First published in my LinkedIn Account on Nov 08, 2018.
In July 2017, the Office of the Auditor General tabled before parliament the audit reports of 244 financial statements from 78 public entities, with some having as much as four financial statements being audited in one year. With 218 auditors employed in the OAG (http://www.auditorgeneral.gov.zw/index.php/about-us/staff), this means that each auditor had an average of only one audit client for the entire year. International standards would probably have a maximum of three months for one audit. This translates to an expected minimum of four audits per auditor per year. However, we know that 106 financial statements were being audited from 89 entities by the end of 2016. Assuming these had been completed too, the total number of financial statements reported would have been 350. This translates to 1.6 reports per auditor per year, and that still falls below the expected output per auditor annually.
During 2016, two entities were having their 2009 financials audited. That is seven years down the line, just past the statutory requirement for the keeping of financial records. Another two sets of 2010 financials were also being audited in the same period. Section 223 of the Customs and Excise Act [Chapter 23:02], Section 37B of the Income Tax Act [Chapter 23:06] and Section 57 of the VAT Act [Chapter 23:12] require that accounting records be kept for a minimum of 6 years. Two entities still hand not submitted their 2009 financials for audit by end of 2016. The question is – will they ever do so? Ideally, financial audits should be carried out annually to be effective. The Public Finance Management Act (22:9) requires in Section 49 that the public entity’s financial records must be submitted to the Auditor General within 5 months from the end of the financial year. Clearly therefore, most public entities are acting in violation of the law.
It is interesting to note that Air Zimbabwe is one of the entities who had their 2009 financial statements still unaudited in 2016. According to the relevant Parliament Portfolio Committee’s report presented in recently, Air Zimbabwe was losing $3 million a month and is technically insolvent. The report indicates that the airline was generating an estimated revenue of $2,65 million a month against an operational expenditure of $5,94 million. This entity is sitting on largely local debt of over $300 million but has evaded audit. In March 2015, Air Zimbabwe had reported that it needed a bail out of $600 million to clear its debt and have fresh capital injected (https://www.chronicle.co.zw/air-zim-seeks-600m-bailout/). In the absence of a timely audit exercise, the parastatal could have lost a lot of money fraudulently. The 2011 to 2016 financial statements of Air Zimbabwe were still not submitted by June 2017.
Another interesting entity is the Anti-Corruption Commission. By June 2017, the entity still had not submitted financial statements for 2012 through to 2016. What causes more worry here is twofold. Firstly, this is a public entity that should ideally lead by example in the world of transparency and accountability and secondly, it is an entity housed under the Office of the President and Cabinet. It still remains to be seen if its financial statements will eventually be submitted and audited.
The report tabled can be summarised as follows:
Number of Entities with Completed audits in 2016 78
Number of Financial Statements audited in 2016 244
Of these, 193 financial statements from 62 entities had unqualified opinions in all the periods they were audited. This represents a ‘pass rate’ of 79%. Whilst this is obviously commendable, one may however raise concerns on the quality of the audit reports. The reports give an impression of a general systems audit and maybe checks on governance without a deep financial audit. The good work done by these entities is encouraging and may be a sign that public financial management in Zimbabwe’s parastatals is generally good. Seven entities, with 19 financial statements had qualified opinions in all their audited periods, whilst two entities with five financial statements had Disclaimers in all their audited periods. Of the remaining seven entities with 27 financial statements, they had a combined eight clean opinions, nine qualified opinions, two disclaimers of opinion and eight adverse reports. The Agricultural and Rural Development Authority (ARDA) leads the pack of Adverse reports with four such reports, followed the pair of the Anti-Corruption Commission (sadly, again) and Zimbabwe Mining Development Corporation with two Adverse reports each. Something appears fundamentally wrong at ZACC. This is the entity that was seized with financial mismanagement investigations at Professor Moyo’s ministry in 2016, but we didn’t know then that they themselves were sitting on adverse audit reports. Scandalous.
The questions will continue to be asked - what is the role of the Public Accounts Committee in Parliament? Is it a toothless bulldog? Are parliamentary debates on these audit reports objective or they easily pass away or degenerate into political squabbles? Do audit committees exist as provided for in section 84 of the Public Finance Act (22:19)? The need for robust financial management, transparency and accountability in public entities can never be over emphasised. There is need for concerted efforts by those leading in parastatals to avail their financials for audit in good time and for the Office of the Auditor General to rise to the challenge.
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