REPORT OF THE PUBLIC ACCOUNTS COMMITTEE ON KAROI TOWN COUNCIL’S AUDITED ACCOUNTS FOR THE YEAR 2020

HON. G. K. SITHOLE:  Madam Speaker, I move the motion standing in my name that this House considers and adopts the Report of the Public Accounts Committee on Karoi Town Council’s Audited Accounts (2020) in the 2023 Auditor-General’s Report.

HON. KANGAUSARU:  I second.

HON. G. K. SITHOLE:  Thank you Madam Speaker. I present the report of the Public Accounts Committee on Karoi Town Council’s audited Financial Statement for the year ended 31^st December 2020 as presented in the Auditor’s Report of the year 2023.

• INTRODUCTION

The Committee resolved to enquire into issues raised by the Auditor-General on the 2019 financial statements for Karoi Town Council (KTC), as reported in the Auditor General’s Report on local authorities for the years ended December 31^st, 2022.

2.0 OBJECTIVES OF THE ENQUIRY

The Committee sought to establish the progress made by Karoi Town Council in addressing audit findings mentioned in the 2022 Auditor General’s Report and the status of implementing recommendations made in the report.

3.0 METHODOLOGY

3.1 The Committee received oral evidence and written submissions from Karoi Town Council and the information gathered enabled the Committee to compile a comprehensive report. 

4.0 Committee Findings

4.1 Council schools

The Council did not account for the revenue, expenses, some assets and liabilities for its six (6) schools in the financial statements contrary to accounting standards. As a result, the segment information did not include the education services segment. 

4.1.1 Committee findings

The Committee found out that Karoi Town Council had delegated the authority to School Development Committees which was an oversight on the part of Council. As a result, Council did not maintain accounting records for schools. To address the issue, Karoi Town Council informed the Committee that a clear roadmap had been developed to employ competent bursars to perform the accounting function at schools by January 2025. Furthermore, an installation of ERPs at schools that will be linked to the main server at the Council main office was indicated to be part of the efforts to address the audit findings. Council indicated that the cost of the ERP will be catered for in 2025 budget. KTC promised to submit monthly financials and carry out internal audits of schools from January 2025.

4.1.2 Observations

The Committee observed that Karoi Town Council was not considering schools as part of its assets and hence did not  consolidate school accounts into the council’s accounts. This error of omission was creating a smoke screen mystifying the true reflection of the financial statements of the town council.

Recommendations

Karoi Town Council must consolidate school financial statements into the Council accounts and by 31 March 2025.

• Valuation of property, plant and equipment

The Auditor-General noted that the Council did not revalue its property plant and equipment to reflect the current value of assets to comply with IPSAS 17.

4.2.1 Committee Findings

The Committee found out that KTC had not done any revaluation exercise of its property and plant equipment observed by the Auditor General. However, the Council has been working on ERP networking and clearance of audit backlogs to facilitate the gaps in the excellent implementation of the IPSAS matrix.  The Town Council submitted before the Committee that the revaluation exercise will be done during the 2025 financial year.

4.2.2 Observation

The work on ERP networking and clearance of audit backlogs is a welcome initiative by Karoi Town Council to make meaningful headway. However, it is paramount for the Council to address the revaluation of plant and equipment as noted by the Auditor General.

4.2.3 Committee Recommendations

1. The Committee recommends that Hurungwe RDC must continue with the current efforts of ERP networking and most importantly conclude the revaluation of plant and equipment by 01 May 2025.
2. The Ministry of Finance, Economic Development and Investment promotion must monitor progress on the adoption of IPSAS by public entities and report to Parliament biannually.

4.3 Registration of vehicles

The Auditor-General noted that the Council had seven (7) vehicles not registered in its name. Two (2) vehicles were not yet registered, and five (5) vehicles were registered in the name of third parties in contravention of the Vehicle Registration and Licensing Act [Chapter 13:14]. In addition, the Council did not provide registration books for six (6) vehicles.      

4.3.1 Committee Findings

The Committee found out that the vehicles in question were allegedly bought by Karoi Town Council from a third party by the name of Mr. Richardson, and had remained in the name of the seller. This was a serious oversight on the part of Council management which has since created a laborious process of registering the cars under Karoi Town Council. However further findings pointed out that, the vehicles were almost obsolete and Council intends to auction them. Efforts by Karoi Town Council were currently underway to get clearance from the CID for some of the vehicles.

4.3.2 Observations

The Committee observed that the delay in changing vehicle ownership was a serious oversight on the part of management. The matter that was raised by the Auditor General has not been addressed by Karoi Town Council.

4.3.3 Recommendations

The Committee recommends that the vehicles in question must  change ownership from the seller’s name to Karoi Town Council by 30 April 2024 before they can be disposed of.

• Fuel for Roads Projects

The Auditor-General noted that the Council did not maintain a fuel register or perform reconciliations for road project fuel.

4.4.1 Committee Findings

The Committee gathered that fuel was registered in fuel issue forms which did not state the purpose of the fuel. This was a major oversight that compromised the transparency process of fuel management. KTC acknowledged the observation. 

4.4.2 Observations

It was observed that the Council was not keeping proper records for acquittals and reconciliation.

4.4.3 Recommendations

The Karoi Town Council Chief Executive Officer must set up an investigation on the management of fuel and properly account for fuel used by 30 April 2025.

• Valuation roll

The Auditor General noted that the Council did not have an updated valuation roll contrary to the requirements of the Urban Councils Act [Chapter 29:15] and I could not determine the basis used in charging assessment rates. As a result, the Council was not billing ratepayers for stands sold between 2008 and 2010. 

  4.5.1 Committee Findings

The Committee found out that Karoi Town Council did not bill (9) rateable stands from a sample of (17) stands in Kubatana area. The Council had not been updating its valuation roll prior to 2024 which saw a draft valuation roll being crafted and now awaiting approval by the valuation board. Further findings by the Committee noted that some properties were left out from the billing platform as they were not properly communicated to the Treasury from the Housing department.

4.5.2 Observations and Recommendations

An updated valuation roll will assist in identifying properties that are not captured in the treasury billing database. Going forward, stands allocated by the Housing department must be communicated to the Council’s Treasury department for immediate billing of service charges.

• Billing of Properties

The Auditor General noted that the Council was not billing ratepayers for stands sold between 2008 and 2010.

4.6.1 Committee Findings

The Committee found out that significant progress had been made by KTC to rectify the findings by the AG. The properties sold between 2008 and 2010 were identified and have been incorporated in the billing system. Council had also procured the LAD’s software to account for stand sales and the same information can now be accessed by the Treasury department.

4.6.2 Observations and Recommendations

Going forward, stands allocated by Housing department must be communicated to its Treasury department for immediate billing of service charges

• Beerhall Procurement and Sales

The Auditor General noted that the Council was operating beer halls without cash registers/ tills and cash was being utilised to buy beer before it was receipted and banked.

4.7.1 Committee Findings

The council admitted that cash from sales was being used before banking it. Karoi Town Council indicated that purchases were now done by the procurement management unit through requisitions. 

4.7.2 Observations

The use of cash for beer sales violated section 48(3) of Statutory Instrument 144 of 2019 on Public Finance Management (Treasury Instructions) which instructs that all revenue received by collectors shall be deposited in the local bank. The use of cash directly from the cash register postulates the potential for misuse and abuse of cash received.

4.7.3 Recommendations

All cash received from beer sales must be banked within 24 hours of receipt as per the provisions of Statutory Instrument 144 of 2019 on Public Finance Management (Treasury Instructions).

• PROGRESS TOWARD ADDRESSING PRIOR YEAR AUDIT FINDINGS AND IMPLEMENTATION OF RECOMMENDATIONS

        The Auditor General had observed that Karoi Town Council did not make progress in addressing audit findings raised in the 2022 annual audit report. The Committee found out that of the (ten) 10 Audit issues, Karoi Town Council addressed four (4).

• Asset Management Policy

Karoi Town Council has come up with an asset management policy which now awaits Council approval (Annexures attached)

• Unallocated Deposits

The finding was addressed. An accounts clerk was appointed to finalise allocating the unallocated deposits.

• Revenue from Stand Sales

The Auditor General found out that receipts from stand sales debtors are not yet linked to the respective debtors’ accounts due to the absence of the database.

4.8.3.1 Committee Findings

The Committee found out that Karoi Town Council has managed to compile a stands database from March 2024. The stands are now being accounted for on an accrual basis, and to this end, receipts are updated on accounts on every payment made by customers.

• Beer Levy

The AG had observed that the payment of beer levy by breweries was not up to date. To address this audit finding Council engaged the breweries and remittance forms were now accessible.

• Valuation of Land

The Auditor General had noted that Karoi Town Council had not done land valuation on where its assets are placed and this observation is still yet to be addressed by Karoi Town Council. Although the Committee was informed of the Council’s plans to engage the Ministry of Local Government and Public Works to facilitate the valuation of land, no tangible progress had been made by Council to address the audit findings.

Recommendations

Karoi Town Council must engage the Ministry of Local Government and Public Works to facilitate the valuation of land by 30 April 2025.

4.8.6 Assets with Nil Values

The Auditor General had recommended that Karoi Town Council must conduct a revaluation of assets.

Committee Findings

The Committee gathered that Karoi Town Council intended to complete the exercise in 2024, and had already started the process.

Recommendation

Karoi Town Council must complete the revaluation of assets exercise by 30 April 2025.

• Council clinics

The AG found out that the finding was partially addressed. The construction of Chiedza clinic was now in progress and the construction of Kubatana clinic was still on the cards and was expected to commence in 2024 financial year.

Committee Findings

The Committee found out that the construction of Chiedza Clinic was now 85% complete while efforts were currently underway to procure a mobile clinic for Kubatana.

Observations

The Committee observed that resource constraints were impeding the progress toward completing the clinic.

Recommendation

Karoi Town Council must complete all outstanding construction of Chiedza clinic and the procurement of a mobile clinic for Kubatana by June 30 2025.

• Registration of Motor Vehicles

The AG found out that there were five vehicles not yet registered in the Council name which Karoi Town Council had not addressed.

Committee Findings

The Committee was informed that the registration of the five motor vehicles had been delayed by the process of transferring the vehicles from the ownership of Mr. Richadson to Karoi Town Council.  It was further submitted that the vehicles were almost obsolete and Council intended to auction them once registration was complete.

Recommendation

The Committee recommends that the vehicles in question must be changed ownership from the seller’s name to Karoi Town Council by 30 April 2025 and be disposed of.

4.8.9 Delivery of Refuse Compactor Truck 

The Auditor General found out that a refuse truck procured by Karoi Town Council had not yet been delivered by Solution Motors. The Committee was informed that the Council was engaging its legal advisor over the issue and the application for condonation with the Procurement Regulatory Authority (PRAZ) had been overtaken by events.

Observations

The Committee observed that Solution Motors had a worrying reputation for not delivering vehicles after receiving payment from public entities. This non-delivery of motor vehicles after payment

Recommendations

The Committee recommends that Solution Motors and all its rebranded companies must be permanently debarred from supplying vehicles paid by public funds.

4.10 Delivery of Goods

The Council procured an extension ladder and safety belts for US$1 100 on November 29, 2018. The procured items were not delivered, instead, 48 reams of bond paper were delivered on April 08, 2019. The supplier cited a lack of capacity to supply the ladder and 84 safety belts and opted to supply bond paper. There was no documentary evidence for the procurement of the bond paper or approval to swap for ladder and safety belts with bond paper.  

The Auditor General had noted that this finding was not addressed and that the Council had not yet applied for condonation with the Procurement Regulatory Authority of Zimbabwe (PRAZ)

Committee Findings

The Committee found out that the then Karoi Town Council management which is no longer in place failed to take instructions from PRAZ to seek condonation for the direct procurement of goods and the unravelling of events overtook the application for condonation.

Observations

The Committee noted that the arrangement to purchase 48 reams of bond paper instead of safety belts was likely a cover-up for the misappropriation of public funds. The cost of the 48 bond paper reams does not add up to US$1100 paid for safety belts.

Recommendations

The Committee recommends that the issue be investigated by the Zimbabwe Anti-Corruption Commission by 30 June 2025.

5.0 PROGRESS ON BRINGING STATUTORY AUDITS UP-TO-DATE IN COMPLIANCE WITH THE PUBLIC FINANCE MANAGEMENT ACT

5.1 Status of Submission

The Committee gathered that the 2022 financial statements for Karoi Town Council were now ready for audit, while the 2023 financial statements were in progress and expected to be completed by the end of November 2024. The challenges causing the delay in completing the financial statements were gathered to be stemming from the mixing up of USD and ZWG transactions, which the accounts clerks were working to resolve. Karoi Town Council further informed the Committee that its accounting system was now semi-computerised and Accounts clerks were engaged on a contract basis to assist in updating financial records. To further aid the staff compliment the Council was in the process of advertising to fill in the Billing Clerks.

5.2 Observations

The failure to submit a financial statement is a serious breach of public finance management regulations and Karoi Town Council must submit all its outstanding financial statements within the timelines set by the PFMA without fail. The Committee notes that the non-submission of financial statements is a worrying trend within local authorities. Chief Executive Officer of councils were not fulfilling their obligation of submitting financial statement on time. 

5.3 Committee recommendations

1. The Committee recommends that the Permanent Secretary of the Ministry of Local Government and Public Works must initiate disciplinary measures for Chief Executive Officers of Councils who are not up-to date in submitting their financial statement by 31 August 2025.
2. The Committee recommends that the Permanent Secretary for the Ministry of Local Government and Public Works must not approve the 2025 budgets for councils that have not submitted their financial statements.

6.0 Conclusion

The Committee is optimistic that the issues identified by the AG’s report in 2023 on Karoi Town Council’s 2020 audited accounts will be addressed through consented efforts of implementing the Committee’s solid recommendations. In this regard, the Committee implores all the tasked stakeholders to take the recommendations made by the Committee seriously so as to ensure financial prudence, restore sanity, transparency and efficiency in the use and management of public funds by Karoi Town Council. I thank you.