Audit Gaps Concerns



It is common to hear that government institutions misappropriate billions of Birr in resources. However, the Administration has failed to take action against institutions that have not managed to use their budgets appropriately. When confronted, the leaders of these establishments come up with one excuse after another. Last week, the Auditor General reported illegitimate transactions of 20 billion Br. This problem has been alarmingly on the rise since 2014. Over time, government agencies with financial books in disarray are surging as SAMSON BERHANE, FORTUNE STAFF WRITER, reports.


Four years ago, the Public Procurement & Property Disposal Service (PPPDS) floated a tender to buy 338 million Br worth of transformers from Fedders Lloyd Corporation, an Indian-based company. The purchase was meant to be made on behalf of the then Ethiopian Electric Utility (EEU).

Now, in 2017, neither the Service nor the EEU have fully received the item from the company. Only half of the transformers worth 61 million Br were delivered so far, but not collected by the EEU as the specifications are different from the sample brought by the supplier.

As a result, the Service was compelled to seize the 277 million Br payment to the company. This, among others, has led to an audit gap of 352.2 million Br in the accounts of the Service last year.

“This is beyond our control, there is nothing we can do,” said Assefa Solomon, deputy head of public relations at the Service. “The case has made its way even to the court.”

This issue had presented itself as a challenge to the Service when it appeared before the Parliament over the past two years.

Again this year, things are getting no better at all. The Auditor General came up with the same findings in conjunction with 20 billion Br of illegitimate transactions discovered in 158 public institutions.

“The Head of Service should either return the money to the treasury account or pay the supplier and bring the necessary document,” a member of the standing committee for public account supervision told Fortune. “Otherwise, they will be accountable for their actions.”

The Service is not the only institution that is instructed by the Auditor General to tackle its financial irregularities. Last week, the report presented by the Auditor General for the preceding fiscal year unveiled massive financial gaps in 53 institutions.

The same report revealed that revenues of close to six billion Br remained uncollected by government institutions in the past fiscal year, twice that of 2014/15. This represents three percent of the budget for the same period. It is a record high compared to the previous five years, with the lowest recorded during 2012/13, at 1.3 billion Br.

Out of the total amount of uncollected revenue, about 1.6 billion Br had not been collected for an unknown period, and the rest of the money was left uncollected for more than a year.

Among institutions that have such problems, the Ethiopia Revenues & Customs Authority (ERCA) is the leading one, with uncollected revenue of 2.3 billion Br.

This is no mention of over 12.7 billion Br of illegitimate transactions by the Authority, which is equivalent to one-third of Addis Abeba’s annual budget. This happened as the country was struggling to raise the share of tax revenue to the budget by 26 billion Br in 2017/18 from 170 billion Br during the last year.

“We have seen the same problem by ourselves before the findings of the Auditor General,” said Ephrem Mekonnen, education & communications director at the Authority. “But, the complexities to get shreds of evidence make it difficult for us to fill the gap quickly.”

A Standing Committee member for Public Account Supervision at the parliament argues differently.

“Knowing the problems alone does not bear any fruit to the country, but taking action does,” he said. “The Authority is always known for such kinds of problems and giving similar reasons year-on-year.”

With the main aim of preventing such kinds of audit irregularities, a new directive was set by the Ministry of Finance & Economic Cooperation (MoFEC). The directive states the penalties and fines those high government officials and employees would face if they spend money without the proper procurement procedures.

Nonetheless, Gemechu says the consequence of the directive is yet to be seen since it was released after the Auditor General set the 2015/16 audit report.

The federal Auditor General has flagged audit irregularities in government institutions including ERCA since its re-establishment in 2010. But it seems the problem is only getting worse and worse.

Besides ERCA, the same problem of uncollected revenues was observed in the National Disaster Risk Management Commission, a federal government committee established to respond to crises and disasters. The Commission has failed to collect 2.3 billion Br on time.

“It is not from our budget. So, we cannot be held accountable for the money regional states consumed,” said Mitiku Kassa, commissioner at the National Disaster Risk Management Commission. “The money is apart from the 16.5 billion Br budget allocated to the regions to respond to the drought last year.”

On the other hand, a Member of Parliament, who is also a member of the standing committee for public account supervision, argues differently.

“The Commission must not forget its responsibility to control those institutions which are under its mandate,” he said.

Besides its responsibility to maintain a readily available cash reserve to combat disasters, the Commission is mandated to ensure that assets and financial resources of funds are properly used, according to its establishment proclamation.

Apart from the Commission, there are over 53 audited institutions which have serious audit gaps. However, seven institutions came up with a better audit result than the previous year, raising the number of establishments with a clean report to 73.

A look at the audit report of problematic institutions, public universities are among the front runners, misappropriating 3.7 billion Br in the year of 2015/16 alone. These institutions are known for spending monies not in line with the country’s legal framework.

Founded half a century ago as Haile Selassie I University College, Addis Abeba University (AAU) is the leading public university in such instances, having illegitimate transactions of 1.2 billion Br. With half of this amount, it is followed by Addis Abeba Science & Technology University.

Making payments for ghost workers, unlawful bids, unproven expenses, recording transactions inappropriately in financial statements, improper payments and flawed bookkeeping are the biggest problems of the university, according to the Auditor General.

“They are reluctant to take appropriate measures,” said Gemechu Dubisso, the Auditor General, explaining why audit gaps are more severe in public universities such as AAU. “No improvement was seen in the case of public universities as no measure was taken on them in the previous year.”

Gemechu relates the problem with the Ministry of Education (MoE), the body of government which is mandated to regulate public universities.

“The Ministry is not assisting and controlling the universities actually,” he said.

Ketema Mesqlea (PhD), general director of higher education at MoE, disagrees with the sentiment given by Gemechu.

“We cannot be fully accountable for such gaps as the universities are autonomous,” said Ketema. “Though, we are undertaking a study to solve such massive audit gaps.”

Also, two months ago, in a meeting organised by the Standing Committee for Public Account Supervision, AAU was blamed by the Public Procurement & Property Disposal Agency (PPPDA) for refusing to use less costly procurements.

“We administer large chunks of various societies, such as students. Thus, our expenses are usually unpredictable,” said Asemahegn Asres, interim director for the office of public relations at AAU. “To hasten procurements, we might be forced to work without the proper procedure.”

Asemahegn also relates that the massive audit gaps of the university come from a lack of evidence.

“It’s hard to get some documents as we have not been audited properly before 2014/15,” he said. “The University was even difficult to be auditable before 2007 – a time where academicians were involved in clearing the audit problems.”

Now, after the Auditor General directed the University, it has floated a tender to hire auditors who are competent enough to audit the University since 1994.

“After that, anyone who is involved in misappropriation will be accountable for his/her acts,” Asemahegn added.

Moreover, without proper regulations on institutions, the Auditor General is finding it more and more difficult to change the trend of audit irregularities as it is expected to. And without federal institutions such as public universities being able to come up with standards, citizens will be burdened with the ultimate costs.



By SAMSON BERHANE,
FORTUNE STAFF WRITER

Published on Jun 10,2017 [ Vol 18 ,No 893]


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