Financial Bill Proposes Individual Liability for Maladministration

A bill proposing the financial punishment and demotion of the heads of public institutions that fail to follow financial administration laws was tabled in Parliament on June 14, 2016.

The new proposal includes provisions for penalties to be exacted on heads of public institutions associated with serious gaps between their budget allocation and audited expenditure. It further prescribes that heads who fail to ensure the timely submission of plans and financial reports to the Auditor General’s Office, and neglect to check that they are done in line with the law, shall receive a 5,000 Br to 10,000 Br administrative penalty.

If such a penalty is imposed more than three times, upon notification to the Prime Minister’s Office and Ministry of Public Service & Human Resource Development, the officials responsible may also face demotion.

The bill foresees the possible intervention from heads of institutions on internal auditors now that the knots are tighter, with direct implication and responsibility on an individual basis.

Internal auditors of institutions will no longer be reporting to the heads of institutions. The Ministry is also being tasked with establishing an independent audit committee in each institution, in order to sustain and guide the auditor’s unit on a day-to-day basis.

In the bill, the internal auditors of public institutions will be directly accountable to the Ministry of Finance & Economic Cooperation. The Ministry will also have a mandate to determine the structural arrangement of these auditors. A new autonomous audit committee will oversee and support the offices. On the basis of convenience, this committee might be put in charge of just one office or many.

Any administrative reporting and accountability of internal auditors has been revised to fall under the Minister of Finance & Economic Cooperation.

Auditors with experience in the area, however, have reservations on the proposed reform, which came after a cry out from the Auditor General’s office.

“It is a nominal proposal made to silence complaints,” a senior auditor at the Auditor General’s office commented.

He argues that the implementation of individual responsibility might be tricky, as it is not defined in clear terms. He also finds the penalty range a joke.

“When we talk about budget gaps, we are talking about hundreds of thousands of birr, if not millions,” he said. “What is a 10,000 Br compared to such huge amounts.”

The rationale for the amendment, however, is not wholly about penalty.

It is articulated in a way that states that the previous laws and systems fell short of meeting the changes made when the country adopted a new budgeting system, programme budget.

Rectifying gaps in the overall financial management too is mentioned as a factor.

The programme budget system differ from line item budgeting is that it directly related to the objectives and vision of respective budgetary institutions. Every allocation is linked with what the institutions want to achieve. Every good and service procured has to relate with specific targets.

The problem back then with line item budgeting was that was it is exposed to wastage, said an accountant with a years of experience in public institutions

This change came following the Auditor General’s report that six billion birr had been misappropriated or left unaccounted for. The report also identified more than six common “wrongdoers”, after assessing a three-year trend. The budget bill was also challenged, as it shows no real connection to the findings of the audit – simply recycling the formulae of previous budget allocations.

The number of public offices with unacceptable reports is increasing, as I the number od offices that fails to respond to recommendations by general auditors. In 2010/11, there were just 11 offices that came under this category; now, there are 37.

In a bid to strengthen controlling mechanisms, the amendment also proposed a structural change.

“It is just one solution; it does not stand alone,” Gemechu Dubisso, auditor General , told Fortune.

He recommended quick action in reforming and empowering audit units, in order to fully implement positive change.






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