Massive impropriety unearthed in most government ministries

via Massive impropriety unearthed in most government ministries October 18, 2014

GOVERNMENT ministries, parastatals and local authorities continue to be havens of mismanagement and other bad corporate governance practices with transparency and accountability — two hallmarks of good governance — virtually non-existent, leading to the loss of millions of dollars in public funds.

This is revealed by reports by Auditor and Comptroller-General Mildred Chiri.

In her reports on Appropriation Accounts and Miscellaneous Funds, Local Authorities and State Enterprises and Parastatals, Chiri revealed rampant diversions of funds, unauthorised expenditures as well as the possibility of understatement of revenues collected by line ministries leading to “significant variances totalling US$169 995 974”.

“Audit revealed significant variances totalling US$169 995 974 between collections recorded by Treasury and amounts collected by line ministries pointing either to understatement or overstatement of revenue received,” wrote Chiri in one of the reports.

“There was also a variance of US$37 165 215 between Treasury records and line ministries’ records for revenue deposited into the Exchequer Account. Ministries were diverting money from funds to meet Appropriation Accounts expenditures of parent ministries causing unauthorised excess expenditure,” Chiri further stated, citing the example of one ministry which loaned out US$11 499 781 to a parastatal which was never recovered.

Despite the audit reports prepared every year, which would have seen heads rolling in well-governed countries, no-one has been brought to book, a development analysts say perpetuates corruption and the looting of public resources at struggling state enterprises.

Instead, bad governance practices and outright theft continue to flourish with further evidence of the flouting of corporate governance procedures ranging from “improperly constituted and understaffed boards of directors and board committees” to impropriety in the procurement of goods and services.

Mobile phone concern Net*One was found to have operated without a substantive board during the period up to December 31 2012 while “the Securities Commission and the Investor Protection Fund Board of Trustees was operating without committees”.

“The Zimbabwe Mining Development (ZMDC) did not have board representations on the boards of its joint venture companies as per joint venture agreements. The Zimra (Zimbabwe Revenue Authority) board membership was reviewed from seven to 10, but the review was never implemented and this resulted in the three non-executive members rotating to serve in the available committees,” reported Chiri.

The National Social Security Authority was singled out for poor governance practices after Chiri found that one board member (name withheld) chaired four of the parastatal’s eight board committees, namely, the corporate governance and strategy committee, the audit and risk committee, benefits appeal committee and the human resources and public relations committee.

“I also noted that one board member sat in the audit committee and the investments committee which may translate to self-review as the audit Committee reviews the investments committee’s decisions. The board should observe good corporate governance practices and principles to avoid these risks,” Chiri concluded.

The perennially loss-making National Railways of Zimbabwe and Civil Aviation Authority of Zimbabwe also feature high on the list of entities flouting good corporate governance procedures in procurement of goods and services after it emerged that the parastatal made pre-payments to five different suppliers amounting to US$1,9 million “who ended up not meeting their service/supply obligations to the organisation”.

Other parastatals that came in for severe criticism for failure to follow good governance procedures include the mobile operator Net*One, People’s Own Savings Bank, CMED and the ZMDC.

Parastatals were not alone in their failure to adhere to acceptable standards of corporate governance as Chiri also found serious anomalies in the conduct of local authorities countrywide. The majority were guilty of failing to present audited financial statements within 180 days after the financial year end as required by the Urban Councils Act and the Rural District Councils Act.

Chief culprits include city councils of Harare, Bulawayo, Mutare, Chitungwiza, Bindura, Plumtree as well as Lupane.

Irregularities were also noted in the procurement of goods and services with Mutare being singled for making a down-payment of 50% to Westgate Investments on a tender of US$662 466 for the supply of water pipes and fittings that were not honoured.

The Buhera council was guilty of making unauthorised expenditure amounting to US$130 752.

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