AG on why parastatals fail to get clean audits

Auditor-General Obadiah Biraro has said the major reason most public institutions continue to face accountability challenges is lack of corporate governance. Speaking to The New Times in an exclusive interview, Biraro, who last week presented the report on how institutions spent public funds in the Financial Year 2012/13, said that ministries were increasingly getting clean audits, while parastatals remain challenged. “As for the case of Energey Water and Sanitation Authority and other parastatals that did not fare well, it was simply because of lack of corporate governance...ministries are increasingly and sustainably getting clean audit opinions, but some of these ‘failing giants’ fall under ministries too since the ministry is meant to be the sector supervisor,” he said. The full interview Institutions outside the central government did not fair well compared to ministries, yet they have funds and management boards, what could be the reason? Ministries are increasingly and sustainably getting clean audit opinions, but some of these ‘failing giants’ come under ministries too since the ministry is meant to be the sector supervisor. The ministries are supposed to extend some of these good practises in governance and accountability as well as supervise to assist in improving the level of corporate governance. Ministries should now be in position to help their aligned agencies especially public enterprises on accountability and public finance management. Management is about seeing misfortunes and being able to mitigate them. As for the case of EWSA [Energy Water and Sanitation Authority] like some other parastatals, our summary stated that it is because of lack of corporate governance. Principles of corporate governance (known and unknown) are simply lacking or being ignored. The Board of EWSA has been advised numerous times to take the initiative to learn corporate governance. This year’s report indicated an increase in the number of government institutions that got clean audit reports from 28 per cent previously to 34 per cent (47) reports. What can the improvement be attributed to? It is important to note that in the last few years, the country’s institutions have made progress towards getting clean audit reports. There was a time a few years ago that only five entities qualified for clean audit reports. We currently have 47. The first reason for the not so impressive performance previously can be attributed to our history. For the last several years, we have had a backdrop of a dark back ground. As much as there have been efforts in the past to ensure accountability, the country’s history was a cause of few firms getting clean audit reports. The second reason for the improved performance is the ownership of public institutions and resources. There have been strategies put in place, the public and officials in the institutions feel that they owe it to the country to be accountable in their expenditure. With that, there have been a lot of efforts, from heads of organisations to managers of accounts, to ensure proper management of public funds. The prime minister himself has led in these efforts, hence the notable progress. I was also impressed by how Members of Parliament felt part of the process and put the auditors to task to get explanations of the auditing process. That shows we have more people on board in support for accountability. The amount of expenses that lacked official justification and wasteful expenditures amounted to Rwf1 billion in the financial year 2012/13, compared to about Rwf850 million in the previous report. What is the reason for the increase figure? The increase in funds unaccounted for is mostly due to EWSA, which is large and had several discrepancies. Not that the budget and expenditure increased and so we should increase wasteful expenditure linearly. We audited EWSA and everything we touched had issues linked to either wasteful expenditure, lack of value for money, lacking supporting documents, among others. That is why we have a disclaimer opinion after auditing EWSA because there was no conclusive opinion by an auditor of the audited entity, mainly due to extreme cases of poor bookkeeping, among others. There is a trend that came up severally in your report whereby there were cases of lack of supporting documents? There are standards that the audit reports must meet, there are stated requirements of audit evidence, how to get it and how to interprete it, for these organisations, the audit evidence was not the standard one required hence the reason for the disclaimers. The disclaimer is that the audit evidence presented is not sufficient according to proper auditing standards. As a holder of a public office, when you make spending decisions on behalf of the public, you are supposed to have documents to back your expenditures, otherwise it will be interpreted differently. For EWSA, it can be narrowed down to lack of corporate governance. In case wasteful expenditure happens, there are grounds to support it; in case there is misappropriation of funds, there are grounds. How can such instances be avoided in the future? Proper management of public resources that works by set rules and procedures to ensure that all expenditure is accounted for and that there is value for money while undertaking expenditures. It all begins with the management of these institutions, then their defined roles and at times the board’s role. There were also expenditures incurred due to delayed payments to suppliers which ended up in fines, is it because of too much bureaucracy? To some extent it is due to incompetence due to the procurement procedures in place. The public is likely to believe that it was done intentionally with a motive in mind. There should be cost benefit analysis that puts into consideration how much time should be spent carrying out certain activities. Bureaucracy should not be used as an excuse to incur unnecessary expenditure or waste public resources. Its benefits heavily outweigh it’s disadvantages. People just use it as an excuse when they are looking to get away with corruption. There are also questionable tender awarding procedures that emerged in your report, like in the case of Rwanda Transport Development Authority... In the case involving Rwanda Transport Development Authority, where there was single sourcing, they cited it as a case of urgency. It is not a wrong method, and it only becomes wrong depending on how and when it is applied. Even when it is urgent, there has to be clarity on how and why they used single sourcing. The bigger the amount ,the more questions are bound to arise. Previously, most organisations’ reasons for failing to qualify for clean audit reports was the ‘orders from above’ excuse. Was it common this time? It has declined to almost zero; it was only in one case where it came up as a case of urgency. It is good that officials now know that they are accountable for the orders they give their subordinates. What are the trends and issues that stand out strongly in this year’s report? We projected much more on value for money spent in public institutions, it is time that; public officials questioned themselves on what impacts the money spent would have on citizens. If it will not positively add value to the taxpayers’ lives or mitigate challenges, it is really worth prioritising? There were several instances of lack of supporting documents, going by auditing standards and requirements. You are supposed to look out for priority, non waste expenditure free of embezzlement, this is one of the main reasons for the requirement of supporting documents. Without them there are only claims. The last one is sustainability, the clean audit reports have been on an upward trend and it should be a journey of no return, the progress should be maintained. A comment on the overall report? All in all, the trend is tremendously positive and to be encouraged considering where we are coming from and the speed we are picking. There are already desirable outputs going by the number of clean audit opinions. The National Budget is growing and we should increase the capacity to manage those resources if we are to expect anything out of it. The Budget is an aggregate of what citizens have put in.