Auditor General’s Report Analysis
Intro
During the year 2013, the Office carried out one hundred and
thirty eight (138) audits on the accounts for the financial year ended 31st
December 2012. This is an analysis of relevant sections.
The major issues that have been highlighted across all the heads
of expenditure and revenue collected are as shown in the table below.
Issue
|
2012
|
2011
|
2010
|
Unaccounted for Revenue
|
1,860,280,055
|
2,253,941,307
|
1,761,709,547
|
Unaccounted for Funds
|
3,624,275,679
|
5,054,209,802
|
3,823,553,675
|
Misapplication of Funds
|
38,738,763,261
|
23,685,562,199
|
220,628,818,731
|
Unretired Imprest
|
25,558,789,274
|
33,136,711,477
|
77,161,637,221
|
Unvouched Expenditure
|
553,142,715,946
|
77,014,932,341
|
74,793,881,735
|
Unaccounted for Stores
|
43,063,044,103
|
22,079,935,144
|
43,921,118,882
|
Irregular Payments
|
1,438,527,391
|
4,233,314,411
|
10,289,923,002
|
Non Recovery of Advances and Loans
|
7,195,232,766
|
3,479,476,312
|
10,098,900,307
|
Failure to Follow Procurement Procedures
|
121,438,503,116
|
4,674,317,060
|
2,540,559,305
|
Undelivered Materials
|
1,232,210,506
|
2,104,187,120
|
646,210,800
|
Non Submission of Expenditure Returns
|
107,765,375,773
|
27,083,333,334
|
3,090,848,292
|
Wasteful Expenditure
|
1,195,270,249
|
2,609,341,457
|
7,362,829,990
|
Overpayments
|
206,913,870
|
6,000,000
|
131,561,606
|
Misappropriation of Funds
|
463,631,579
|
1,060,362,947
|
1,096,257,658
|
Source: Auditor
General’s Report 2012
These issues arise as a result of the failure to adhere to
regulations and weaknesses in the implementation of internal control systems.
Revenue
Description
|
Actual Revenue
|
Income Tax (Other than mineral tax)
|
11,732,388,509,836
|
Medical Levy
|
24,487,279,427
|
Customs and Excise
|
3,680,555,710,400
|
Fuel Levy
|
613,804,508,639
|
Value Added Tax
|
4,721,273,708,622
|
Fines
|
19,744,120,468
|
Licences
|
297,789,051,570
|
Commissions
|
14,088,818,148
|
Fees of court or Office
|
278,780,165,970
|
Interest
|
549,400
|
Other Revenue
|
528,466,002,589
|
General Budget Support
|
536,346,731,135
|
Sector Budget Support
|
65,741,036,200
|
Total
|
22,513,466,192,404
|
Source: Auditor
General’s Report 2012
Excess Expenditure
A review of Statement ‘C’ of the Financial Report for the year
under review revealed that expenditure in excess of the provision voted by
Parliament in respect of three (3) heads of expenditure amounted to
K9,495,894,076 as tabulated below.
Ministry
|
Total Authorized
Provision
|
Actual
Expenditure
|
Excess
Expenditure
|
Ministry of Chiefs and Traditional
Affairs
|
77,130,791,355
|
77,806,017,300
|
675,225,945
|
Drug Enforcement Commission
|
41,863,422,400
|
50,683,890,531
|
8,820,468,131
|
Zambia Intelligence Service
|
321,444,299,489
|
321,444,499,489
|
200,000
|
Total
|
440,438,513,244
|
449,934,407,320
|
9,495,894,076
|
Source: Auditor
General’s Report 2012
This excess expenditure
of K 9,495,894,076 will require approval by Parliament as provided for in
Article 117 (5) of the Constitution.
Tax
During the financial year ended 31st December 2012, a total
amount of K20,772 billion was collected as tax and non-tax revenue against a
total target of K20,154 billion resulting in a surplus of K617 billion.
License Fees
In the Estimates of Revenue and Expenditure for the
financial year ended 31st December 2012 amounts totaling K26,094,573,819 were collected
resulting in an over collection of K3,637,160,669 as shown in the table below.
Revenue Type
|
Actual Collection
|
Mining licence
|
4,001,146,939
|
Surface Fees
|
553,719,733
|
Other Revenue
|
247,685,191
|
Water Board Fees
|
5,216,704,677
|
ERB Licence Fees
|
16,075,317,278
|
Total
|
26,094,573,819
|
Source: Auditor
General’s Report
Ministry of Defense
In the Estimates of Revenue and Expenditure for the
financial year ended 31st December 2012, a total provision of K788,358,396,083
was made to cater for various activities under the Zambia Army against which
amounts totaling K855,724,713,699 were released resulting in an over funding of
K67,366,317,616 which was not supported by a supplementary provision.
Ministry of Education
In the Estimates of Revenue and Expenditure for the
financial year ended 31st December 2011 and the period ended 30th September
2012, a total provision of K405,321,502,209 (US$84,602,207) was made to cater
for activities under the National Implementation Framework (NIF) II against
which amounts totaling K353,692,560,418 (US$69,852,938) were released resulting
in an underfunding of K51,628,941,791 (US$14,749,269) by various Cooperating
Partners (CPs) and GRZ.
Ministry of Lands, Energy and Water
In the Estimates of Revenue and Expenditure for the
Financial Year ended 31st December 2012, a total provision of K758,638,214,819
was made to cater for various activities under the Ministry.
During the period under review, the Ministry was split into
the Ministry of Mines, Energy and Water and the Ministry of Lands, Natural
Resources and Environmental Protection. The Ministry of Energy and Water after
the split and for which a total provision of K665,447,498,564 was made and
K187,823,389,111 released. The Ministry of Lands Natural Resources and Natural
Protection after the split and for which a total provision of K109,424,660,361
was made and K69,404,903,943 released
In the Estimates of Revenue and Expenditure for the
Financial Year ended 31st December 2012, a provision of K28,493,771,000 was
made to cater for opening up of new areas for development. in various local
authorities against which amounts totalling K25,839,421,228 were released resulting
in an underfunding of K2,654,349,772.
Ministry of Agriculture and Cooperatives
In the Estimates of Revenue and Expenditure for the financial
year ended 31st December 2012, a provision of K1,156,181,000,744 was made to
cater for the purchase and distribution of inputs under the Farmer Input
Support Programme (FISP) against which K1,155,861,071,547 was released
resulting in an under funding of K319,929,197. As at 31st December 2012, a
total amount of K1,139,624,512,924 had been spent leaving a balance of
K16,236,558,623.
In the Estimates of Revenue and Expenditure for the
financial year ended 31st December, 2012, a provision of K96,440,628,594 was
made to cater for various activities at the DACOs and PACOs against which
amounts totalling K100,138,048,659 were released.
Constitutional and Statutory Expenditure – Ministry of Finance
Head 99 comprises funds for servicing external and internal
debt, contingency and other expenditure and is controlled by the Secretary to
the Treasury at the Ministry of Finance.
Management Information System
The Ministry of Finance (MOF) has been using the United Nations
Conference on Trade and Development‟s (UNCTAD) Debt Management and Financial
Analysis System (DMFAS) since 1986. This is a specialised debt management and
financial analysis software designed to help countries manage external and
domestic public debt, including securities. The Investment and Debt Management
(IDM) Department is charged with the core function of management of public
debt, supervision and monitoring of Government investments. IDM has five units;
External Debt, Domestic Debt, Government Investments, Accounting and a Data
Debt Unit. The DMFAS database is maintained by the Debt Data Unit and contains
only public external debt. The other units of IDM have no access to the system.
In the Estimates of Revenue and Expenditure for the financial year ended 31st
December 2012, a total provision of K3,934,159,822,511 was made to cater for
various activities against which a total amount of K3,102,063,287,369 was
released resulting in an under funding of K832,096,535,142.
The Ministry of Finance did not provide reports clearly
showing the debt stock for Pre HIPC and Post HIPC position of the Country.
Position of Public Debt
The position of domestic and external debt as at 31st December
2012 was as shown in the table below:
TYPE
|
Opening Balance as at 1st
January 2012
|
Amount Borrowed
During the
year 2012
|
Amount Repaid
During the
year 2012
|
Closing Balance as at 31st
December 2012
|
Domestic Debt
|
13,825,383,063,019
|
11,241,865,743,600
|
9,710,182,629,280
|
15,357,066,177,338
|
External Debt
|
7,656,868,272,984
|
8,927,980,854,463
|
1,153,182,535,027
|
15,431,666,592,420
|
Total
|
21,482,311,336,003
|
20,169,846,598,063
|
10,863,365,164,308
|
30,788,792,769,758
|
Source: Auditors
General Report
As can be seen from the table above, total public debt increased
from K21,482,311,336,003 as at 31st December 2011 to K30,788,792,769,758 as at
31st December 2012 representing an increase of 43%. The increase in the debt
levels was attributed to new borrowings made in 2012.
Loans
Records in respect of loans in amounts totalling US$123,446,502
as shown in the table below, revealed that the Government has not been
consistent in servicing the loans from Brazil, Iraq and China. Loans from
Brazil were last serviced in June 2001, from Iraq in July 1984 and those from China
have never been serviced and interest has since accumulated to US$44,906,325 as
shown in the table below.
CREDITOR NAME
|
ARREARS
PRINCIPAL
US$
|
ARREARS
INTEREST
US$
|
OUTSTANDING INCL
ARREARS TOTAL
US$
|
BANCO DE BRASIL
|
32,250,842.36
|
34,886,132.57
|
67,136,974.93
|
GOVT OF CHINA
|
19,221,513
|
19,221,512.84
|
|
GOVT OF IRAQ
|
27,067,822
|
10,020,192.43
|
37,088,014.28
|
Total
|
78,540,177
|
44,906,325
|
123,446,502.05
|
Source: Auditor
General’s Report
Debt owed to Brazil
The Government of Zambia and the Federal Government of Brazil have agreed that the outstanding debt of US $67. 1 million owed to Brazil will be treated through the special bilateral arrangement. Under this arrangement, 80 percent will be cancelled while 20 percent will be repaid on terms of the agreement to be signed between the two parties. The debt relief agreement between Zambia and Brazil is expected to be signed in December 2014.
Debt owed to Iraq
The Government of Zambia and the Government of Iraq have agreed to settle the outstanding debt of $37 million under the Paris Club VIII debt write-off framework. Under this arrangement, Iraq will cancel 90 percent of the outstanding debt stock, while the remaining 10 percent will be repaid on terms of the agreement to be signed between the two parties.
Debt owed to China
In 2011, the Government of China, through a protocol, delivered partial debt relief by cancelling the outstanding amounting of RMB Yuan 247 million which represented 50 percent of the debt forgiveness from China. The Government of Zambia has commenced negotiations with Government of China on the cancellation of the remaining 50 percent of the outstanding debt. It is expected that the negotiations will be completed by the end of this year and a debt relief agreement signed in 2015. Total outstanding debt to China stood at US $19. 2 million as at end of 2012.
Conclusion
Looking back to the end of 2013, preliminary estimates indicate that the total debt as a percentage of GDP stood at 28%. Of this, external debt stood at US $3.1 billion [approximately K17 billion] or 13.7% of GDP, whilst domestic debt stood at K17.6 billion or approximately 14% of GDP. Debt service (principal and interest payments) stood at K11 billion or 1.2% of GDP (and approximately 6% of domestic revenue). In this regard, external and domestic debt levels are below the international thresholds of 40% and 25%, respectively.
The Debt situation has deteriorated, but is still inline with 2030 vision goals. This does not mean that our current scenario should be promoted.The overall sentiment in the Auditor General's report is riddled with lack of Internal controls, with the other biggest problems in 2012 being Non Submission of Expenditure Returns, Failure to Follow Procurement Procedures,Irregular payments
and Unvouched expendititure.
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