HARARE City Council’s subsidiaries have not been submiting their books of accounts to the local authority, escalating the risk of corruption and mismanagement of funds, a report by Parliament’s Public Accounts Committee has shown.
The irregularities were uncovered when council sought to establish the extent to which Harare City Council had addressed audit observations made in the 2020 Auditor-General’s report.
PAC also sought to establish why council is operating without a proper accounting system.
The findings, presented last week in the National Assembly, revealed that the City of Harare’s wholly-owned subsidiaries, namely Rufaro Marketing (Pvt) Ltd, City Parking (Pvt) Ltd and Sunshine Holdings, were not consolidated or accounted for.
“City of Harare officials submitted that the set up was such that subsidiaries were treated as entities outside the City Council.
“Harare City Council also had problems accessing information from the subsidiaries which it wholly owns. The subsidiaries had not been providing audited accounts to Harare City Council since their inception.
“While Harare City Council has a sound ERP (Enterprise Resource Planning) System in BIQ, Harare City Council had not been doing bank reconciliations since 2015 leading to huge unreconciled amounts. Not all transactions have been going through the Harare City,” read the report.
The accounting situation was worsened by a fallout between Harare City Council and its accounting system provider, Quill Associates, which saw the local authority being switched off, leaving council without a sound accounting system.
“At the moment, the prejudice of the amounts involved or the amounts lost could not be quantified. A proper investigative audit would help to numerate the amount lost,” according to the report.
In 2019, Quill Associates hiked licence fees to the accounting system from US$25 000 to US$75 000, an amount which council has been disputing.
After the fallout, council then turned to SAGE for an alternative system, at an annual fee of US$300 000, compared to Quill’s BIQ’s US$75 000.
However, it was further submitted to the Public Accounts Committee that SAGE was not functioning and did not have the capacity to handle council’s huge operations, which saw the local authority being grounded.
This led to a lot of anomalies within council operations, most of which were unearthed by the Auditor-General in the 2020 report.
While Harare City Council says it is now undertaking a tendering process to acquire a new accounting system, the Public Accounts Committee has urged council officials to hastily re-engage Quill Associates for the BIQ system to recover funds which are unaccounted for, and restore sanity, transparency an well as efficiency to avoid continued financial haemorrhage in city operations.
Last month, the Public Accounts Committee ordered local authorities, with immediate effect, to put in place back-up systems for information, while ordering the ministry of Local Government to procure current accounting software by 30 June 2023, after it emerged that several of them were last audited between 2017 and 2019, raising the risk of corruption, and mismanagement of fund.
Local authorities are required by section 35 (6) of the Public Finance Management Act (PFMA) to submit audited accounts to the Auditor-General.
Rural district councils comprise the bulk of local authorities that are yet to submit, with their accounts going unaudited between 2018 and 2019.