Poor governance, weak service delivery dog local authorities

Sikhumbuzo Moyo, [email protected]
POOR corporate governance and weak service delivery concerns continue to ruin the performance of local authorities across the country with the latest Auditor General’s report tabled before Parliament showing that 90 councils failed to comply with international financial reporting and accounting standards.
In the report, acting Auditor General, Mrs Rhea Kujinga, cited weak internal control of inventory, absence of bank reconciliations, ghost workers, poor cash management, poor revenue collection, and debt recovery, among others as top bottlenecks.
She also said a majority of local authorities did not maintain comprehensive asset registers, which would have enabled accountability of public assets.
Mrs Kujinga said some local authorities had salary arrears, which were not supported by a list of employees.
Further, the amounts owed were not reconciled to the payroll and the ledger accounts, as well as to the financial statement figures resulting in unresolved variances. In addition, some local authorities’ management were awarded allowances and benefits, which were not subjected to taxation as required by law.
Mrs Kujinga said while local authorities were experiencing growth, facilities have not been upgraded to match the growth.
“Water, sewerage infrastructure and waste management were not being upgraded to match the growth,” she said.
“Out of 92 local authorities, only two councils, which include Marondera Rural District Council and Goromonzi RDC in Mashonaland East were exempted from the issues raised in the report.”
Mrs Kujinga said 90 councils failed to comply with International Financial Reporting Standards (IFRSs) and International Public Sector Accounting Standards (IPSASs).
The audit covered aspects of governance issues, revenue collection and debt recovery, management of assets, procurement of goods and services, employment issues and service delivery.
Mrs Kujinga said the primary purpose of financial statements is to provide relevant and reliable information to users about a reporting entity’s financial position and financial performance.
The adverse report comes against the background of President Mnangagwa’s “Call to Action, No Compromise to Service Delivery” blueprint for local authorities, which was launched in November last year.
“In this report, I have issued two unmodified/ clean opinions, seven, disclaimer of opinions, twenty-nine qualified opinions and fifty-eight adverse opinions for non-compliance with the standards, in particular, Ipsas three that is accounting policies, changes in accounting estimates, Ipsas 17, which is property, plant and equipment, Ipsas four, which is the effects of changes in foreign exchange rates and because of, inter alia, incomplete asset registers, unsupported journals, incomplete records of inventories, unsupported expenditure and suspense accounts,” reads the report.
The report stated that only Goromonzi RDC and Marondera RDC received an unqualified audit opinion.
Harare, Mutare and Masvingo councils have adverse audit opinions while Victoria Falls’ accounts were qualified.
Mrs Kujinga did not express an opinion on Bulawayo City Council’s financial statements, noting that the city’s reporting framework was not explicit as to whether it was Ipsas or IFRS while its financial statements were prepared with reference to the Urban Councils Act (Chapter 29:15) and the Public Finance Management Act (Chapter 22:19).
“As a result, the financial statements were not suitable for other purposes as they may lack comparability and may not be useful to the users,” she said.
In financial terms, an adverse audit opinion means the financial statements contain material mis-statements that are not confined to, or mis-statements represent a substantial portion of the financial statements.
Disclaimer of opinion is when the auditor has not been able to obtain sufficient evidence to provide a basis for an audit opinion. The lack of sufficient evidence is not confined to specific or represents a substantial portion of the financial statements.
A qualified audit opinion means the financial statements contain material mis-statements in specific amounts, or there is insufficient evidence to conclude that specific amounts included in the financial statements are not materially mis-stated and an unqualified audit opinion is when the financial statements contain no material mis-statements.
On governance issues, Mrs Kujinga said that there are instances of weak internal control over inventory, cash management, absence of bank reconciliations, unsupported adjustments, incomplete records and late submission of financial statements.
“Late submission of financial statements creates gaps for accountability and this has resulted in most local authorities not being able to avail supporting documents and reconciling variances noted during the audit.
“In addition, the majority of the local authorities were lagging in embracing technology as most of their business processes were still manual or partially automated,” reads the report.
The report stated that local authorities are losing revenue due to the absence of complete/updated databases for their various revenue streams. Most of the local authorities’ revenue collection processes were not automated.
“I noted instances of non-billing of revenue and unresolved variances between the revenue records and the reported figures in the financial statements. Most councils were recognising revenue on a cash basis because of not billing, therefore, their receivables were incomplete,” said Mrs Kujinga.
The management of public funds is governed primarily by the Constitution of Zimbabwe Amendment (No. 20) Act, 2013 and the Public Finance Management Act (Chapter 22:19).
Section 37 of the Public Finance Management Act (Chapter 22:19) requires all public entities’ financial statements to be prepared in accordance with generally accepted accounting practice (Gaap).
“This is interpreted as comprising IFRSs and IPSASs. IFRSs and IPSASs comprise interpretations adopted by the International Accounting Standards Board (IASB) and the International Public Sector Accounting Standards Board (Ipsas), which sets standards so that financial statements can be consistent, transparent and comparable around the world,” said Mrs Kujinga.
“The issues I have raised above, if not addressed, service delivery and efforts made to enhance transparency and accountability through various instruments may be compromised.
“Concerted efforts from those charged with governance are required to put in place measures to address reported weaknesses to enhance transparency, accountability, good corporate governance and service delivery.”
In the report, the AG reported 81 findings in respect of revenue collection and debt recovery with the local authorities losing revenue due to the absence of complete or updated databases for their various revenue streams.
Commenting on the findings, association of Rural District Councils president, Councillor Gideon Shamu said most local authorities were facing resource challenges to implement some key systems meant to enhance service delivery.
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