Auditory General: Fix flaws in corporate governance

Flaws in corporate governance and lack of strategic direction among majority of government entities need to be expeditiously fixed as one way of improving management of public funds. This is one of the key findings and recommendation from the 2014/15 Auditor General’s report released last month. The Auditor General called for strengthening of boards of directors for state enterprises, saying these should primarily provide strategic direction and ensure they keep the executives on their toes to deliver. This, the report says, will significantly reduce the number of stalled projects on which huge sums of public money has been lost. “This, coupled with appropriate follow-up, is envisaged to reduce cases of stalled public projects. Targets in performance contracts signed by chief budget managers should continue to be aligned to the respective entities and sector priorities,” the report reads in part. Speaking to The New Times recently, Auditor General Obadiah Biraro said most financial management flaws cited in the report can be traced back to neglecting responsibility accounting practices. In the latest annual report, out of the 157 public entities audited, 78 got unqualified (clean) audit opinion. These include 34 government projects and central government entities. “Most of the aspects centre on responsible accounting. This means that if you do not do it, you must pay for it. There is no shortcut in public sector,” Biraro said. “There is statement of responsibility which is highly neglected; do people pay when they do not honour it?” He said majority of entities, mostly parastatals, had financial flaws resulting from adequate policing, poor management and lack of follow up from supervisory authorities. “They (the agencies) have adverse opinions because of inadequate policing, poor management, exacerbated by poor follow up. All this is at organisational level,” the AG said. He added that some were simple responsibilities such as reviewing and signing off financial statements. Noting that parastatals receive about 60 per cent of the total budgetary allocations to implement government policies, he said transparency and efficacy would not only save taxpayers’ funds but also ensure value for money. “What is failing fundamentally is responsibility accounting. It is high time that transparency had effect in our institutions. Parastatals are sitting on about 60 per cent of the budget, why are people not serious? These are entities implementing government policies,” Biraro said. The boards and supervisory authorities were further urged to step up their supervision and monitoring of government programmes. The Auditor General said the follow-up and monitoring would ensure programmes realise their intended objectives within the stipulated timeframes and apply corrective measure where necessary. How to fix gaps Independent analysts say that the gaps in corporate governance can be filled by having board members whose skills and backgrounds are relevant with the entities they lead to ensure that they have an understanding of the entities they lead. Paul Mugambwa, a senior tax manager at PriceWaterHouseCoopers, a multinational professional services network, told The New Times that, going forward, board members and supervisory authorities should be largely constituted of persons who bring in required skills. He said by having persons with an understanding of the mandate of their agencies, board members would be able to execute their roles better. “It is understandable that you cannot have entire boards comprised of financial management experts since we are even yet to have adequate accountants in the country, ,but the skills set in corporate entities should ensure checks and balance and represent several disciplines,” Mugambwa said. Auditor General Obadiah Biraro He noted that supervisory authorities should not shy from seeking advice and experts’ inputs in their oversight roles to reduce instances of such short coming. “We should also see efforts to reduce gaps in human resources and skills, especially in accounting management across ranks in organisations. Although this will take time and some level of investment, it will save a lot of taxpayers’ money,” Mugambwa said. Following the release and evaluation of the report, grilling for accounting officers in the institutions implicated is expected to begin early June, when the officers appear before the parlimentary Public Accounts Committee. From the exercise, investigation and prosecution of people who embezzle or mismanage public funds could then begin. Prosecutor-General Richard Muhumuza told The New Times that not all persons mentioned in the report are prosecuted as some are qualified as administrative errors. “A thorough scrutiny of the report is made and suspects are identified, summoned and investigated. It should be noted, however, that not everyone that the Auditor General points a finger at ends up in court,” Muhumuza said. “Criminal responsibility is personal and those who are not directly involved in misconduct are not prosecuted. There are acts mentioned in the Auditor General’s report which according to the Penal Code do not qualify as criminal offences.” However, the prosecutor-general added that such flaws are reported to the Office of the Prime Minister for administrative sanctioning. Last year, 272 people fell under this category. A new list for this year is being compiled and will be out before end of June. editorial@newtimes.co.rw

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Auditory General: Fix flaws in corporate governance