are a clear case in point.”

Parliament’s Budget Office called on the Finance minister Patrick
Chinamasa to revoke the retention authority and enforce the constitutional
requirement that all funds must be remitted to the CRF and where
appropriate, the concerned departments can be allowed to retain a small
percentage, just like what Zimra does to meet fund administration
expenses.

Treasury directed all government departments who collect statutory funds
or retain other funds to open accounts with the central bank with effect
from January 31, 2016 to enhance transparency and accountability, failure
of which they threatened to revoke the retention authority. All the
concerned departments have complied with this directive.

“However, it should be noted that this has not addressed the issue of
abuse of funds and the constitutional requirements provided for in Section
302,” the Budget Office noted.

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