TRANSPARENCY International Zambia and ActionAid have condemned the continued mismanagement of public funds by parastatal bodies who keep flouting financial management regulations.
In a joint statement, TIZ executive director Maurice Nyambe and ActionAid country director Nalucha Ziba welcomed the release of four audit reports by the Office of the Auditor General last week.
The four reports released include The Report of the Auditor General on the Accounts of Parastatal Bodies and other statutory institutions for the financial year ended 31st December 2018; Special Report of the Auditor General on the Accounts of Water and Sanitation Companies for the Financial year ended 31st December 2018; Performance Audit on Preparedness for Implementation of Sustainable Development Goals in Zambia; and Performance Audit on the Provision of Special Education in Public Primary Schools in Zambia for the period 2014 to 2018.
They stated that TI-Z and ActionAid had both conducted detailed reviews of the reports, and some of the anomalies that are revealed, particularly in the report on parastatal bodies and other statutory institutions.
The duo stated that contents of reports were a source of great concern to “us, and to civil society in general”.
They highlighted some of the most pressing anomalies revealed in the report on parastatal bodies and other statutory institutions, and have categorized them as; non-compliance with statutory obligations – according to their analysis, 10 parastatals, representing around 60 per cent of audited parastatals, all failed to remit statutory obligations to the Zambia Revenue Authority (ZRA), National Pensions Scheme Authority (NAPSA) and Workers Compensation Fund.
“The parastatals concerned are the Citizens Economic Empowerment Commission (CEEC), Examinations Council of Zambia (ECZ), Food Reserve Agency (FRA), Independent Broadcasting Authority (IBA), Mansa Trades Training Institute, Mpulungu Harbour Corporation, National Sports Council of Zambia (NSCZ), Nitrogen Chemicals of Zambia (NCZ), Patents and Companies Registration Agency (PACRA), and the Zambia Telecommunication Corporation Limited (ZAMTEL),” they noted. “Collectively, these entities failed to remit K3.4 billion worth of statutory obligations, despite these deductions having been effected on employees’ emoluments.”
They stated that they consider this to be not only immoral but also a damning verdict on the financial management capabilities of those parastatals.
The duo stated that the analysis further revealed that in eight out of the 16 parastatals audited, the governance and oversight mechanisms leave much to be desired.
“For instance, there were no full and/or substantive boards of directors appointed at FRA, NCZ, NCSZ, the University of Zambia (UNZA) and the Public Service Micro Finance Company; while the Lusaka South Multi Facility Economic Zone (LS-MFEZ) had an unusually high turnover rate of board of directors (four separate boards in a five-year period). At the Workers Compensation Fund Control Board (WCFCB), the legally provided for board composition was not complied with, while the ECZ failed to avail nomination letters for incoming council members,” they noted. “Our concern is that all these weaknesses and irregularities in the governance mechanisms of these parastatals meant there was no effective oversight provided to them, and in all likelihood contributed to the continuation of the glaring irregularities in these entities.”
They stated that they were appalled by the several examples of disregard for internal controls by many of the parastatals that were audited.
“For example, there was failure to prepare financial statements at Zambia Forestry and Forest Industries Corporation (ZAFFICO), NCZ and UNZA; issuance of loans without security to employees at WCFCB; irregular sale of fertiliser at NCZ; delayed payment to farmers by FRA, which works against the FRA Crop Market Modality which indicates that, a farmer needs to be paid within 14 days of meeting all the conditionalities through provision of all necessary documents; unretired imprest by the ECZ; and unsupported payments at the Judiciary, UNZA, and at Mansa Trades Training Institute,” they stated.
The duo stated that TI-Z and ActionAid’s concern was that in the absence of internal controls, or where these are disregarded at will as the case appears to have been, opportunities for misuse of public funds would not only exist but also be perpetuated, “and the fact that well over K40,000,000 was lost as a result of weak internal controls attests to this”.
They stated that there was lack of action by CEEC to recover K1,042,427 worth of outstanding loans owed by 23 clients who the Commission failed to trace, resulting in the reduction of the loan revolving fund and thus denying other potential clients the opportunity to benefit from the loan facility.
The duo stated that there was recruitment of an unqualified Company Secretary at LS-MFEZ, resulting in the payment of K185,600 to a legal firm for legal services which should have been provided by the company secretary.
“Poor disbursement of funds by FRA particularly to rural farmers, lack of participation of key stakeholders in decision making structures, and failure to meet gazetted national food strategic reserves,” they stated.
They stated that TIZ and Action Aid were both horrified by the revelations, “which undoubtedly show a blatant disregard not just for principles of good public finance management, but also for different provisions of the law”.
“We have observed that over the years, the Auditor General’s reports have continued to reveal such blatant examples of mismanagement of public resources, and yet the practice appears to be getting worse. We are concerned that the continuation of these anomalies seemingly unabated is costing Zambia billions of kwacha the country can ill-afford to lose while social service provision continues to be poor,” they stated. “In addition to this, the country’s image both domestically and internationally has continued to take a battering as a result of our apparent failure to put a stop to financial management irregularities that are revealed in the Auditor General’s reports on a regular basis. It is also not lost on us that there have long been suspicions of high levels of political influence in the running of most of these parastatal institutions, and this coupled with poor involvement of oversight bodies such as Parliament in the operations of these parastatals has created a fertile breeding ground for such irregularities to not only occur but to also take root.”
They condemned “in the strongest possible terms” the continued mismanagement of public funds by parastatal bodies who keep flouting financial management regulations seemingly with impunity.
“It is our contention that parastatals, being government owned, should be among the best examples of adherence to the law and to the principles of good financial management, and the fact that they are not places an indelible stain on government’s professed commitment to address corruption and promote accountability and transparency in the management of public resources,” they stated.
They stated that the time had come for the country to put a stop to the recurring irregularities revealed in the Auditor General’s reports.
They demanded that the respective line ministries under which the different parastatals whose irregularities have been highlighted fall, take immediate action to investigate the circumstances under which the anomalies occurred, and that the culprits be made to account for their actions.
“In this vein, we demand that all chief executive officers of erring parastatals be relieved of their responsibilities in order to send a strong signal that such blatant disregard of principles of sound financial management will not be tolerated in any way, shape or form. We are convinced that it is only by taking such punitive visible actions against the culprits that such irregularities will start to reduce. As it is now, culprits repeatedly commit these offences and see no action taken against them, so they continue with impunity and the cycle goes on, making a mockery of the work of the Auditor General in highlighting all these anomalies. We further call for all the culprits to be prosecuted for abuse of office and resources in line with the provisions of the public finance management Act of 2018,” they stated.
“We also call upon respective line ministries to ensure that all parastatals have credible and functioning boards that are comprised of professionals rather than boards packed with cadres for purposes of political expediency. We urge the government to work closely with the Institute of Directors in this regard to facilitate improvements in the performance of parastatal boards.”
For the agricultural sector in particular, they called on the government to redefine the manner in which resources are being invested in the sector as the current scenario where huge amounts are invested towards FRA as opposed to extension services and research continued promoting food insecurity in the country.
“We will seek direct engagements with respective line ministries not only to remind them of their obligation to address these concerns, but also to mutually seek solutions that will put a stop to these anomalies once and for all. We believe that it is in the interest of all well-meaning Zambians that such anomalies be eliminated in order for the country to have the full purse of resources at its disposal for the advancement of its development prospects,” stated the duo.