More than 1,000 assets belonging to the East African Community that were bought at $1.88 million cannot be traced, the East African Legislative Assembly was told this week in a further indictment of the Secretariat’s management.
The assembly was also told by the EALA Accounts Committee that more than $1 million in cash could not be accounted for.
The report, presented in the House on Tuesday, details alleged loss, wastage of Community funds and assets, breach of procurement procedures and violation of staffing regulations. The audit covers the financial year ended June 30, 2017.
The House had rejected the audit last November when it was tabled, for being “shallow” and not being scrutinised by the East African Development Bank (EADB) because of a legal technicality.
When the report came up for debate this week, the existence and whereabouts of some assets including six vehicles and their logbooks, could not be verified. Also, other assets referred to as ‘‘work in progress’’ of $64,816 were alleged to have been procured but were not in use.
The assets in question, however, are almost fully depreciated and carry a book value of $12,052.
Wastage was alleged over the Secretariat’s purchase of kitchen equipment worth $212,987 in December 2014, and that was never used.
In the FY 2016/17, the total budget of the EAC Secretariat, its organs and institutions was $106.5 million but only $71 million was remitted. Even this was not fully absorbed and only $63 million was used giving a performance rate of 62 per cent.
The Audit Commission could not ascertain the existence, ownership, completeness, valuation and accuracy of non-current assets valued at $20 million as of June 30, 2017.
The EALA legislators attributed the low budget absorption to weaknesses in financial management and staffing leading to programmes stalling or running behind schedule.
Such was the heated debate that the House suspended Rule 30 to allow more time to discuss the contents of the report.
Francine Rutazana, a Rwandan MP, asked Speaker Martin Ngoga to suspend Rule 30 to provide for more time for members to exhaust debate on the report, which had been pending before the House for months.
CALL FOR SANCTIONS
The committee recommended that current and former Secretariat staff who have perpetrated irregularities and illegalities be punished.
The MPs called on the EAC Council of Ministers to institute sanctions against all officials, including Secretary General Libérat Mfumukeko, for the alleged misuse of funds and Community assets, negligence of duty and breach of EAC rules.
Others blamed for the state of affairs are Community counsel Dr Kafumbe Anthony, finance director Juvenal Ndimurirwo and human resources director Simba Ruth. Deputy secretaries-general and procurement officers are also on the list of those who should be held to account.
Some MPs, however, suggested the probe should go further back into the previous administration of Richard Sezibera.
They want the Council of Ministers in charge of EAC Affairs to ensure that those found culpable for the loss and wastage of EAC funds and assets are held personally responsible, financially liable and disciplined in accordance with provisions of the bloc’s staff rules and regulations.
NAME AND SHAME
“It is the responsibility of the House and the Community to mention the names of the individuals whom the auditors have found responsible for either misuse, abuse or the negligence of the use of resources of the community,” said Aden Abdikadir, a lawmaker from Kenya, during the debate in the House in Arusha.
The lawmakers expressed their frustrations with the continued failure by the Council to punish errant officials despite previous recommendations. But they noted that the decision to name and shame officials and punish them was a positive move.
Mr Kafumbe had opposed the naming of individuals, saying the report mentions people who were not given an opportunity to defend themselves, but the MPs overruled him. They said they had accorded everyone an opportunity to present their side of the story. They cited the lack of co-operation from the staff of the Secretariat, some of whom did not appear before the committee even after receiving summonses.
Ms Rutazana said such impunity would impact the Community.
Denis Namara, a lawmaker from Uganda, said, “We were given clear instructions that this report mention the people who are culpable, so we followed the EALA Powers and Privileges Act. Culpability is individual, not systemic.”
Fatuma Ali Ibrahim, a member from Kenya, while calling the Council of Ministers to move quickly to act, said it must also provide the assembly with timelines for implementation of the recommendations, which range from punitive sanctions to streamlining of the operations of the bloc’s bodies.
“We are demanding that the Council of Ministers come up with a time frame for implementation,” she said.
Her counterpart from Uganda, Mathias Kasamba, said, “We are here to serve the people of East Africa and every penny from the partner states and donors must be accounted for.”
He noted that donors had pulled out of important regional projects citing lack of accountability.
“Have we audited ourselves to see why donors are leaving?” he wondered.
The Audit Commission reported laxity in the collection of revenues, recording an outstanding value added tax of $1.8 million — which was an increase by $478,859 from FY 2015/16. The MPs observed that the non-recovery of $1,877,168 from the regional revenue bodies had deprived the Community of the scarce resources to implement its programmes and activities.
The statement of financial position reflected a non-current assets balance of $20,251,613 as at June 30, 2017, but $2,983 non-current assets with original cost of $3,819,390 which were fully depreciated were still in use without review of their useful lives.
Further, the audit noted items worth $829,058 entered in the asset register were not associated with any identifiable assets, contrary the EAC financial procedures. The Audit Commission was told that the EAC had adopted new accounting systems, which affected the way the institution was capturing and maintaining financial data. This caused some entries not to be supported in the assets register.
When queried, the EAC management informed the Committee that the process of updating the fixed assets register to indicate the serial numbers, location and condition of assets was ongoing.
The Committee observed that without specific identification of assets, it may not be possible to track, monitor and control the assets and reports in the financial statements could therefore be fraudulent. They recommended disciplinary measures against the director of finance for the unsupported entries.
The committee expressed concerns over gross irregularities in the recruitment and award of said short-term contracts. They say there was no evidence that the engagement of short-term staff was recommended to the Council for approval as required by the regulations.
“There was no evidence to show that there was a competitive process in the engagement and the determination of salary levels was not clear,” says the report. The MPs noted that some staff have been engaged on short-term contracts for over seven years, with no evidence of leave or terminal benefits, contrary to the international labour requirements and the EAC staff rules and regulations.
The audit further points to irregular reallocation of $1,342,650 from personnel emoluments to recruitment expenditure, contrary to Regulation 19 (3) of the EAC Financial Rules and Regulations Act 2012.
The Secretariat said that the move had been sanctioned by the Council of Ministers, but the legislators pointed to Regulation 19 (3) of EAC Financial Rules and Regulation 2012, which stipulates that no funds shall be reallocated from personnel emoluments budget. “Thus there was gross violation of the EAC financial rules and regulation,” the Accounts Committee states
The report shows that the EAC Secretariat received a grant of $356,000 in March 2016 from the African Union Commission — Inter African Bureau for Animal Resources (AU-IBAR) for the implementation of Action for Reinforcing Veterinary Governance in Africa. It reported to have spent $178,761 on the project while $117,000 was transferred to AU-IBAR on November 4, 2016. Supporting documents were not provided for audit.
“Consequently, it was not possible for the Audit Commission to confirm the propriety and validity of the reported expenditure and transfer of $178,761 and $117,000 respectively as at June 30, 2017,” the MPs said.
The MPs said that the continued non-audit of the EADB was in contravention of the Article 134 and Article 9 and want a Summit directive to resolve the disparity between the EADB Charter and the EAC Treaty.
“This Charter empowers the EADB Governing Council to appoint auditors to carry out audits on the bank selected by the board of directors,” says the report.
The shareholding of the EADB comprises Kenya and Uganda with a 27.03 per cent shareholding each, Tanzania with 23.77 per cent and Rwanda with 9.51 per cent. The Bank however has other non-EAC shareholders.
The audit commission reported delays in remittances of contributions from partner states. The committee indicated that only 39 per cent of the contributions for the financial year 2016-2017 had been received by December 31, 2016.
“The committee recommends to the assembly to urge the Council of Ministers to ensure that it explores the possibility of enforcing sanctions and penalties on partner states defaulting on remittances of contributions to the EAC,” said Dr Ngwaru Maghembe.