Audit reveals 3.5 billion unexplained gov’t expenditure- mainly from Defense

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The Reporter

-Slams state universities for procuring out of regulation 

-Immigration and mining sectors performance below standard

Federal Auditor General’s recent report to the House of Peoples’ Representatives indicated that a 3.5 billion birr spending found in the official records of nine government organizations were totally unexplainable either by existing financial documentations or other forms of information from the spending organizations.

The auditor general has been expressing his concern over the existence of such types of unidentified spending in the official government system in the past. And oftentimes, the Ministry of Defense (MoD) has been a prime mention in incidences of unexplainable expenditures in the system. According to the report that summarized the audit, work conducted on 124 federal ministries and agencies operating under the national budget system, 3.2 billion of this unexplained spending is from the side of the MoD, while Information Network Security Agency (INSA) was second in this list, with 187.9 million birr followed by some of the newest state universities like Wello and Mizan Tepi and Semera. The report indicated that the agencies themselves could provide the required information to back the spending and it made it quite difficult to assess the validity of the spending or whether it had been spent for the intended purposes.

In general, the auditor general assessed the spending, revenue and performance of the various government institutions in the last budget year with particular focus on the legality and the standards applied in the financial records. The audit report shows that many state universities’ procurement activities are done completely outside of rules and regulations. All in all, some 30 government agencies that receive formal government budget had, in one way or  another, made procurement decisions worth 353.6 million birr out of the rules and regulations in the period in question. Jimma University tops this list by procuring 240.2 million birr worth of products out of regulation, while INSA’s procurement sums up to 36.1 million and Mekelle, Arbaminch, Mizan Tepi and Wello Universities had a fairly large share in the out-of-regulation procurements conducted in the budget year. Some of these procurements were conducted without floating the proper bid process or without collecting enough pro forma for those procurements needing pro forma. The Audit also said stronger measures ought to be taken in these regards.

Some state universities were frequently cited by the report as cases of out of regulatory payments and procurement practices. Jimma University in particular was everywhere in the audit report. Jimma was one of the top citations for 77.6 million birr payment made that completely deviates from the rules and regulations of the public finance in the country, while Arbamich and Welita Sodo Universities were also quite high in this list, with 34.8 million and 10.8 million birr, respectively. These were the types of payment that should never have happened if the rules and regulation were upheld by these institutions. Particularly, the universities were found making overtime payments and position allowances, which are not allowed by the Ministry of Civil Services (MoCS) in the first place.  Revenue and Customs Authorities (ERCA), on the other hand,was found paying overtime payment to its employees in all of its six branch offices, even after MoCS’s circular explicitly restricts it, the report said.

Still on the spending side, in 11 government institutions the audit has also come across a total of 1.39 billion birr worth of payments made in excess of the correct value of the products and services procured. In most of these cases, it was observed that some of the institutions have opted for more expensive procuring options in the market for no visible reason. This in turn resulted in excess payments to the product and services purchased by the agency/ministry. In some other instances also, payments have been made more than once for a product that has been paid for already; not to mention exaggerated and unlawful allowance payment to employees. In fact, 851.6 million birr of the excess payment is concentrated in only four of these institutions, said the report.

The annual report presented to the House last Tuesday by Gemechu Dubisso, auditor general, also included the revenue collecting side of the agencies/ministries, painting a picture as to what the public finance sector looks like. In this regard, a sum of 1.36 billion birr collectibles is yet to be balanced by the government agencies/ministries. The total sum was observed in the books of some 57 agencies where the Ministry of Education (MoE) is leading with 401.8 million birr followed by MoFA and government procurement agencies. Furthermore, between ERCA’s head office and its six branch offices, 866.2 million birr accumulated revenue, which should have been collected from tax, interest and penalties, was also unearthed by these audits. Although much less than the receivables, the audit also found out a lot of payables in these agencies/ministries in order of 419 million birr. Here as well, the MoD is at the top of the list with 173.8 million birr, followed by 159.3 million of the MoFA, where a large sum of money is expected from these two companies.

Gemechu’s reports have also shown that there was 212.4 million birr that was used out of the original budget line. Here again the state universities like Bahir Dar, Hawassa and Welita Sodo were accused of switching around money out of the original allocation. In fact, the auditor general’s investigation also did not refrain from bashing the Ministry of Finance and Economic Development (MoFED). It said that if a problem surfaced in the process of an audit, it is the responsibility of the auditor general to notify the agencies/ministries so that they can make corrections in their documentation and reporting. This feedback will also be sent to MoFED so that when the final report arrives at MoFED to be part of the consolidated country report, it could be crosschecked for the particular problems and if corrections have been made. But, Gemechu’s report showed MoFED’s indifference to checking these before including them in the final report.

One addition to the financial part, the auditor general also does some investigation in the area of performance. The performance audit is there see if government spending actually met its target. Among the sectors explored under the performance audit, high level customer dissatisfaction was reported in passport and travel document provision, which is offered by the National Intelligence Security Service (NISS). The average number of days to get a passport was observed to be more than 90 days whereas three days is enough to do the job, the report said. And, the report said, 60 percent did not know passports were given in regional branch offices.

On a different note, the performance report has also identified some serious concerns regarding the mining sector. Some of the main shortfalls were in producing documentation to back exploration licenses that the ministry has issued to companies thus far. Hence, there was no visible documentation for 67 percent of exploration licenses issued that the companies indeed fulfill all criteria to undertake the job. Furthermore, no documentation can be produced by the ministry on the status of 81 exploration licenses, or whether the licenses were renewed, canceled or even if warnings were issued to this effect. According to the rules, exploration licenses have to be renewed yearly, after the first three was finished but ministry had no information on 81 of these companies thus far. Even much worse is how 20 of the 21 mining companies audited did not make any royalty payments to the government. It is to be recalled that the rate (royalty) was raised from 2 percent to 5 percent a few years back.