Source: Govt officials loot US$500m in loans – The Zimbabwe IndependentJune 30, 2017
ZIMBABWE’s broke Treasury has failed to account for nearly US$570 million disbursed to unnamed beneficiaries in the form of loans, exposing bad governance, gross mismanagement of public funds and systematic looting by top officials, an explosive report by the Auditor-General reveals.
Kudzai Kuwaza/Bernard Mpofu
Government is currently operating within tight fiscal space that has seen public recurrent expenditure accounting for 90% of total revenue, depriving funding for social spending and capital projects. Together with revenue leakages, this has exacerbated the country’s fiscal crisis. This comes as the World Bank expressed grave concerns about Treasury’s fiscal sustainability this week in its Zimbabwe Economic Update, saying government’s US$1 billion overdraft with the Reserve Bank of Zimbabwe (RBZ) was unsustainable. The tight liquidity constraints buffeting the economy have been triggered by production collapse, export shrinkage and drying up of financial inflows.
In her report for the financial year ended December 31 2016 on appropriation accounts, finance and revenue statements and fund accounts, Auditor-General Mildred Chiri reveals that more than half a billion was doled out by Treasury to senior officials without stating the reasons or documenting identities of the beneficiaries. She warned this might prejudice the fiscus and rob the public.
“Treasury did not disclose the details of the purpose and the names of beneficiaries (debtors) for loans amounting to US$567 537 792,” Chiri’s report reveals. “Failure to maintain a loans guarantee register and lack of supervision resulted in the omission of loan details.”
The report says the Finance ministry had not responded to her queries as to the purpose of the loans and the identities of the beneficiaries.
The revelations come at a time government is spending more than 90% of revenue on recurrent expenditure, including the payment of wages to its workforce which it is failing to pay on time due to financial constraints.
The report raises concern over various issues, including maintenance of accounting records, fraudulent activities, transfers of money from fund accounts, outstanding payments to suppliers of goods and services, use of fund resources as collateral security and unsupported expenditures.
In another scandal unearthed during the audit, it also notes there was a net variance of US$132 249 422 between the balance disclosed in the Treasury Consolidated return compared with line ministry balances.
The report says there was a major discrepancy in the maintenance of register for Treasury Bills and bonds.
“Contrary to good accounting practice, a register for treasury bills and bonds was not maintained. In the absence of a register with details of treasury bills and bonds, I was unable to establish whether the treasury bills and bonds reported were accurate and complete,” the report says. “Furthermore, only treasury bills and bonds issuance notes with a value of US$647 794 516 were availed for audit examination against a total of US$1 190 675 248 disclosed in the statement.”
This means Treasury Bills and bonds issuance notes with a total value of US$542,8 million were not availed for audit.
Chiri’s report says the revenue discovered in the line ministries’ returns and the Zimbabwe Revenue Authority (Zimra) return was at variance with the revenue disclosed in Treasury’s return by US$18,4 million.
“Furthermore, revenue received as per Public Finance Management System (PFMS) report was different from revenue disclosed by treasury resulting in a variance of US$151 253 283,” the report says. “Under normal circumstances revenue received figures on PFMS, treasury schedule and ministries/departments returns should agree. There was no evidence of efforts made to reconcile the different balances.”
Chiri’s report points out that although Zimra contributed 93% of the total revenue received, there were misstatements on the Zimra return relating to false claims of input tax refunds amounting to US$226,3 million which remained uncorrected up to the time of consolidation of the revenue received return. It says ministries and fund accounts advanced loans worth US$91,8 million to private and state enterprises without signing loan agreements.
“This exposed the government in cases of the entities defaulting on repayments,” Chiri’s report says. “Normally most constituents of funds have no provision for lending money, so this was contrary to their objectives.”
The report reveals a total of US$1 025 384 million was spent by four ministries without following tender procedures during the period under review.
It also says outstanding payments to suppliers of goods and services increased by US$31 million from the previous year.
“Ministries continued to acquire goods and service from suppliers, although they did not have the financial resources to meet the expenditures. This was evidenced by an increase of US$30 574 096 (57%) of amounts owed to suppliers from last year’s figure of US$53 511 409 to the current balance of US$84 085 505.”
The report observes that the Ministry of Youth used money in the bank account of the Youth Development and Economic Empowerment Fund as collateral security for loans issued to private individuals.
“As a result, the fund, whose bank account was used as collateral security, was exposed to risk of losing a total amount of US$1 879 755 as the beneficiaries were struggling to repay the loans,” the report says.
Chiri’s findings were buttressed by findings of the World Bank, which also exposed fiscal indiscipline this week.
“Domestic financial markets are too small to absorb the Government of Zimbabwe’s US$1 billion overdraft with the RBZ,” the World Bank says in an economic update on Zimbabwe. “Replacing this overdraft with treasury bills and a domestic bond would further constrain the supply of credit to the private sector.”