Local government authorities lost billions of dollars in revenue
According to the local government report, officers were supposed to hand over to councils a sum of 5.62 billion/- from the collection, while council employees were supposed to hand over the full amount collected.
Instead, the CAG report indicates that collectors and staff remitted to the Council a total of 987.76 million/- and 1.8 billion/- only, thus, 4.64 billion/- and 5.49 billion/- were not remitted respectively, making a total of 10.13 billion collected. but not banked.
Given the procedures involved in collecting the Council’s revenue from its own sources, the CAG reviewed information from the Local Government Revenue Collection System (LGRCIS) and the bank statements of the Council’s revenue accounts kept with NMB Bank Plc, CRDB Bank Plc, NBC and DCB Bank Plc. for the period from July 2019 to June 2021.
The CAG further claims that the embezzlement of collected funds was perpetrated by altering LGRCIS information to conceal the facts and producing fabricated receipts.
“I urge the government to take appropriate steps to ensure that it recovers the amount from the responsible staff and officers,” CAG Charles Kichere said in the report.
However, the CAG discovered that 16 local authorities made adjustments to transactions in the LGRCIS for their own revenues totaling 28.33 billion/-, without following the adjustment procedures provided for.
These adjustments were not approved by the respective accountants and were not the subject of any supporting documents. This anomaly was attributed to weak internal control systems over transaction adjustments in the LGRCIS.
According to Kichere, the unauthorized adjustments could be misappropriated revenue or fraudulent transactions made through own-source revenue. Similarly, reconciliations made through erasing and correcting revenue transactions in the system without the approval of the competent authorities could facilitate the diversion of government revenue.
“I recommend to the responsible authorities to take appropriate action against the officials mentioned in the respective reports who made changes to the system without observing the proper procedures;
In addition, PO-RALG is advised to improve controls over the Local Government Revenue Collection Information System (LGRCIS) used by local government authorities,” Kichere states in the report.
In another separate audit, the CAG reviewed the management of the implementation of agreements with agents (receivers) to collect its revenue from its own sources and identified various weaknesses.
For example, the CAG said they found that despite the contract with M/s Pick Trading Ltd expiring on November 30, 2019, the company continued to receive revenue without a contract for 11 months from December 01, 2019 to October 30, 2020, where a total amount of 496.47 million/- was collected, however, only 900,000/- was remitted to the Council, leaving a sum of 495.57 million/- unremitted.
CAG Kichere recommends that the government take appropriate action against the officer and staff involved in the hijacking.
However, during the audit, 7 local government authorities did not submit payment vouchers to me for 1.37 billion/-, in respect of payments made during the financial years 2018/19 to 2020/21.
Following the non-submission of payment vouchers for verification, the validity of the payments made could not be verified. The CAG warns that this is contrary to Section 15(2) of the Public Audit Act 2008 and Order 8(2)(c) of the Local Government Finance Memorandum 2009.
“I recommend that the PO-RALG Permanent Secretary take appropriate action against local authority staff mentioned in the specific audit reports for failure to present supporting documents for payment,” Kichere stresses.