Auditor General’s report shows alarming increase in embezzlement

Auditor general Obadiah Biraro. (photo Bruno Birakwate)

The presentation of the annual report of auditor general in parliament is a much-awaited event. Yet every year, there is disappointment when it emerges that not much improvement has been made, and public money keeps on being spent irresponsibly, without authorization or documentation, or worse, it is stolen.

It was not different on Friday when Obadiah Biraro appeared before the House to present the report for the fiscal year 2010-2011, which covers 331 institutions and districts (73% of national budget).

Embezzlement, disrespect of tendering process and the lack of bank reconciliation were among the mistakes that reappeared in many institutions. This raised concern among the MPs, who noted that their recommendations on previous reports, the auditor general’s advice and certain mechanisms in place to improve financial management, seem to be ignored by many institutions.

And yet they would benefit from it, because as is shown by the report, management of public funds is still a big problem, even when it comes to the basics: some institutions continue to exceed their budget, while others are apparently not capable of even spending half of the money allocated to them.

Bookkeeping is another challenge. In total, the AG found more than Frw 2 billion on the list of payables (fees to be paid by the government) for which it was not clear who was to be paid how much. And more than Frw 3 billion in institutions like RDB and the Rwanda National Police was registered in receivables while to all appearances it concerned payables.

According to Biraro, the excuse given by accountants to explain such blatant errors is that they do not master the International Financial Management System (FMIS) that they are supposed to be using.

Other basic accountancy practices also continue to be disregarded: for all the audited institutions combined, around Frw 6 billion was registered in expenditures without any supporting documents. And in other cases, the books indicated that money was deposited in the bank, but the corresponding bank statement was nowhere to be found.

Some institutions also use their budget quite liberally. For instance, Frw 400 million was given to staff in form of bonuses, but without proper authorization. Top of this list was Orinfor, which accounted for 73% of the total sum. As the AG reported, this was attributed to the fact that Orinfor doesn’t have a board of directors since several years.

“Saying that ORINFOR has since May 2009 never had a board of directors and that this results in the mismanagement of public funds, those are false excuses,” reacted Senator Narcisse Musabyeyezu, who pointed out that ORINFOR mismanaging the public funds is not a new issue. “The problem relies in its ‘acting staff’: director general is acting, as well as the chief editor of television and the director of press and cine-photo.  We recommend that whoever is concerned be summoned by the Public Accounts Committee.”

In a related type of mismanagement, around Frw 47 million of salary advances were granted without the permission of MIFOTRA – something the MPs found unbelievable. “How can an institution give such privileges, from what budget do they get money?” one of them wondered.

However, not all mismanagement was related directly to money. One example was that of King Faisal hospital, where medicines worth more than Frw 1 billion were lying idle because the hospital had no use for them. They were then given to Camerwa, which manages the country’s drugs stocks, to sell them, but only 7% of the medicines actually found a buyer. Deputies were flabbergasted, asking how this could happen in a country where pharmacies lack medicines. In addition, at Camerwa itself expired medicines were found.

As usual, cases of outright embezzlement also happened, but it was alarming to see that in the 2010/11 reports the problem seems to have escalated. Not less than Frw 627,700,561 was stolen in money or goods, compared to ‘only’ Frw 81 million for the previous year.  “That is gone and won’t come back!” Biraro said pessimistically.

One of the most shocking cases in this respect happened in October last year, when an accountant which the AG didn’t identify was able over a period of ten days to withdraw Frw 117 million, after which he disappeared. The police is looking for the man.

Another case was a shipment of iron sheets worth Frw 31 million from MINALOC, destined for housing of poor, which disappeared while being transported.

Internal auditor

Despite Biraro trying to sound an optimistic note and saying that “things are not too bad” because 11 institutions obtained a clean audit report, MPs did not hide their discontent.

The first concern was that mechanisms put into place to ensure proper financial management were apparently not taken advantage of by public institutions and their accountants. One of those is the internal auditor attached to every public institution, who is supposed to ensure that any irregularities are being solved before the auditor general’s staff arrives. “In some countries, when the auditor general goes to field, he finds everything cleared by internal auditor”, Biraro said wistfully.

In addition, the School of Finance and Banking (SFB) ensures a steady supply of professional accountants, yet despite this, as one MP pointed out, an institution like Orinfor (again) manages to have an accountant who graduated in… vocational training.

The MPs therefore urgently requested the ministry of finance to help institutions in this respect. Apparently, this was not unexpected, because the national budget exactly provides support to Certified Public Accountants of Rwanda and the SFB to produce enough certified accountants.

Yet the question that seemed to be most on the MPs mind was: “how can these things happen?”

“Other transport companies are now paying a lot of taxes because their business is growing, but Onatracom is asking the government to for an additional 4 billion francs; this is inacceptable!” deputy Innocent Kayitare fumed. “And how about Orinfor, with its big web printing machine, and yet they ask for 5 billion more!”

However, some MPs admitted that they themselves should share some of the blame. Deputy Jean Thierry Karemera for instance pointed out that Parliament should not just voice its concerns towards the auditor general but also act itself and to take serious measures against public finance mismanagement. Others disagreed.

“I think we do our job properly. For the last report, we made recommendations and the government is considering them”, the speaker of the lower chamber Rose Mukantabana said. “And the National public prosecution authority has put in place a special committee of prosecutors to follow up the economic crimes.”

The AG’s report will now go to the committees in charge of budget and the Public Accounts Committee to be studied in detail.

Posted by Jean de la Croix Tabaro on Jun 25 2012. Filed under Cover Story, National, Weekly Highlights. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry