Transparency International Zambia (TI-Z) and Action Aid Zambia welcome the release of four (4) audit reports by the Office of the Auditor General last week on 20th July 2020. The four reports released were as follows:
- 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.
TI-Z and Action Aid have both conducted detailed reviews of these reports, and some of the anomalies that are revealed, particularly in the Report on Parastatal bodies and other statutory institutions are a source of great concern to us, and to civil society in general. We would like to highlight some of the most pressing anomalies revealed in the Report on Parastatal bodies and other statutory institutions, and we have categorized them for ease of reference:
- Non-compliance with statutory obligations
According to our analysis, a total of 10 parastatals, representing around 60% 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). Collectively, these entities failed to remit ZMW3.4 billion worth of statutory obligations, despite these deductions having been effected on employees’ emoluments.
TI-Z and Action Aid consider this to be not only immoral but also a damning verdict on the financial management capabilities of these parastatals.
- Weak governance and oversight mechanisms
Our analysis further revealed that in 8 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 usually high turnover rate of Board of Directors (4 separate boards in a 5-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.
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.
- Weak internal controls
We are 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 fertilizer 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.
TI-Z and Action Aid’s concern is 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 will not only exist but also be perpetuated, and the fact that well over ZMW40,000,000 was lost as result of weak internal controls attests to this.
- Other areas of concern
- Lack of action by CEEC to recover ZMW1,042,427 worth of outstanding loans owed by twenty-three (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;
- Recruitment of an unqualified Company Secretary at LS-MFEZ, resulting in the payment of ZMW185,600 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.
As TI-Z and Action Aid, we are both horrified by these 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 unabetted is costing Zambia billions of Kwacha the country can ill-afford to lose while social service provision continues to be poor. 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.
TI-Z and Action Aid would therefore like to condemn 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.
It is our considered view as TI-Z and Action Aid that the time has come for us as country to put a stop to the recurring irregularities revealed in the Auditor General’s reports. We would therefore like to demand 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.
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, we call on the government to redefine the manner in which resources are being invested in the sector as the current scenario where huge amounts are investment towards FRA as opposite extension services and research continues promoting food insecurity in the country due to low rates of investment increases the potential for mismanagement of financial resources by FRA.
As TI-Z and Action Aid, we have taken keen interest in the revelations from the Auditor General’s reports, and we will incorporate in our activities public sensitization to enable the Zambian citizenry know how their resources are being abused seemingly with impunity and how this ultimately affects their livelihoods. In addition to this, we will also 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.
Maurice K. Nyambe Nalucha N. Ziba
Executive Director Country Director
Transparency International Zambia Action Aid Zambia
