The Sunday Mail
The media have been awash with reports that portray a public sector in the throes of a financial management crisis.
The Comptroller and Auditor-General, Mrs Mildred Chiri, presented two shocking reports to Parliament on goings-on in 2013 and 2014, and the demonetisation of Zimbabwe dollar notes and coins.
Mrs Chiri should be congratulated for presenting the 2014 report timeously, as required by law, which achievement should enable swift remedial action.
Demonetisation is in full swing and should have been completed by September 30, 2015. We now await announcement of its success, or otherwise.
One is convinced, though, that the main reason for demonetisation is to legally decommission Zimdollar notes and coins, and not to compensate citizens for lost value in this legal tender.
I find this rationale most simplistic, inadequate and flawed. I, therefore, beg to differ.
For starters, when the Section 41(2) and 44(3) of the Reserve Bank of Zimbabwe Act on demonetisation were enacted, Zimbabwe had just come out of hyperinflation.
My good guess is these clauses were informed in the main by the simple requirement to replace the then existing currency with new notes and coins of equal and/or fair value – period.
The scenario of 2008/9 was a radically and completely different one and we should thus not give a rather superficial and erroneous legal interpretation of the relevant clauses on demonetisation.
We have even had the audacity to disqualify some versions of notes and coins that the RBZ previously issued as legal tender.
This is rather strange and unfair, particularly as such notes have no chance in hell of ever being reintroduced. So, are Zimbabweans holding onto these notes supposed to burn them?
Our interpretation of the law has had the undesirable effect of denying due fairness and equity to citizens over no fault of their own.
In other jurisdictions, this would have been deemed a scandal of the worst type. Indeed, our citizens were grossly under-compensated and this merits reconsideration, if you ask me.
Imagine the injustice being visited upon pensioners and insurance policy-holders whose funds and companies were legally expected to lend, and invested a portion of their money in the State by way of Zimdollar denominated prescribed assets.
They expected future benefits, which investments disappeared into thin air in the event and circumstances, much to their prejudice and annoyance.
Fortunately, this particular aspect will receive further attention from the Commission of Inquiry the President set up.
The two reports by Mrs Chiri are a cause for serious concern as they highlight clear cases of corruption, sheer incompetence and gross abuse of State funds and public property by those entrusted with taxpayers’ money and property.
The cases include malpractices and misdemeanours — from naked fraud, goods being purchased and paid for but never received, wanton flouting of procurement regulations, abuse of vehicles and fuel, and poor debt recovery systems.
In the case of State enterprises, statutory bodies and parastatals, there were also numerous incidents of bad corporate governance.
Some entities operate without boards of directors for extended periods and, in some instances, boards are manned by incompetent and unqualified characters.
Boards do not sit as expected, while others simply do not meet at all, but get their dues, nevertheless.
A number of parastatals are technically insolvent and failing to pay their statutory obligations, medical aid contributions and salaries.
In one classic case of mismanagement, the National Social Security Authority invested about US$30 million in the ailing Capital Bank, which — by all indications — was heading down the garden path.
Other unwise investments were made in various companies.
Capital Bank collapsed and took down with it pensioners’ money.
Further, the situation in certain local authorities is a mirror reflection of all the above ills.
The form and type of urban councillors are questionable.
The provision of water — a basic need — is unsatisfactory in most jurisdictions, as are garbage collection and road maintenance.
Street lights are now scarce or dysfunctional.
There is little evidence of good planning in central business districts and residential areas.
The rot is too deep-seated to cover comprehensively here.
In summary, the Auditor-General’s report of 2014 covers most of the said short-comings in central Government and public entities.
The 2013 report made further alarming disclosures of an irreconcilable difference between the Paymaster General accounts and public finance management system of US$3,5 billion to US$4,5 billion.
Our central Government’s and public bodies’ finance management and accounting systems are run on the internationally renowned SAP computer software.
Therefore, some of the glaring weaknesses mentioned in the audit reports are least expected and most surprising.
Also, a large number of these irregular and over-expenditures could have been easily avoided or at least minimised if the Public Finance Management Act (Chapter 22:19) No 11/2009 were respected and strictly enforced.
Part IX of the Act clearly defines financial misconduct and outlines the disciplinary proceedings to be instituted whenever such misconduct occurs.
In a nutshell, financial misconduct relates to unauthorised, irregular or wasteful expenditure.
The Act also covers late or non-preparation and presentation of financial statements and other important and associated reports of a financial or general nature, and safeguarding public assets.
Section 91 clearly outlines offences and penalties for such misconduct.
In serious situations, culprits can find themselves serving prison sentences for periods not exceeding five years, being heavily fined and/or having mismanaged public funds/resources being recovered from them.
Under such circumstances, staff rationalisation can legally and cost effectively be carried out without the need to pay exit packages and golden handshakes.
In addition, bad corporate governance and the whole gambit of the public sector are also covered by the Act. The Framework for Management of Public Enterprises is derived heavily from this law.
And the recently-adopted National Code of Corporate Governance, which applies to the public and private sectors, has added another very interesting and important dimension to this whole subject. The PFM Act is valid and binding under both the old and new constitutions (with possibly minor cosmetic amendments).
I am at a loss as to why the Act is being flagrantly disregarded, leading to this scandalous situation that we now find ourselves in.
Parliament, through its public accounts and budget committees, should ensure both the PFM Act and Auditor-General’s reports are respected and acted upon.
After all, Parliament should exercise its oversight role, doesn’t it?
Corruption and other vices mentioned above are not the preserve of the public sector.
They are also rampant, if not worse, in non-governmental organisations and the private sector.
The situation in the private sector seems beyond redemption.
If the sector respects the Companies Act and other relevant legislation, fully utilises external and internal auditors, and boards and management act professionally, these can save companies earmarked for judicial management/curatorship due to financial mismanagement and other improprieties.
Should all these pieces of legislation and codes be applied religiously, we can look forward to cleaner audit reports.
Mr Edmore AM Ndudzo is a certified public accountant and member of the Institute of Chartered Accountants of Zimbabwe. He was the lead consultant in the compilation of the Public Finance Management Act (Chapter 22:19) of 2010. He writes in his personal capacity.
