Audit Shows Surge In Governance Issues Among State Entities

In a recent report, Acting Auditor General Rheah Kujinga has raised concerns about the worsening state of governance within Zimbabwe’s state entities, despite notable progress in financial compliance.

Kujinga’s 2023 audit reveals a sharp increase in governance-related issues, rising from 170 in 2022 to 310 in 2023, while financial reporting improvements have been marked.

The audit covered 191 state entities, with a total of 388 issues flagged in 2022. Of these, only 132 were fully addressed, 77 were partially addressed, and 177 remained unresolved. This indicates a troubling trend where governance problems are escalating, overshadowing advancements in financial reporting.

State entities, once crucial to Zimbabwe’s economy—accounting for about 40% of the Gross Domestic Product (GDP)—now contribute a mere 2% due to severe mismanagement and governance failures. These entities have increasingly depended on fiscal bailouts, further straining public resources. Kujinga’s report underscores various deficiencies in governance and internal controls.

Key issues include unsupported expenditures, misalignment of accounting practices, outdated financial manuals, non-compliance with tax laws, lack of bank reconciliations, and absence of internal audits. The report categorizes problems into seven areas: revenue collection, debt recovery, asset management, procurement, service delivery, employment issues, and investment management.

Despite these issues, the Auditor General commended recent government reforms aimed at improving governance. Notable among these is the establishment of the Corporate Governance Unit (CGU) within the Office of the President and Cabinet and the introduction of performance contracts for senior management.

However, Kujinga urged boards to focus on improving transparency and accountability by enhancing their internal audit functions. The World Bank emphasizes the critical role of state enterprises in delivering essential services and advancing state policy. Effective governance of these enterprises is vital for resource allocation, economic development, and poverty alleviation.

However, the Auditor General’s findings reveal significant revenue leakages, long-standing debts, and issues with asset management, all of which jeopardize the sustainability of these entities and their service delivery capabilities.

Among the specific issues highlighted, Kujinga reported 31 problems related to revenue collection and 26 entities struggling with operating losses and liquidity issues. Additionally, there were 22 issues concerning asset management, including poor record-keeping and inadequate investment due diligence.

Procurement issues also rose from 20 to 33, with concerns about non-delivery of goods, lack of interest declarations, and insufficient documentation. Kujinga’s report also followed up on previous audit findings, noting that only 32 out of 388 issues from prior years had been fully addressed. This persistent backlog reflects ongoing governance challenges.

In light of these findings, the Auditor General calls for urgent action from those in governance to address the unresolved issues. Ensuring transparency, accountability, and effective corporate governance is crucial for improving the performance and sustainability of state entities.