The Ministry of Agriculture came under fire for ignoring recommendations made by the auditor-general’s office to rectify its accounts and for giving false information to Parliament’s Public Accounts Committee that it had addressed concerns raised by the auditor-general when it had not.
According to a report presented to Parliament by Mufakose Member of Parliament Paurina Mpariwa, the permanent secretary Ringson Chitsiko had told the committee that the ministry had resolved problems surrounding different sets of figures given as the ministry’s expenditure when it had not.
The report was looking at the ministry’s budget for the year ending 2011 and the period before that especially from 2009 when the country introduced dollarisation.
The ministry exceeded expenditure on 58 line items though it did not overspend on the overall budget but the committee said this should not be allowed to continue.
It issued certificates for assets that the ministry had not physically verified and paid US$3 070 to 11 employees who had since left the ministry raising concerns about how many ghost workers the ministry was paying.
The Ministry also failed to disclose a debt of US$3.7 million for farming inputs and did not even know who the beneficiaries were.
It also failed to disclose loans made to the Agricultural and Rural Development Agency and the Grain Marketing Board which totalled over US$32 million.
Below is the full report:
FIRST REPORT OF THE PUBLIC ACCOUNTS COMMITTEE ON THE EXAMINATION OF THE APPROPRIATION ACCOUNTS FOR THE MINISTRY OF AGRICULTURE, MECHANISATION AND IRRIGATION DEVELOPMENT FOR THE YEAR ENDED 31 DECEMBER, 2011
MS. MPARIWA: I move the motion standing in my name that this House takes note of the First Report of the Public Accounts Committee on the Examination of the Appropriation Accounts for the Ministry of Agriculture, Mechanisation and Irrigation Development for the year ended 31st December, 2011.
MR. CHIDAVAENZI: I second.
MS. MPARIWA: Thank you Mr. Speaker Sir. I have the privilege to present the First Report of the Public Accounts Committee.
1. INTRODUCTION
The Report of the Auditor-General for the financial year ending on 31st December, 2011 was tabled in Parliament in November 2013 in terms of Section 12 (2) of the Audit Office Act [Chapter 22:18]. As provided for in Standing Orders No. 63 of the National Assembly Standing Orders, the Committee examined the Ministry of Agriculture, Mechanisation and Irrigation Development on the observations made by the Auditor-General on the Ministry’s accounts for the financial year ended 31st December 2011. Generally, the Auditor-General in three successive years from 2009 had been issuing a disclaimer of opinion on the Ministry’s accounts, a state of affairs which implies that there was fundamental lack of documentation to an extent that an audit opinion could not be expressed. This was largely attributed to breakdown of the Public Finance Management Systems (PFMS).
The Auditor-General raised 14 observations on the Ministry’s accounts for 2011. The Committee was concerned to note that most of the observations had been recurring since 2009 which is an indication that the Auditor-General’s reports are not being taken seriously by the Ministry. This Report therefore, is a summary of the Committee’s findings, observations and recommendations on the Ministry’s accounts for 2011 for adoption by the House.
2. OBJECTIVES OF THE COMMITTEE
In carrying out an examination on the Ministry’s accounts, the Committee sought to fulfill the provisions of Section 299 of the Constitution of Zimbabwe which mandates Parliament to carry out oversight over the management of resources and in specific terms to satisfy itself that all revenue is accounted for; all expenditure has been properly incurred; and any limits and conditions on appropriations have been observed. Over and above these objectives, the Committee also compels the Ministry to take corrective action and put in place mechanisms to prevent recurrences in future, as a matter of urgency.
3. METHODOLOGY
The Committee received oral evidence from the Secretary for Agriculture, Mechanisation and Irrigation Development and officials from the Ministry. It requested documentary supportive evidence of action taken to address audit observations that were analysed by the Office of the Auditor-General and considered by the Committee. The Committee also tasked the Office of the Auditor General to conduct a fact finding visit to the Ministry’s offices in relation to some building materials that were observed as wasteful expenditure and a wreckage of a vehicle that was involved in an accident and written off without following laid down procedures. The Committee also appointed a team of three Members who conducted a verification visit in relation to the accident damaged vehicle. The Committee deliberated on the evidence gathered and produced this report with recommendations that need to be implemented by the Ministry.
4. FINDINGS AND OBSERVATIONS OF THE COMMITTEE
4.1 Unreliable Accounting System
For the second year in succession, the Audit observed unreliable accounting system as evidenced by the existence of three different expenditures figures which the Ministry failed to reconcile. In 2011, the Appropriation account reflected a total expenditure of $154 070 999, the Sub Paymaster General Account, a total of $142 465 122 while the PFMS had a total of $146 521 040. In the previous year in 2010, the Appropriation account reflected an amount of $215 511 694, the PFMS had a figure of $112 730 411 while the Sub Paymaster’s bank statement showed an amount of $205 876 312. Given such circumstances; the Auditor General could not ascertain the correctness of the expenditure figures for the 2010 and 2011 financial periods. There is therefore, a possibility that the Ministry’s total expenditure might include fraudulently processed vouchers and as a result, Government might be paying for services not rendered or goods not delivered to the Ministry.
When the Secretary for the Ministry, Mr R. J. Chitsiko and his officials appeared before the Committee, he attributed the discrepancies to constant breakdown of the PFMS experienced during the period 2009 to 2012. He further pointed out that the Treasury had made direct payments to the Grain Marketing Board (GMB) lenders and the amount was neither uploaded on the Ministry’s vote as a provision nor was the payment made through the Sub Paymaster General Account. The Ministry indicated that, following interventions by the Accountant General’s Office which sought to address all system related problems across the Ministries, the system is currently up and running and the 2011 and 2012 figures were eventually reconciled. To prevent future recurrences, the Secretary informed the Committee that reconciliations were being done on a monthly basis.
The Committee however, noted with great concern that contrary to these claims by the Ministry, the 2012 accounts were qualified on the same grounds and there was no evidence that reconciliations were being done on a monthly basis. By presenting falsehoods before the Committee, the Ministry was not taking the Committee and the Auditor General seriously. It is now very difficult for the Committee to understand whether there is a real challenge or it could be just a matter of attitude on the part of the Ministry. Given that the system was reported to be up and running in 2012, the Committee sees no reason why the Ministry was failing to carry out reconciliations on a monthly basis.
4.2 Unauthorised Excess Expenditure
The Ministry incurred excess expenditure of $14 564 569 across 58 line items though within the overall budget allocation. The Secretary informed the Committee that the observation was occasioned by Treasury releases which did not match the requests by the Ministry. When Treasury disbursed funds, the Ministry would then move resources from one item to another as it deemed fit resulting in these excesses. Though the Ministry did not spend in excess of the total budget, there is a danger that in future, if the Ministry continues with the practice, it would result in overdrafts on the Sub Paymaster-General Account and subsequently attracting bank charges that were not initially budgeted for. Considering that the observation was also raised in the previous year in 2010, the Committee is concerned to note that there could be serious expenditure control weaknesses in the Ministry which if not addressed, were likely to continue in future. It also raises issues of non-adherence to laid down virementing procedures and at the same time raising questions of whether the Auditor-General’s recommendations were being taken seriously or not by the Ministry.
4.3 Management of Public Assets
The Committee noted that the Accounting Officer for the Ministry had submitted an annual Departmental Assets Certificate stating that the assets under the Ministry had been physically compared with records for at least once during the 2011 financial year. However, the audit observed that the validity of such a certificate could not be ascertained as assets at the Horticultural Research Institute in Marondera were not physically compared with records as evidenced by some of its assets that were not recorded in the assets register. The Departments of Engineering and Mechanisation; Livestock Production and Development and Veterinary Technical Services did not maintain up to date assets registers while the Engineering and Mechanisation department did not submit an asset certificate for Manicaland province.
The Ministry indicated to the Committee that due to financial constraints, officers from the Head Office could not travel to districts and provinces to assist in the verification of assets and relied on what had been transmitted by those stations to put up the Departmental Assets Certificate. The Committee noted with concern that the Ministry was not prioritising the physical verification of assets as the same observation was raised in 2010. With such a state of affairs, losses can occur undetected and it will be difficult to identify assets that are old, unserviceable and needed replacement.
4.4 Payroll Reconciliations
The audit observed that the Ministry for the second year running failed to perform monthly payroll reconciliations, that is, comparing pay sheets to Ministry records. As a result, the Auditor-General could not ascertain the correctness of the wage bill and consequently Government might be paying salaries to ghost workers unknowingly. Due to failure to conduct monthly payroll reconciliations, the Ministry continued to pay salaries amounting to $3 070 to 11 former employees who had left the service of the Ministry without giving sufficient notice.
The Ministry in response to the observation attributed its failure to carry out monthly payroll reconciliations to delays in getting returns from the Salary Service Bureau. Failure to cease salaries for officers who had left the service of the Ministry was attributed to delays in relaying relevant documentation by its departments. In addressing the observation, the Ministry indicated that it had requested for an additional post of the deputy director level for its various departments which it said had alleviated the problem. Evidence was also availed to the Auditors indicating that the Ministry had raised disallowances for the officers who had irregularly received salaries when they had left theservice of the Ministry. The Committee was pleased to note that the observation had been addressed.
4.5 Failure to Respond to Audit Observations
4.5.1 Other Capital Liabilities- Agricultural Inputs Borrowed from Seed Houses
The Audit had observed since 2009 that the Ministry had an outstanding debt of $3 700 000 from 2008 related to supply of inputs by some Seed Houses whose beneficiaries were not disclosed to auditors for examination to ascertain whether the inputs were distributed to targeted farmers. In his response to the observation, Mr Zata, the Director of Finance in the Ministry informed the Committee that the debt was incurred under the Operation ‘Maguta/Inala’ which he said was a stand-alone programme initially funded directly from Treasury and later on by the Reserve Bank of Zimbabwe when Treasury failed to continue funding it. He further revealed to the Committee that on winding up of the programme, the figure in question was then transferred to the Treasury through the Ministry of Agriculture, Mechanisation and Irrigation Development and at the time of receiving evidence from the Ministry, it was reported that the verification of the $3 700 000 was still in progress. Regarding the list of beneficiaries of the inputs, the ministries indicated that the auditors should find out from the officers who were responsible for the operation.
Without knowing those who benefitted from the inputs, it will be very difficult to rule out possibilities of abuse of public funds and as such, the facts of the matter should be investigated by the Ministry and be fully accountable for public funds. The other concern of the Committee is that failure by Government to pay the long outstanding debt to Seed Houses jeopardises Government’s creditworthiness and in future, will not be able access such a facility. The huge debt also cripples the operations of the Seed Houses and in turn, compromises the country’s food security standing.
4.5.2 Contingent Liabilities- Guarantees
The Audit in 2009 observed that the Ministry in its return had not disclosed the outstanding loan of $13 854 245 obtained by the Agricultural and Rural Development Authority (ARDA) from Iran and guaranteed by Government through the Ministry of Agriculture Mechanisation and Irrigation Development. There were further guarantees in 2010 to the Grain Marketing Board worth $19 000 000 which were also not disclosed in the 2010 return submitted for audit. When the Ministry appeared before the Committee, it attributed omission of the amounts guaranteed to parastatals to loss of institutional memory within the Ministry’s Finance directorate. The Director of Finance in the Ministry argued that the officer who prepared the returns was not aware of the transactions which in the Committee’s view were an admission of the dereliction of duty on his part as the Finance Director. The fact that some of these issues had been outstanding since 2009 is clear evidence that the Finance Director was not taking his duties of proper management and safeguarding of public resources seriously.
Further written submission by the Ministry indicated that both the GMB and ARDA loans had now been disclosed though supporting documents showed that efforts were still underway to reconcile the GMB figures. The Committee observed that the Ministry has problems in maintaining proper records for contingent liabilities which makes it difficult to monitor usage of money guaranteed and the repayment of loans.
4.5.3 Public Financial Assets- Disclosure of Government Stakes
The Ministry also did not respond to observations made by the audit relating to non-disclosure of Government stakes in nine parastatals and companies under the control of the Ministry. Such a state of affairs makes it difficult to verify whether there is any supervision by the Ministry on those parastatals. Furthermore, one cannot confirm ownership and existence of Government stakes in those enterprises. Still the Director of Finance in the Ministry gave the same excuse of loss of institutional memory when in terms of the Public Finance Management, it is his duty to prepare financial statements for the Ministry.
Though the Ministry indicated that the stakes of Government in the nine enterprises had eventually been disclosed, no evidence was presented to prove that such stakes have been disclosed. The Committee is concerned with the conduct of the Ministry of not responding and acting on audit observations on time.
4.6 Violation of Tender Procedures in Procurement of Goods and Services
The audit revealed that the Department of Irrigation Services under the Ministry had flouted tender procedures through procurement of goods and services amounting to $280 225 which is above the $10 000 informal tender limit. The Department further sourced quotations from six companies owned by one supplier resulting in $872 204 being paid to one vendor contrary to Statutory Instrument 171 of 2002. When the Ministry appeared before the Committee, the Director of Finance acknowledged the irregularities and indicated that the first case was an act of fraud that was first picked up by the internal auditors and then reported by the external auditors. Regarding the six companies belonging to one supplier, he pointed out that it was not possible for the officers to pick that the companies belonged to one supplier as they were all registered as different companies with the State Procurement Board. For the officers who flouted tender procedures, he indicated that they had since been discharged from the service of the Ministry for such conduct.
The Committee is however concerned that when tender procedures are violated in the procurement of goods and services by ministries, there is a danger that due process is not undertaken and Government might be buying at inflated prices well above the market prices and underhand dealings involving the suppliers of goods and services and Ministry officials cannot be ruled out. There is therefore, a likelihood of Government unnecessarily losing scarce resources through such conduct by officials. The Committee though is pleased to note that the Accountant and the Administration Officers who were implicated in violating tender procedures had faced disciplinary action and have since been discharged from the service of the Ministry.
4.7 Debtors
It was observed by the audit that 107 transformers and 440 pumps were issued to various farmers throughout the country on a cost recovery basis during the Zimbabwean dollar era. Up to 2012, the values of the equipment were not disclosed to farmers, yet the equipment were bought with a Chinese loan worth $200 000 000 which needed to be serviced. The Ministry indicated to the Committee that it was difficult to place value on the equipment during the hyperinflationary period and as such farmers were informed that they would be advised of the value when the Zimbabwean dollar stabilises. After dollarisation, the Ministry indicated that it sought guidance from the RBZ on the equipment loaned to farmers which then requested a list of beneficiaries and equipment issued for consolidation. It further highlighted that the equipment was issued by the Irrigation Services Department as part of the RBZ quasi fiscal mechanisation programme and the repayment of the loans were to be made to the RBZ. The Ministry also indicated that the farmers did not sign contract forms so they were not servicing the loans. The values for the pumps were not ascertained. As for the transformers, the Ministry indicated that they were rented out to farmers who were paying fixed monthly charges to ZESA depending on the size of the transformer. The Committee noted with concern that the Ministry had taken long to bill the farmers and there is a danger that the debts might end up being prescribed in terms of the Prescription Act [Chapter 8:11] and as a result, Government might fail to recover funds owed by farmers.
4.8 Departmental Assets Certificate for the Department of Tsetse Control Services
The Ministry submitted an annual asset certificate stating that the Departmental Assets were physically compared with records yet the Audit observed that the Master Asset Register was last updated in 2010 and the inventory lists were also last updated in January 2010. When the Ministry appeared before the Committee it pointed out that the observation was occasioned by a missing page on the Master Asset Register as it was not filed in the Register Book. The Committee is pleased to report that the departmental assets for the Ministry had been updated and the Register is currently in order.
4.9 Illegal Take Over of the Research and Quarantine Farm under the Department of Veterinary Technical Services
The Audit had since 2009 observed the illegal occupation of the Department’s farm in Mazowe and the irregular transfer of its Mbizi Quarantine Farm in Mwenezi. As a result, the Department’s capacity to monitor the spread of diseases, for instance, animals imported via Beitbridge Border Post, had been hampered. The Ministry informed the Committee that Mbizi farm was occupied by Mr Taruvinga on the 99 lease agreement issued by the Ministry of Lands and Rural Resettlement and engagements with the Ministry of Lands and Rural Resettlement were underway to have the lease agreement reversed. The Ministry further highlighted that the farmer was initially issued with an offer letter in 2005 which was eventually reversed following engagements with the Ministry of Lands and Rural Resettlement. The 99 year lease therefore came as a surprise to the Ministry.
With regards to illegal occupation in Mazowe, the Ministry indicated that the illegal settlers were evicted on the farm several times but they kept on coming back on the farm. As a result of these occupations and several others throughout the country, the Ministry indicated that five million head of livestock was at risk. The Committee failed to understand why Mr Taruvinga was issued with a 99 year lease when initially the offer letter was withdrawn. The Committee therefore, expressed concern that an individual farmer under very suspicious grounds had been allowed to occupy the farm which is of strategic value to the nation and the matter needed to be investigated and find out who exactly is Mr Taruvinga and why the whole matter had been handled that way. The two ministries should engage each other seriously to resolve the occupations as a matter of urgency so that the department may continue to discharge its mandate which is of strategic national importance.
4.10 Inadequate Transport Arrangements for the Agricultural, Technical and Extension Services
The Audit revealed that, since 2010, the department had only 469 motor cycles for the 5 139 Extension Officers to provide extensions services to 1 940 912 farmers throughout the country. It was further observed that the motor cycles increased to 930 in 2011 after the purchase of an additional 461. The Ministry acknowledged the challenge and indicated that it had also distributed 3 000 bicycles which still fall short of the 5 139 extension workers. The Ministry lamented non release of budgetary support towards the cause by the Treasury and the Ministry had proposed in 2012, a special ownership scheme which would operate as a revolving fund but the idea was turned down. In view of the fact that Agriculture is the backbone of the country’ economy, the Committee is of the view that extension services are key to providing timely services to farmers, especially with an increased number of people getting into farming sector following the land reform programme. The Committee further is of the opinion that the success of the agriculture sector hinges on the provision of extension services to farmers, especially given the impact of climatic changes.
4.11 Gifts Legacies and Donations
The Department of AGRITEX under the Ministry in 2008, received a donation of 332 motor cycles from the RBZ which were distributed to Extension Officers without registration numbers. Authority to accept the donation was also not sought from Treasury as required by law. It was further observed by the Audit that the Extension Officers were maintaining them from their personal resources. When the Committee sought an explanation from the Ministry, it argued that it had not thought of the necessity of seeking Treasury Authority since RBZ is a Government arm and had purchased the motor cycles on behalf of Government. The Ministry pointed out that the Extension Officers were maintaining the motor cycles from their own pocket due to unavailability of funding from the fiscus.
Given that the purchase of the motor cycles by the RBZ was not done within the budget approved by Parliament and Treasury had not advanced the funds to the RBZ for the procurement, it is difficult for the Committee to understand the basis for the explanation advanced by the Ministry. This could be the reason why the Ministry had ignored the Auditor-General’s observation and decided not to take action since 2009. The Committee in 2009 observed that a number of ministries received some assets from the RBZ and did not seek Treasury approval for accepting the donations. However, after the issue was raised by the audit most of the ministries eventually sought such approval in line with the Auditor General and PAC recommendations. In view of the fact that the Ministry has information regarding the chassis and engine numbers for the motor cycles, the Committee sees no reason why they cannot be registered.
4.12 Management of Public Resources- Department of Agricultural Engineering and Mechanisation
The Audit observed that the Department had in 2011 received some assets as donation from the Korean Government in September 2011 without Treasury authority. During the 2009 Annual Audit, it was observed that vehicle GAG 599 under the Department was involved in an accident and written off without Treasury authority as required by the Public Finance Management Act[Chapter 22:19]. The Director of Finance informed the Committee that Treasury authority to accept the donation from the Korean government was not sought on time as the equipment had some structural defects that needed to be sorted out before the Korean Government could hand over the equipment. He informed the Committee that after the issue was sorted out, the authority was eventually sought and approval was granted in February 2013.
In relation to the vehicle GAG 599, he informed the Committee that it was involved in an accident in Masvingo whilst in the hands of an unauthorised driver who was accompanying the authorised driver. The Director of Finance indicated to the Committee that a board of enquiry was conducted and recommended that the vehicle be written off and charges be preferred against the officers involved. He refuted that the vehicle was written off. He also highlighted that a decision was made to implement the recommendation of the board of enquiry regarding the writing off of the vehicle. He explained that CMED was not able to make an assessment of the damaged vehicle as the damaged board was left in Masvingo while the engine was taken to Harare.
The Committee found out that no charges were preferred against the officers and it was also not clear to the Committee why the engine was taken to Harare leaving the body in Masvingo. The Committee tasked the officials from the Auditor-General to undertake the verification visit at the Ministry’s Offices in Haticliffe. The officials found out that the damaged body was eventually transferred to Harare but could not verify the engine and chassis numbers as the vehicle was not registered. Three Members of the Committee also conducted a verification visit thereafter. Then Members inspected the engine and suspected that it was being used on another vehicle. The data plate was removed on the damaged body so it could not be matched to the engine.
5.0 CONCLUSION AND RECOMMENDATIONS BY THE COMMITTEE
The Committee concluded that the time taken by the Ministry to resolve audit issues showed high disregard of the Office of the Auditor General and is totally unacceptable. In fact, the Director of Finance with the Ministry, judging by the manner in which he responded to issues during oral evidence, raises questions of competence for the job. The Secretary for the Ministry after presiding over the Ministry for more than six months professed ignorance of issues raised on his Ministry’s accounts. The Committee strongly feels that the attitude of Government officials should change and that they should develop a culture of being accountable for the way they manage public resources as required by the Constitution of Zimbabwe. The Committee with the indulgence of the House compels the Ministry to implement the recommendations outlined below and report back to the House within six months of the adoption of this Report.
5.1 Specific Recommendations
5.1.1 Unreliable Accounting System
The Ministry should put in place clear controls to prevent system variances in future and monthly reconciliations between bank statement PFMS balances should be religiously carried out in order to detect errors of omission or commission.
5.1.2 Unauthorised Excess Expenditure
Though the Ministry’s expenditure was within the overall vote, effective control system must be put in place to ensure that unauthorised excess expenditure within line items does not recur in future.
5.1.3 Management of Public Assets- Annual Departmental Asset Certificate
The Ministry should prioritise physical verification of assets and should maintain an up-to-date asset register in compliance with Treasury Regulations
5.1.4 Other Contingent Liabilities- Debt to Seed Houses
Since the Ministry had assumed the debt owed to Seed Houses, it should engage the Seed Houses, the Reserve Bank and officers who were responsible for Operation Maguta and get all the details relating to the exact figure of the debt and the beneficiaries of the inputs.
5.1.5 Contingent Liabilities- Guarantees
The Ministry should provide documentary evidence to prove that the GMB guarantees had been disclosed and as matter of procedure it should maintain proper records of contingent liabilities.
5.1.6 Public Financial Assets- Disclosure of Government Stakes
The Ministry should provide documentary evidence to prove that Government stakes in parastatals is being disclosed.
5.1.7 Procurement of Goods and Services
The State Procurement Board should strike off from the register of government suppliers, the supplier who had registered six companies in different names on grounds that he or she was engaging in unfair business practices.
5.1.8 Debtors
The Ministry should seriously engage the RBZ and come up with the value of the pumps to facilitate recovery of the outstanding debts.
5.1.9 Research and Quarantine Farms
The Ministry should seriously engage the Ministry of Lands and Rural Resettlement and resolve the issues of the illegal occupants and the reversal of the 99 lease given to Mr. Taruvinga with regards to the Mazowe and Mbizi Farms respectively.
5.1.10 AGRITEX- Mobility of Extension Officers
The Ministry should procure motor bikes for all extension officers through the establishment of a revolving fund in order for them to be mobile and provide a critical service to the nation. Allowing officers to assume ownership over the motor bikes would also motivate them to properly maintain them.
5.1.11 Gifts, Legacies and Donations
The Ministry should seek Treasury authority to accept the donation and engage the Ministry of Transport and Infrastructural Development to facilitate registration of the motor cycles.
5.1.12 Management of Assets -Accident Damaged Vehicle
The Ministry should penalise officers for unauthorised use of vehicle and embark on the process of having the vehicle written off in terms of Treasury Instructions.
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