Economic Governance Watch 08-2021 - AG's 2019 Report on Local Authorities

ECONOMIC GOVERNANCE WATCH 8/2021

[11th August 2021]

Auditor-General’s 2019 Report on Local Authorities

The report on the Auditor-General’s audit of financial statements prepared by local authorities for the 2019 financial year was presented to the National Assembly on the 16th June.

Background to the Report

Local authorities in Zimbabwe are divided into two main classes:

urban local authorities established under the Urban Councils Act, which comprise (in diminishing order of status and size) city councils, municipal councils, town councils and local boards, and

  • rural district councils established under the Rural District Councils Act.

Local government is the sphere of government closest to ordinary people – local authorities are responsible for delivering services that affect the health, welfare and comfort of people within their areas, and public confidence in them depends on their providing those services effectively, efficiently and economically.  To ensure they do so, and do not squander taxpayers’ money, it is essential that they keep proper records and prepare proper financial statements and that those records and statements are subjected to regular independent audit.  Accordingly, the Auditor-General is mandated by section 309 of the Constitution to audit the accounts, financial systems and financial management of all local authorities.

The Report

The Auditor-General’s report for 2019 covers the financial statements of four city councils, six municipalities, three town councils, one local board and eleven rural district councils. 

The report provides a glimpse of the challenges faced by local authorities, and shows they remain vulnerable to corruption and misappropriation of public resources due to ineptitude and lack of adequate control mechanisms.

The Auditor General’s findings can be summarised as follows:

Not complete audit of all local authorities

A large number of local authorities are not covered:  the Auditor-General noted that when her report was prepared, 43 audits were still in progress and 38 local authorities had not yet submitted their 2019 financial statements for audit.

COVID-19 and accountability

The COVID-19 pandemic has affected the management of public entities, including local authorities, and is likely to reduce their accountability and transparency and delay their financial reporting.

Local authorities operating without key policy documents

Many local authorities did not have key policy documents such as risk management policies, recruitment policies and housing policies, and did not have procedure manuals for their central stores. This resulted in contradictory operational and management decisions and could allow the systems to be manipulated for personal interests.

Poor revenue collection, accounting and management systems

Many councils did not have proper systems for revenue collection and the recording of income and expenses. Examples were:

Gweru City Council:

Stands valued at $1 714 784 were sold, but the amount could not be traced in the financial statements.  Where it went is unknown.

Records were not kept of all stands sold, the persons to whom they were sold, their purchase price, instalments paid or the outstanding balance on each stand.

Some councillors who were allocated stands did not make arrangements to pay for them, and some had not paid anything by the expiry of their terms of office.

Mutare City Council:

The Council did not bank all cash collected.

The Council was unable to provide a breakdown of $1,1 million written off as part of a discount to ratepayers.

Bindura Municipal Council billed accounts with no valid names, some of which had been created by unknown system users.

Masvingo City Council:

A review of parking fees for 2018 revealed that fees receipted in South African Rands and amounting to R1 308 were not deposited into the Council’s bank account and were not accounted for.

Detailed lists were not maintained of rented properties and lease agreements, so revenue received could not be properly accounted for.

Marondera City Council likewise did not maintain a detailed list of rented properties and lease agreements.

Fruitless and wasteful expenditure

The report revealed several instances of fruitless and wasteful expenditure by local authorities which did not carry out due diligence in procurement of goods and services: for example:

Bindura Municipal Council:  US$90 850 was paid to acquire a front-end loader in December 2018, but it had not been delivered at the time of audit in October 2020.

Mutare City Council paid a supplier US$330 000 in 2012 for the supply of water pipes which were yet to be delivered at the time of audit in December 2020.

  • Ruwa Local Board bought five tablet phones valued at $7 609 from a local supplier in November 2018, but they had not been delivered at the time of audit in February 2020.

Improper management of public resources

The report also revealed that local authorities lacked controls related to the use, recording and management of public resources.  Some councils had inherently insufficient systems that created opportunities for the diversion of public resources from the intended purposes. Masvingo City Council seemed to have the weakest internal controls.  For example:

There was no comprehensive record of fuel usage, neither was there a fuel register to indicate the name of the person drawing down fuel from stores and the purpose for which the fuel was required.

  • A number of motor vehicles with registration books on file could not be physically verified. Some motor vehicles were not recorded in the fixed assets register.

Poor service delivery

The audit revealed failures on service delivery persisting over many years, characterised by largely incomplete projects, unsupervised projects, lack of maintenance of service delivery infrastructure and haphazard road maintenance.  In particular, councils failed to meet the daily water demand for their respective communities, mainly as a result of dilapidated water reticulation systems.  In particular:

Masvingo City Council was producing 30 megalitres of treated water per day whereas the demand was for 48 megalitres a day.  In addition, there were instances of sewage spillages in high-density areas which flowed into streams feeding into the City’s main source of water (Lake Mutirikwi).

Marondera Municipality could only provide 13,5 megalitres of water against a daily demand of 27 megalitres.

Bindura Municipality’s suburbs such as Brockdale, Woodbrooke, Greenhill, Cleverhill and Chiwaridzo 3 (Garikayi) had had no reticulated water since their establishment.  The Council moreover was using a decommissioned mine as a dumpsite.

In Chegutu 80 per cent of residents had non-functional water meters.

In Chiredzi the figure was more than 50 per cent with non- functional meters.

  • Chinhoyi Municipality lost 62,5 per cent of its processed water.  The Shackleton and Alaska areas had 1 694 households without access to potable water whilst Rujeko suburb had 365 out of its 380 households without water accounts.

The Auditor-General’s Recommendations

The Auditor-General made recommendations in respect of each local authority covered in the report.  Many of her recommendations are the same, and they can be generalised as follows:

Councils should prepare and implement standard operating procedures, human resource manuals and benefits policies to increase uniformity and efficiency and enable employees to have a clear and comprehensive understanding of the procedures they must follow.

Councils need to review and strengthen their revenue collection structures, as well as their accounting systems and financial records.

Councils should maintain proper and updated inventories of all assets and databases of all their leased properties.

Councils must utilise public resources effectively, efficiently, and for authorised official purposes in compliance with the Public Finance Management Act.

Councils should develop strategies to improve service delivery, in particular to meet current and future water demand.

Conclusion

Altogether the picture presented by the report is a distressing one of pervasive ineptitude, incompetence and corruption.  Most local authorities had not submitted their financial statements by the time the Auditor-General’s conducted her audit, and of those that did submit them most were late in doing so.  Normal procedures for recording income and expenditure were not followed, with the result that revenue which should have been expended for the benefit of ratepayers and communities was lost or frittered away on irrelevancies.  Service delivery suffered, particularly the delivery of water, and councillors seem not to have cared that their success or failure in office would be judged by the delivery of basic services.  To keep their communities short of water was particularly reprehensible, and has become even more so during the Covid pandemic.

 

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2021