Public service delivery: A peep into the 2021 Auditor-General’s report

By Zvikomborero Sibanda | Sep. 1, 2023

Masvingo City Council failed to maintain a comprehensive asset register showing acquisition dates for its assets and did not have an asset management policy.

THE audit reports issued by the Auditor-General (AG) serve as an essential public expenditure document that tracks government (local and national) expenses to ensure optimum public finance management (PFM).

These reports also serve as an evaluation tool for internal control mechanisms within the public sector, which will in turn stimulate good governance through enhancing efficiency, transparency, and accountability in the use of public funds.

This column, therefore, succinctly reviews the latest 2021 AG report on local authorities, specifically focusing on city councils, with the main intention of identifying governance, service delivery, employment, revenue management, and procurement issues raised by the AG, as well as, giving insights on the implication of these on the welfare of residents.

Brief context

The Office of the Auditor-General (OAG) is an independent office established under the Audit Office Act (Chapter 22:18). This office is charged with the primary oversight role of ensuring accountability within the three arms of government.

The Public Finance Management Act [Chapter 22:19] and the Audit Office Act [Chapter 22:18], direct the Auditor-General (AG) to prepare and submit not later than the 30th of June in each year, a report on the outcome of an examination and audit of the financials prepared by the government and its entities.

As such, the OAG report provides the Auditor-General’s opinion on the validity and reliability of an entity’s financial statements.

2021 OAG findings

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For 2021, the OAG managed to audit the financial books of only four city councils: Kadoma (2018), Masvingo (2020), Mutare (2020), and Victoria Falls (2020). The findings are discussed below.

Business continuity

The concept of going concern in business accounting is an assumption that an entity will not be forced to halt its operations in the immediate term and will not liquidate its assets. In simple terms, the entity is expected to operate for the foreseeable future.

However, the AG report registered concern about the business continuity of city councils. For example, Kadoma City Council was operating without a documented disaster recovery policy.

Data back-ups were reportedly being done on-site using external hard drives but there was no evidence of monitoring and checks on whether onsite backups were being done consistently.

As such, business continuity may be compromised, which may greatly affect residents, who rely on council services.

Violation of procurement procedures

The Auditor-General unearthed violations of procurement procedures and processes by some of the four city councils that submitted books for audit in the year under review.

For instance, a local contractor was contracted by Mutare City Council and paid about US$3,26 million in 2010 to construct the Dangamvura water pipeline. But to date, the pipeline is yet to be completed.

As a result of such irregular procurement processes, local authorities may incur financial losses and misappropriation of assets. Also, residents will suffer prejudice from delays in the completion of life-changing projects.

Poor revenue collection

Many local authorities continue to increase rates charged to residents instead of broadening their tax base by improving efficiency in revenue collections. The latter brings relief to residents while increasing revenue for quality service delivery.

For example, the AG indicated that Kadoma City Council failed to obtain sales schedules from brewers to ascertain the exact amount of beer levies to collect from breweries within its jurisdiction as per the Traditional Beer Act.

The Masvingo City Council failed to maintain the security items register for business licences issued. These business licences were neither serialised nor had other security features.

All this promotes fraudulent activities and compromises service delivery for residents.

Inventory management

Inventory management is the process of ordering, storing, and using an entity’s stock like raw materials, work-in-progress, and final products.

A lack of effective stock management might cause an overflow of stock, which is difficult to manage, a challenge being faced by some local authorities in Zimbabwe.

For instance, the OAG found that Kadoma City Council did not have records for expired drugs and damaged inventory. Ironically, this inventory was stored in the same warehouse as the current stock and was not separated from the rest of the stock.

In the end, the council may issue expired drugs to patients or may overstate its stock by including obsolete inventory.

Asset valuation and registers

The AG’s audit report highlighted that some city councils are not properly registering as well as valuing their assets.

It was established that Masvingo City Council had property, plant, and equipment (PPE) with a carrying amount of ZW88,9 million (US$3,5 million at the 2020 rate of US$1:ZW$25) but asset valuation was last undertaken in 2011.

The council did not assess the economically useful life of the PPE contrary to international public sector accounting standards (IPSAS).

Also, Masvingo City Council failed to maintain a comprehensive asset register showing acquisition dates for its assets and did not have an asset management policy.

As for Mutare, the council did not assess its properties for impairment despite evidence of the walls, trusses, and ceilings of its properties falling out.

All of these cases may result in safety risks to council tenants, misappropriation of assets, and materially misstated financial statements.

Segregation of duties

Generally, segregating duties is considered the best technique for minimising risks internally. This is because, with the segregation of duties, the risk of fraud or error will be reduced as all workers involved get access control and limitations.

However, almost all city councils covered in the 2021 AG’s report were not segregating duties among employees.For instance, Kadoma City Council had an IT administrator also working as the human resources officer responsible for senior payroll because it failed to fill the vacant post.

The AG also established that there was no segregation of duties between the revenue function and systems administration function at Masvingo City Council. The lack of segregation of duties may result in financial losses due to overriding of controls.

Residential stands

Zimbabwe is facing acute housing shortages with government estimates showing that the nation has a backlog of two million housing units. Yet, local authorities are failing to develop, manage, and account for residential stands.

For example, Masvingo City Council did not have a master record clearly showing opening balances, new creations, allocations during the year, and closing balances of residential stands.

The case is the same for Mutare City Council, which was operating without a land bank register to account for its land reserves.

Resultantly, poor accounting of land reserves and residential stands causes misappropriation of land, dual allocations of stands, and serious misstatement of financial books.

Water management

Zimbabwe’s Constitution identifies access to clean, safe, and potable water as a human right. It is also crucial in the realisation of other human rights like the right to a clean and safe environment.

Despite all this, city councils are failing to provide safe water to communities.For instance, Masvingo City Council is failing to supply adequate portable water as it relies on a water treatment plant that was commissioned 50 years ago.

In Mutare, the council had no bulk water metres to record water distribution and identify water losses between the pumping point and consumption point.

The aging water infrastructure and limited resources to acquire electronic devices to detect underground leakages by many councils are also leading to excessive water losses.

This is forcing residents to use unprotected water sources thereby exposed to waterborne diseases like cholera and typhoid.