THE Auditor-General’s latest report on Local Authorities has once again flagged Harare City Council for failing to fully account for its finances.
RUVIMBO MUCHENJE
Acting Auditor-General Rheah Kujinga’s report reveals that council did not have a determination on the audit conducted, because it did not provide sufficient material for the audit.
“I do not express an opinion on the financial statements of the City of Harare. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of my report, I have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements,” said Kujinga.
Harare failed to submit sufficient data for audit because the city council does not have proper accounting systems in place.
In 2019, Quill Associates, previous provider of the city’s Business Intelligence Quotient (BIQ) System, abruptly withdrew its service after the local authority failed to pay for it for a consecutive five months.
Since then, the local authority has not procured an accounting system, resulting in revenue leakages leading to poor service delivery.
Kujinga reports that the material submitted for audit by Harare is not a true reflection of all the transactions that happened at the local authority.
“The City Council’s accounting and financial management system collapsed following the withdrawal of the BIQ financial accounting and reporting system in March 2019. I was not able to obtain sufficient appropriate evidence as to whether all the recorded balances and transactions during the year under review had actually occurred, been correctly classified, and had been completely and accurately recorded. In addition, I was not able to confirm the reported balances by alternative means and I was not able to obtain sufficient appropriate evidence that management fulfilled its responsibility in the preparation and fair presentation of the financial statements in accordance with International Public Sector Accounting Standards (IPSASs). Based on the audit evidence I gathered, it is my opinion that the financial statements submitted by City of Harare are not based on credible underlying accounting records as there was no credible financial accounting system,” reported Kujinga.
In 2020, the then Auditor-General Mildred Chiri warned council against operating without a proper accounting system in place.
Harare says because the cancellation was abrupt, they could not extract all the 64 cashbooks in the system. In 2020, Chiri recommended that systems be put in place to address the governance crisis.
“The Council’s cashbooks were not furnished for audit. Cash receipts and payments journals linked to the bank accounts were also not availed. Reconciliations of bank accounts, EcoCash accounts were not updated and proper checking and authorisation of the same was not being done. Some of the bank accounts were not in the accounting system. The risk is that fraudulent transactions might not be detected and acted upon on time as well as possible financial loss. I recommend that the council should ensure adequate and proper maintenance of records. Monthly bank reconciliations should be done and reviewed,” said Chiri in the previous report.
A year later, acting Auditor-General Kujinga could not make a determination on the receipts provided by the local authority, citing insufficient evidence.
After Chiri’s report, Parliament’s Public Accounts Committee instituted an inquiry into the shambolic state of affairs in the local authority’s accounting and made similar observations.
In their inquiry, the MPs were told that all receipting and invoicing was now being done manually, which was a nightmare for finance officers.
“Mr Mhukarume (Francis), the Finance Director at Harare City indicated that it was an agreed position that the current Sage system that replaced BIQ is not functional and it is a nightmare operating in an environment in this day and age without a proper system. He submitted that Harare City was struggling in receipting as it receipts manually. As a result, all receipts were not accurately accounted for. The billing was not being done accurately because SAGE did not have the capacity. In a nutshell, Harare City did not have an accounting system, and was just operating on an auto pilot. The Procurement was also affected as there was no system being used. At the end of the day, Harare City Council’s financial reporting was not transparent and that signals failure. Mr Mhukarume further submitted that the environment currently was a nightmare because the only module which was working was the billing which was operating at 50%,” read the report by PAC.
Meanwhile, in addition to the accounting nightmare at Harare City Council, the other problem that has persisted is the failure by the local authority to account for its subsidiaries.
Noted Kujinga in the latest report: “The Coun[1]cil did not consolidate and/or disclose the full list of subsidiaries, associates, joint ventures and other entities that the City of Harare invested in. No financial statements of subsidiaries, associates, joint ventures and other entities the City of Harare is invested in were submitted. International Standard on Auditing (ISA) 600, ‘The Work of Related Auditors and Other Auditors in the Audit of Group Financial Statements’, requires the group auditors to have full access to information on all group components. In addition, management reported that the joint arrangement with Easi-park (Pvt) Limited had been terminated. I was not able to establish the terms and conditions of the reported termination and how the termination was accounted for in the council’s books. Besides, this joint venture had never been accounted for in the council’s financial statements in accordance with accounting standards. I was not able to obtain sufficient appropriate audit evidence that the financial statements and the notes thereto have been properly prepared in accordance with applicable standards.”
Her predecessor, Chiri, also raised concerns over the issue of subsidiaries, saying: “International Public Sector Accounting Standard (IPSAS) 6- Consolidated and separate financial statements requires the consolidation of all controlled entities. I noted that 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. Access to the identified entities was not granted and the investments, in aggregate, may be significant and material. It was also unclear whether all the interests in Sunshine Holdings were known.”
Management promised to follow it up and ad[1]dress the anomaly by 2019, but did not.
“Noted, all accounts for subsidiaries will be consolidated in 2019. Council will endeavour to comply to all the requirements of the IPSAS Guideline,” responded management.
Harare was among six local authorities flagged for failing to provide sufficient data for audit by the Auditor-General.
