Lawmakers in the parliamentary Public Accounts Committee (PAC) have called for explanation in writing by all government entities whose financial performance, according to the latest Auditor General’s report, fell in the ‘adverse audit opinion’ category.

According to the directive, the explanations must be sent to the committee before public hearings, slated for next month, start.

The latest annual report for the year that ended June last year, which was tabled before Parliament earlier this month, shows that out of the 157 public entities audited, only 78 got ‘unqualified’ audit opinion, 22 an ‘except for’ audit opinion, while the remaining 57 got ‘adverse’ audit opinion.

An adverse audit opinion is a red flag that is given by an auditor when financial statements are found significantly different from generally accepted accounting principles.

Of all 157 audited public entities compared to 131 of the last year only 50 per cent of them recorded a clean/unqualified audit opinion, having relatively improved from the last year audit report – which was assessed at 36 per cent.

In professional language of the Auditor General (AG), unqualified audit opinion is equivalent to clean audit opinion, while the ‘except for’ audit opinion is next after a clean audit opinion, more or less like a satisfaction report.

Speaking to The New Times, MP Theoneste Karenzi, the deputy chairperson of PAC, said while the committee has been sampling public entities for public hearing, the upcoming scrutiny will compel all entities, business enterprises and boards to provide formal responses on identified mistakes.

"Before we start public hearings, we will write to all concerned entities in that particular category to give us formal explanation on the audit queries as raised in the last Auditor General’s report,” he said.

The report established that Rwf12.7 billion lacked financial supporting documents, Rwf3.8 billion with incomplete financial documents and Rwf1.7 billion which were classified as wasteful expenditures.

Administrative measures

On the other hand, MP Karenzi warned of administrative measures against chief budget managers in different government entities whose implementation of the Auditor General’s recommendations have repeatedly been recording below 60 percent.

Unlike last year where AG recommendations were observed to a commendable rate of 60 per cent, Obadiah Biraro, the Auditor General, told lawmakers that, currently, the rate has declined slightly to 51 per cent due to several factors, including previous local government elections that affected practical implementation of different projects.

While the Prime Minister is soon expected to present a comprehensive report on the outcomes of the last parliamentary resolutions against the 2013/14 AG report, Karenzi told The New Times that individuals responsible for earlier mistakes have been sanctioned accordingly.

"The sanctions normally range from salary cuts and temporary suspension, to explanation in writings but when it is criminal, the case is submitted to the Prosecutor General for follow-up,” he added, saying that the upcoming report by the Prime Minister will be about sanctions taken from the last parliamentary resolutions which will also be scrutinised.

At least by the end of 2014, the Office of the Prosecutor General had investigated and worked on close to 80 government entities from which 35 involved cases had been concluded by the courts while the rest were ongoing in respective courts.

Concerns in the new report

The state of finances, as stipulated in the 2014/15 AG report, cites inappropriate financial reporting by public entities and financial statements which do not reflect performance as the most quite worrying issues.

For example, Rwanda Biomedical Centre (RBC) failed to disclose significant balances of fixed assets, worth Rwf3.5 billion and inventory of Rwf29.1 billion, while Rwanda Development Board (RDB) financial statements do not include investments, worth Rwf4.2 billion, in preference redeemable shares in Olleh Network Rwanda, accordingn to the AG report.

"Omission of significant balances from the books of account and financial statements discounts the usefulness of the reported information,” reads the report.

Delayed and abandoned projects

Other queries raised by the AG are about persistent cases of delayed contract execution and abandoned works that, according to the report, portray weaknesses in contract management and have resulted into increased cost of Government projects.

While previous audits identified contracts for 77 projects, worth Rwf126 billion, that were not completed within stipulated period, the latest report indicates about Rwf32bn for 70 contracts in cases of delayed and abandoned works from which 12 contracts, worth Rwf4 billion, were abandoned.

The report says there has equally been an increase in expenditures whose transactions and value for money remain questionable, with at least Rwf18.9 billion in expenditures incurred by Government entities on ineligible and irregular expenses.

"This comprises of unsupported expenditure amounting to Rwf12.7 billion partially supported expenditure of Rwf3.8 billion; wasteful expenditure of around Rwf1.7 billion; ineligible allowances Rwf443 million and fraudulent payments of Rwf173 million,” reads the report.

The new report outlines 20 serious financial flaws that needs particular attention if government is to improve on its public financial management.

Agencies such as Rwanda Social Security Board (RSSB), which was audited for the second time; the defunct Energy Water and Sanitation Authority (EWSA); the merged University of Rwanda colleges; key projects in the Ministry of Agriculture; One Laptop Per Child, among others, failed to post clean audits, according to the report.

According to Biraro, there is need for a concerted effort by the Office of the Accountant General and other players to further support and push chief budget managers of government enterprises and boards to embrace frugality initiatives toward improving financial management and accountability practices.

editorial@newtimes.co.rw