The Office of the Auditor General of State Finances (OAG) report for the financial year that ended on June 30, 2023, exposed cases of mismanagement of public assets in some entities, which it said calls for action to ensure value for money.
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On April 29, the parliament’s Public Accounts Committee started holding public hearings in line with analysing the report.
The following are 10 major findings of the report you need to know:
1. Audit opinions on public entities’ performance
Out of 208 public entities and projects audited, 191 (representing 92 per cent) had unqualified opinions (clean audits), 11 (representing 5 per cent) had qualified opinions, and the remaining 6 (representing 3 per cent) had adverse opinions on their financial statements. These include 21 Government Business Enterprises (GBEs) that generate own revenue.
Concerning compliance with laws and regulations for controlling public spending, 142 entities representing 69 per cent of the 206 public institutions and projects audited, had unqualified conclusions, 59 entities (representing 29 per cent) had qualified conclusions, while five entities (representing 2 per cent) had adverse conclusions on compliance with laws and regulations regulating public spending.
For the realisation of value for money in utilisation of public funds, out of 206 compliance audits conducted, 122 (representing 59 per cent) of the public entities had unqualified conclusions, 65 (representing 32 per cent) had qualified conclusions and 19 (representing 9 per cent) had adverse conclusions.
2. Impact of audits – financial losses likely to be recovered
The current year’s audits used a preventive audit approach to review contracts before their implementation or while they were still being implemented. This audit approach helped to identify financial losses while there was still a chance for recovery.
The audits identified financial losses amounting to Rwf6.92 billion that were likely to be recovered. The losses were a result of contracts that were not properly designed, inadequate monitoring of construction projects, and review of invoices before payment. These included duplicated or inflated items in ongoing contracts and amounts overpaid to contractors.
According to OAG, such a method of checking is in line with preventing deficiencies in public financial management that may prevent the government from achieving the objectives set out in the National Strategy for Transformation, such as quality education for all, moving towards a poverty-free Rwanda, and increasing agriculture output and livestock quality.
3. Most fraud cases noted in the previous years unresolved
As per the previous audit report, unresolved fraud cases had accumulated to Rwf2.36 billion, from 2013 to 2022. Follow-up audits during the year [in 2023] noted that public entities recovered only Rwf18 million, which means that Rwf2.34 billion was still unresolved.
"We recommended the Ministry of Justice to continue following up these cases,” the OAG report reads in part.
4. Continuous poor financial performance of EUCL – accumulating losses
As per the report, the Energy Utility Corporation Limited (EUCL) – a subsidiary of Rwanda Energy Group (REG) – made a loss before income tax of Rwf53.47 billion in the financial year ended on June 30, 2023 (compared to Rwf31.3 billion loss in 2022), and had accumulated losses totalling Rwf126.39 billion by then.
The loss was attributed to, among other factors, purchase of power from high-cost sources: EUCL spent Rwf33.89 billion to purchase power from thermal power plants (run on diesel] which represented 21 per cent of the total production costs for the year. Yet, the amount only purchased 87.57 million kWh, or 10 per cent of the total energy available.
Meanwhile, the report indicated that the Government discontinued the use of thermal power (diesel) plants after the year under review.
"This is expected to reduce the company’s operational costs. We recommended REG to speed up the implementation of hydropower projects that were aimed at reducing the cost of power production to improve the company’s performance,” the Auditor General’s report reads in part.
5. Water production per day below NST1 target
According to NST1, the country is aspiring to move towards a modern Rwandan household with 100 per cent access to water by June 30, 2024 (from 87.4 per cent in 2017) through investments in construction, extension, rehabilitation of 3,788 km of water infrastructure in the country and by increasing daily water production capacity from 182,120 meters (m3) to 303,120 m3 per day.
The audit found that the actual water production per day was 200,883 m3 from 23 water treatment plants in the country, excluding water from other sources.
This resulted in a gap of 102,237 m3 (34 per cent) per day as of June 30, 2023. Water and Sanitation Corporation (WASAC) management attributed the gap to old water treatment plants and network infrastructure that require significant financial resources to rehabilitate or upgrade, the report showed.
Consequently, it said, the NST1 target will not be achieved on time, the report concluded, recommending to the management to revise the target based on available resources.
6. Insufficient pupils’ books compared to the number of pupils per classroom
According to the report, in the education sector, the number of textbooks per pupil remained low. One book was being shared between five pupils and 48 pupils. This was observed in all provinces. In addition, some schools did not have any students’ textbooks for some subjects, which was the case in Ngoma, Kayonza, and Rubavu districts.
7. Issues affecting students with disabilities
Still, in the education sector, the report exposed that 70 per cent of 50 schools visited [as a sample] did not conduct identification of special needs for learners with disabilities prior to their admission, while 30 per cent of them carried out such an assessment, used non-standardised tools developed by their respective partners.
This was caused by a lack of standardised procedures and relevant tools to guide schools in this exercise, it added.
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The report observed that inappropriate assessment and identification of special needs for learners with disabilities deprives them of having individual learning plans and any other special considerations that should be given during course delivery.
Also, it indicated that the schools did not have adequate teaching and learning materials, with 60 per cent of the 50 schools visited not possessing a single set of the minimum package required to host learners with different disabilities.
At both national and school levels, there were no books printed in braille format and other learning materials (such as braille machines and audiobooks) to facilitate learners with visual impairments to read by touch, it pointed out.
Also, learners with hearing impairment lacked visual aids (such as screens and projectors) to follow and understand what is being taught more clearly, or to express thoughts more easily.
The unavailability of teaching and learning materials negatively affected the delivery of courses and the quality of education given to learners with disabilities, the report concluded.
8. Delay in automation of SACCOs
The Ministry of Finance and Economic Planning (MINECOFIN) was implementing a project to automate and merge 416 Umurenge Savings and Credit Cooperatives (U-SACCOs) into 30 district SACCOs and establish a cooperative bank to serve them.
The project, the report showed, was initially planned to take three years from June 2020 to March 2024, with financing of Rwf6.89 billion.
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However, at the time of the audit in October 2023, only 163 out of the 416 U-SACCOs (representing 39 per cent), had been automated in 11 districts.
The slow pace was attributed to delays in recruiting skilled human resources, the audit report showed, observing that the project objectives will not be timely achieved.
The report recommended MINECOFIN management to fast-track the recruitment of skilled human resources to expedite the automation.
9. National strategic petroleum reserve target not achieved
According to the report, the Rwanda Downstream Petroleum Policy (November 2020) set the storage capacity and quantity of petroleum reserves target at 337 million litres by 2024. However, the audit noted that the storage capacity was still low at 117.2 million litres, representing 35 per cent of the national target.
This implies a gap of 219.8 million litres (65 per cent).
It recommended the Ministry of Trade and Industry (MINICOM) liaise with relevant stakeholders to ensure that the fuel strategic reserve target is achieved within the set timelines.
10. Persistent slow pace in implementing government projects
In the year under review, the audit found that different public institutions delayed the implementation of eight projects [funded by development partners] worth more than almost Rwf564 billion. The initial project duration had either expired or was about to expire, yet the disbursement rates were still low.
This puts the projects at risk of forfeiting part of their funding. Some projects are financed by loans. As per development requirements, undrawn balances attract commitment charges. During the year under review, the Government paid Rwf885 million in commitment charges (fees charged by a lender to a borrower to compensate the lender for keeping a credit line open – for unused loans) on two projects that had been delayed.
The projects in question are Rwanda Sustainable Water Supply and Sanitation Program (RSWSSP), and Rwanda Innovation Fund (RIF) – which aims to address the financing gap that tech-enabled companies face at different growth stages in Rwanda and in the wider East African region.
These gaps were partially attributed to a long procurement process and a lack of project readiness at commencement.
"There is a need to speed up the projects to minimise commitment charges and to achieve the intended project objectives,” the report noted.