Transparency International Zambia (TI-Z) welcomes the release of the special audit of the Government payroll for the financial year ended 31st December 2017 to 31st December 2021. We commend the Office of the Auditor General for their unwavering commitment in carrying out their mandate in line with the Constitution, the Public Finance Management Act No. 1 of 2018 and the Public Audit Act No. 13 of 1994. The new report was conducted to ascertain that the funds appropriated by parliament for emoluments were adequately accounted for by the various Ministries, Provinces and Agencies (MPAs) as allocated through the budget.
In recent weeks, TI-Z released details of an investigation which revealed the misuse of government funds at the Ministry of Finance amounting to K100 million between 2019 and 2021. This siphoning of government funds-which was mostly in form of sitting allowances and Daily Subsistence Allowances (DSAs), was facilitated through “creative accounting.” Payments were made for activities that were either not worked for at all by members of staff, or were received in larger amounts than were actually worked for and in some cases, were not applicable and fictitious.
TI-Z would not be fulfilling its mandate as a watchdog institution dedicated to fighting corruption if we did not scrutinize the public finance management system which includes the use of public resources, in order to provide necessary checks and balances. Therefore, through this press briefing, we would like to address some specific concerns following our analysis of the special audit of the Government payroll system. We will also share some recommendations in accordance with the issues raised. Our analysis, interpretation and recommendations are based on the nature of financial irregularities highlighted in the audit report. These include failure to reconcile the salary account, irregular payment of allowances, irregular payment of salaries, double payment of salaries, suspected fraudulent diversion of salaries, irregular upgrading of teacher’s salaries, among others.
TI-Z notes that among the six departments that the Public Service Management Division (PSMD) has are the Payroll Management and Establishment Control (PMEC) and the Public Support Service Department (PSSD). These are responsible for effectively managing an integrated Payroll Management and Establishment Control (PMEC) System in order to monitor and control expenditures on personal emoluments in the Public Service. Further, the Public Finance Management Act No 1 of 2018 mandates the Accountant General to design, implement, monitor and evaluate the financial management systems, policies and guidelines in accordance with the laws and for the proper management of public resources.
TI-Z therefore wonders how such a system could allow for the level of disorganization and weakness highlighted in the special audit report. The audit found that salaries amounting to ZMW95.4 billion were processed through the salary account at ZANACO Bank but there was no evidence of any reconciliation having been done on this account by the Ministry of Finance. In addition, unutilized funds grew by 79% from ZMW42.5 million in June 2021 to ZMW75.4 million in June 2022 and by end of July, 2022, these accumulated funds had not been returned to the consolidated fund. The lack of reconciliation is a red flag for corruption, abuse and misappropriation of funds. TI-Z therefore demands answers from the Ministry of Finance and National Planning as to why reconciliation was not being done for such a long period. Where was the Accountant General’s office in all this? Is it possible that financial audits during the period 2017 – 2021 could not detect this anomaly? If this was detected, what corrective measures were taken?
This state of affairs could also be indicative of institutional capture by systems or individuals with influence over governance institutions. If this is the case, then fears of established and well organised cartels within the governance institutions are justified. We and other stakeholders have repeatedly raised concern about the magnitude of political influence in the civil service and on the governance institutions. What else can incapacitate established Government institutions to this extent, if not political patronage and politicization of the civil service? As part of our analysis, we also noted that Three (3) ministries had Eighty-Seven (87) end users diverted salaries amounting to ZMW 10.5 million into their personal accounts as well as to other accounts belonging to individuals not in the public service. This indicated that a cartel was created for the manipulation of the systems to include thousands of ghost workers, which generally weakened the entire payroll management system in the country. TI-Z is therefore convinced that such system failures can only possible through the use of calculated cartel.
Another issue which captured our attention relates to the number of unaccounted for officers. The Audit established that Nineteen (19) ministries had 9,800 unaccounted for officers who were not known by the institutions and were paid ZMW707 million in the period under review. The findings imply that internal auditing and monitoring functions had become, for the most part, non-operative and ineffective due to weak management and poor information. TI-Z also wonders why this audit took so long to be conducted. In a well and functioning democracy and where there is good governance, issues of accountability, transparency and integrity are given priority. It is clear from the findings that lack of an auditing for such a long period of time was intended to defraud the system and make it vulnerable to political patronage during the period under review.
These findings also establish that there was a direct lack of transparency and integrity in the recruitment of civil servants at all stages. This resulted in irregular recruitment of 239 officers without appointment letters, who were paid amounts totalling ZMW70.3 million. Further, 299 teachers were placed on the payroll and paid salaries totalling ZMW3 million without authority from the Teaching Service Commission. TI-Z is astonished that officers assumed office without appointment letters. This level of impunity suggests that the mal-administration was intentional and sought to defraud the system. While theft and corruption initially compromise the level of accountability, and result in a lack of transparency and responsibility, these eventually lead to unemployment, political instability, inequality and other social ills. The resources that have been lost during the period under review would have been used to improve public service delivery in different social sectors.
In light of the above, TI-Z concludes that during the period under review, there were systemic weakness which led to theft of Government financial resources through the payroll management system. Corruption and financial mismanagement took root through red tape, nepotism, non-responsive bureaucracy, pervasive political interference and patronage. A partisan monopoly status ensured that the civil service was unresponsive and inefficient, with an absence of a performance culture, as well as a lack of accountability. This planned or institutionalized non-compliance to financial and administrative regulations created room for administrative corruption and partisanship in the civil service thereby massively affecting the payroll management system.
TI-Z therefore makes the following recommendations:
- The Ministry of Finance and National Planning should strengthen its oversight role in the management of the wage bill, the determining of manpower levels in line ministries (establishment), in assessing financial implications of staff changes and retrenchment policies, as well as the financial components of the pay structure for the civil service as a whole.
- The Public Service Management Division (PSMD) should improve the payroll system in order to automatically integrate employee exits so that payments to departing employees cease on their departure. They should also run fortnightly expenditure reports, recognize and notify line management of anomalies and overpayments and recover over-payments by deducting the excess amount from a subsequent payment.
- The Executive should end Partisan Administrative Impunity; Effective law enforcement is essential to ensure that the corrupt are punished in order to break the cycle of impunity. Successful enforcement approaches should be supported by a strong legal framework, law enforcement branches and an independent and effective court system.
- The Government should reform public administration and financial management in the civil service. Reforms focusing on improving financial management and strengthening the role of auditing agencies can achieve greater impact than public sector reforms on curbing theft and corruption.
- Investigative wings should conduct further investigations on all suspected fraudulent or criminal activities, and ensure that all those found wanting are prosecuted to the fullest extent of the law.
- PSMD should improve human resource planning to ensure that human resource forecasting, recruiting and related resource allocation in done adequately. There is also need to enhance the capacity of officers providing oversight on payroll in MPAs, controls and to make sure that all systems are strengthened.
Maurice K. Nyambe (Mr.)
EXECUTIVE DIRECTOR
