Auditor General (AG) Alexis Kamuhire on Tuesday, May 2, presented his annual audit report for the 2021/2022 fiscal year to a joint session of Parliament. The report summarises key results from audit reports of public entities and projects for financial checks conducted between May 2022 and April 2023.

Here are 10 key findings from the report:

1. Slow progress in Lake Kivu water transport project execution

Lake Kivu Inland Water Transport Project (LKIWTP), the report showed, is a venture undertaken with a funding of $32.6 million from Trade Mark East Africa (TMEA), The Netherlands Enterprise (RVO), and the Government of Rwanda to develop four (4) ports facilities across Lake Kivu in Rubavu, Rusizi, Karongi, and Rutsiro districts as envisioned under the National Strategy for Transformation (NST1).

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The original duration of the project was five years from 2018 to 2023. But, the audit noted gaps, including that the construction of planned ports at Lake Kivu was put on hold.

For instance, the construction of two ports in Rubavu and Rusizi districts at a cost of more than $12 million was expected to be completed on June 17, 2021. However, the construction was suspended when works were at 26 per cent.

This was done in order to revise the study following unforeseen terrain conditions. The revised detailed study was due in August 2021, but it was not yet approved at the time of the audit in November 2022.

The AG recommended that Rwanda Transport Development Agency (RTDA) management should liaise with the contractor to expedite the feasibility study.

Moreover, the report exposed that the construction of two remaining ports (in Rutsiro and Karongi) had not yet started, indicating that the procurement process for their construction was put on hold because of a lack of funds.

It recommended that "there is a need for RTDA to speed up funds mobilisation in order to improve inland water transport.”

2. Persistent cases of delayed contracts

The audit report exposed that 55 cases of delayed project contracts worth Rwf644.16 billion were observed in 2022, which is over three times in terms of the monetary value of the cases recorded in the previous year. The delays ranged from 30 days to four years.

According to the AG’s report for the 2020/2021 financial year, there were 37 cases of delayed contracts worth over Rwf201 billion in 28 public entities and projects.

In 2022, the cases comprised 41 contracts worth Rwf551 billion identified during the year under audit, and 14 contracts worth Rwf92.9 billion from previous audits.

As per the report, the completion of these projects can greatly improve the lives of citizens through better infrastructure and services.

"Public entities should improve contract management processes or engage the Ministry of Finance and development partners to address budget constraints, where necessary,” the Auditor General recommended.

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3. Idle assets

Auditors at OAG identified 117 idle assets worth Rwf124 billion -- which is three times in monetary value compared to 37 billion in 2021 -- in 66 public institutions that were not put to use.

These comprised 97 new cases worth Rwf99 billion and 20 cases worth Rwf24 billion noted in the OAG’s last year’s audits.

4. Increase in supervision costs

Contract periods for three supervising companies in some projects were extended at a cost of Rwf2.7 billion, after the contract periods with the primary contractors were extended, according to the report.

The projects are five contracts for upgrading and extension of the water supply network, a contract for the rehabilitation of indicative feeder roads in Nyabihu, Rutsiro, and Gakenke districts, and a contract for the rehabilitation of indicative feeder roads in Gatsibo, Nyagatare, and Nyaruguru districts.

Delay in the implementation of projects was due to slow progress in the expropriation of affected properties as a result of the late availability of funds.

The report advised that the management should closely monitor the implementation of the projects and budget for the expropriation.

5. More than Rwf52 billion loss at EUCL

The report indicated that the audit carried out in Rwanda Energy Group (REG), revealed that the Energy Utility Corporation Limited (EUCL) -- its subsidiary -- made a loss of Rwf52.5 billion during the financial year ended June 30, 2022, compared to a profit of Rwf2 billion in the previous year.

Factors for that include purchasing power from high-cost sources, the thermal power plants are the most expensive source of energy with a unit cost of Rwf375.5 per kilowatt hour (kWh) -- the energy consumed by a 1,000-watt or 1-kilowatt electrical appliance if it is kept running for an hour.

This is more than Rwf259.9 spent on producing a kWh from Hakan peat power plant, more than double the Rwf173.7 for generating a kWh from Methane Gas, and almost three times the Rwf136.9 for the production of a kWh from a hydropower plant, showed the report.

Ultimately, the report pointed out the situation resulted in the production of expensive power, adding that EUCL paid Rwf38.8 billion to source energy from thermal power plants.

"This will continue to worsen the financial performance of EUCL unless there is a plan to phase out thermal plants,” the report warned.

6. Persistent high volume of non-revenue water (lost water)

The Water and Sanitation Corporation (WASAC) Ltd only billed 55 per cent or more than 37 million cubic metres (M3) out of more than 68 million M3 of water produced during the year ended June 30, 2022. The remaining 45 per cent were not billed, compared to 42 per cent in 2021.

As a result, the report said, WASAC Ltd lost revenue between Rwf9.91 billion (considering the minimum selling price of Rwf323/M3 ) and Rwf27.45 billion (Maximum selling price of Rwf895/M3 ).

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Therefore, the financial sustainability of WASAC Ltd is at stake if this trend is not addressed, the report cautioned, pointing out that the management attributed this mainly to old water network infrastructure, lack of active leakage control system, and old or inaccurate water metres.

"Management should urgently come up with new strategies to reduce non-revenue water to reverse the trend," the report advised.

7. Unlawful expenditure

During the current year ended June 30, 2022, different cases of unlawful expenditure totalling more than Rwf6.4 billion were noted, which is double the Rwf3.2 billion recorded in the previous year, the report exposed.

They included partially supported expenditure (Rwf644 million), wasteful expenditure (over Rwf2.4 billion), overpayment (Rwf3 billion), and funds diverted (fraud) amounting to Rwf169 million.

The Auditor General recommended that there is a need for Chief Budget Managers to put in place strong internal controls to avoid increasing unlawful expenditure.

8. Progress made in the implementation of audit recommendations

According to the report, the Office of the Auditor General (OAG) is committed to conducting impactful audits of government institutions to ensure that public resources are being utilised for national priorities and the well-being of Rwandan citizens.

It added that improvement in public financial management systems will only be realised when audit recommendations are implemented by management and those charged with the governance of public institutions.

Out of 4,216 recommendations given in the previous audit, 57 per cent were fully implemented, compared to 48 per cent in 2021 -- reflecting an improvement of 9 per cent. Of the remaining recommendations, the report showed that 14 per cent of them were partially implemented, while 29 per cent were not implemented.

ALSO READ: Auditor General speaks out on unimplemented recommendations

9. Improvement in clean audit scores by public entities

According to the report, the OAG audited 221 public entities (for both financial and compliance checks), compared to 210 public entities audited in the previous year, and it also conducted 14 performance audits, six Information System audits, and 12 special audits.

The Auditor General said that the selection of audit topics focused on sectors aiming at improving citizens’ lives including agriculture, health, transport, education, infrastructure, and social protection.

The report indicated that 68 per cent of the entities that were audited got unqualified opinions (clean audit statement) in financial statements in 2022, up from 57 per cent in 2021, while 61 per cent got an unqualified opinion in compliance with laws and regulations on public spending compared to 44 per cent in the previous year, and 53 per cent of unqualified opinions on compliance with laws and regulations to realise value for money, from 44 per cent earlier.

An unqualified opinion or clean audit reflects fair and transparent financial statements in compliance with generally accepted accounting principles and statutory requirements.

10. Impact of the audit – financial losses likely to be recovered

In 2022, Kamuhire said that the audits placed a strong emphasis on reviewing contracts before their implementation or while they were in progress. This audit approach, he observed, helped to identify financial losses while there is still a chance for remedies.

The audit identified public financial losses amounting to slightly over Rwf10 billion that were likely to be recovered.

The report said that the losses were a result of contracts that were not properly designed, adding that the management of the entities in question committed to discussing with the contractors to recover the losses.

Speaking during a press conference on May 3, Kamuhire said that the Auditor General’s report has, among other purposes, looked into the prevention of losses by working on the identified risks.

Overall, on the way forward regarding identified losses, this report will be forwarded to relevant entities including the prosecution.

"The prosecution will look at its findings, and if they find elements that constitute a crime, they will prosecute the implicated people,” he observed.