Rampant abuse puts $1bn public funds at risk

Source: Rampant abuse puts $1bn public funds at risk | The Financial Gazette July 6, 2017

A Parliamentary organ has raised the red flag over potential abuse of finances at government institutions retaining funds collected from the public, with nearly $1 billion at stake annually due to lack of transparency and accountability.

In a report tabled before Parliament last month, the Parliament Budget Office (PBO) said the country may be losing millions of dollars through misuse of retained funds by various government departments, which are retaining 100 percent of the funds they collect.

This, it said, was clearly in violation of section 302 of the Constitution, which compels government institutions to remit all funds to Treasury.

According to the report, 43 percent of the fund accounts audited by the Auditor General (AG) were issued with qualified audit opinions, while 11 percent had disclaimer audit opinions and an equal number had adverse audit opinions. Qualified, disclaimer and adverse audit opinions are red flags of possible abuse of public funds, said the PBC report, which warned that this showed “that there is urgent need for accountability and transparency on most of the fund accounts”.

The country has 64 statutory and retention funds, which are expected to collect a total of $712 588 960 this year.

Thirty-one fund accounts had not submitted their accounts for audit as at May 17, 2016.
The PBO report said combined revenues collected by government institutions or departments outside the budget could have well reached over $1 billion in 2016 had these been properly and accurately accounted for.

These include fines and user charges collected by the Zimbabwe Republic Police, the Zimbabwe National Roads Authority, the Environmental Management Agency, the Judicial Services Commission and the Registrar General’s office.

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

It said a lot of money was being spent on non-essential 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,” said PBO.
The report said it was clear that all retentions not backed by an Act of Parliament were unconstitutional.

“Most of these funds were created before the adoption of the new Constitution in 2013 and have no specific enabling legislation. They obtained retention authority from the Minister of Finance and Economic Development through Section 18 of the Public Finance Management Act (PFMA) (Chapter 22:19),” said the PBO.

The AG has previously reported on rampant abuse of funds by government, with cash from the number plate fund, for example, being diverted to the national airline, Air Zimbabwe, while a roads levy had previously been used to finance civil servants salaries.
The PBO said government should revoke the retention authority and enforce the Constitutional requirement that all funds must be remitted to the Consolidated Revenue Fund (CRF).

Where appropriate, the concerned departments could be allowed to retain a small percentage, just like what the Zimbabwe Revenue Authority is allowed to do to meet administration expenses.
Remission of funds into the CRF would enhance transparency and accountability as funds are allocated by the Ministry of Finance under the control of the National Budget system and the supervision of Parliament, said the PBO. This would ensure smooth allocation of the funds to various government departments according to priorities.

“(It) ensures even distribution of resources and eliminates the current scenario were some government departments with retention funds are well off compared their poor cousins who rely entirely on treasury allocation. (For example, ZRP which has upgraded its fleet and spruced up police station using retained revenue yet the Zimbabwe Prison Service on numerous occasions has failed to bring prisoners to the courts citing fuel and transport challenges),” said the PBO.

It said the current system made it difficult to enforce transparency and accountability and that it encouraged abuse of resources and non-priority expenditure.

It also promoted over-taxation and excessive revenue collection to meet revenue targets, said the PBO, which added that the fines thrust by the ZRP, for example, emphasised increased collection rather than reduction of crime.

“It is our fervent hope, as the Budget Office, that this matter will be given the consideration it deserve…. Value for money to the public is greatly emphasised. The ultimate aim should be to harness more resources into the system, improve service delivery and reduce revenue loopholes that have continued to drain public funds,” said the PBO.