The Auditor-General, Obadiah Biraro, has said that Rwanda Revenue Authority (RRA) continues to struggle with the issue of tax arrears which he says have increased by 40 percent since 2017.

Biraro said this while presenting his annual report to members of both chambers of parliament for the financial year that ended June 2019.

He said that while the national tax collection body was owed Rwf161bn in 2017, the amount has since risen to Rwf270bn in 2019 representing 20 percent of the total government revenue collected by RRA for the financial year ended 30 June 2019.

The Auditor-General attributed the arrears mainly to the increased number of tax audits conducted in the mining sector which he says is a commendable practice to detect and control tax evasion.

He reminded parliament that any shortfalls or delays in collecting revenue adversely affect the cash flow that would be used to finance important government activities in a timely manner.

He called for a fast solution before such shortfalls force government to source funds in form of loans at higher cost instead of using tax revenue.

"There is need to devise measures to quickly recover the fairly new arrears before it is too long to become difficult to recover or uncollectable at all. The efforts to detect tax evaders should go hand in hand with strong recovery efforts to reduce accumulation of tax arrears,” he said.

Delayed contracts

Biraro commended the effort put into reducing delayed and abandoned contracts, cutting the number from 95 in 2017 to 32 in 2019.

According to the report, contracts delay for a period ranging between 50 and close to 2,000 days.

This year, 71 percent of the delayed and abandoned contracts fell under Boards and Government Business Enterprises (GBEs) plus district clusters.

For instance, Land Husbandry, Hillside Irrigation and Water Harvesting Project (LWH) under which the construction of five collection centers with cooling facilities for horticulture produce at Muyanza Site in Rulindo district is yet to be completed.

The project, which is being implemented by ECOMEM Ltd to a tune of Rwf593m, was expected to have been completed by June 2018.

In Eastern Province, the project to supply, install and commission cold rooms on three collection centers (1 in Ngoma, 1 in Rwamagana and 1 in Gatsibo)—which was expected to be completed by June 2018, is yet to be completed.  LWH contracted ECOMEM Co. Limited for this project to a tune of Rfw355m.

Biraro also identified 22 cases of stalled projects worth Rwf115.3bn that resulted from inadequate contract management.

The projects stalled after contractors abandoned them in previous years leaving public entities with no alternative but to terminate their contracts.

The stalled projects are clustered in categories with Boards and Government Business Enterprises (GBEs) taking the biggest blame with six stalled projects valued at Rwf4.1bn. Of this, Rfw2.2bn had already been paid to contractors.

The second cluster is districts, with 11 stalled projects worth Rfw6bn. Of this Rwf3.8bn had already been paid out to the contractors.

The third cluster is projects which have five stalled projects worth Rfw105bn. Of this, Rfw31bn had been cashed out to contractors.

It should be noted that none of the ministries or any other central government entities have registered stalled or abandoned projects.

As a result, the report says that the government is not realizing value for money from expenditure incurred on uncompleted works since budgetary constraints and long procurement procedures have halted their continuation.

"Public entities in collaboration with their line ministries should urgently strategize to consider means and ways in which currently stalled projects may be resumed to ensure that they serve the envisaged purpose,” he advised.

Cases of idle assets

The report highlights a significant improvement from the registered idle assets from 92 assets in 2016 to 48 this past year.

The AG pointed to 98 cases of idle assets worth Rwf17.2bn. These comprise of 48 new cases worth Rwf7.1bn and 48 cases worth Rwf10bn from previous audits which were yet to be put to use by the time of current audit.

Majority of assets reported have been idle for a period ranging between six months and 10 years. 

Biraro blamed this on the lack of needs assessment prior to acquiring assets and inadequate asset management.

"Instances of lack of maintenance plan of assets, failure to put into auction the old assets and untrained staff to use assets were identified as indicators of inadequate assets management across public entities,” he said.   

He called for a proper needs assessment should be carried out by public institutions before procuring assets and improved asset management by ensuring that what is purchased is used for the intended purpose.

Poor attitude

Biraro touched on utility companies Water and Sanitation Corporation (WASAC) and Rwanda Energy Group (REG) which he criticised for never producing financial statements on time and reports which he said ‘don’t make sense’.

"Managements of these institutions don’t seem to be in charge of accountability, as such there is lack of ownership of corporate governance. Both institutions have failed to provide reliable and proper accountability for resources that they manage,” he said.  

He blamed this on what his said is the issue of a poor attitude of management pointing out that there was need to look into how the lack of adequate supervision by senior knowledgeable staff can be improved.

Reacting to the report, MP Theoneste Begumisa commended the improvements that have so far been made and called for partnerships between government institutions.

"Based on this report, I see that there has been improvement in different institutions. I would like to suggest that the Auditor General’s office finds ways to work with some of these institutions to mitigate these issues,” he said.

MP Francis Karemera called on the Auditor General to advise the competent institutions on what should be done when projects are abandoned.

"What happens to the people who are given money and they abandon the projects? There are some people who were given a poultry contract and money and nothing ever picked up. The AG needs to advise us on what to do,” he said.

Audits for the current year covered 165 public entities and projects, which comprises of 137 budget agencies and projects, two Government Business Enterprises and 26 district hospitals.