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News Analysis: Auditor General exposes rampant financial mismanagement, massive overdue receivables

On 18 June 18, 2024, Meseret Demisse, the head of the Office of the Federal Auditor General, presented a startling report to the House of Peoples’ Representatives. The report uncovered overdue accounts receivable totaling 14.1 billion birr (Photo: HoPR)

Addis Abeba – On Tuesday, 18 June, 2024, Meseret Demisse, the head of the Office of the Federal Auditor General, presented a startling report to the House of Peoples’ Representatives.

The audit revealed significant overdue government income, tax revenue arrears, and unaccounted illegal expenses involving 162 federal agencies during the 2022/23 fiscal year.

In her annual presentation to lawmakers, Meseret exposed financial mismanagement and irregularities in accounting documentation across various federal government institutions.

The audit report identified unaccounted expenditures totaling 43.5 million birr within 11 federal institutions, including the Federal Police Commission.

Additionally, the report uncovered illegal disbursements of 16.7 million birr by 30 institutions.

However, the highlight of the audit report was the significant amount of overdue accounts receivable, totaling 14.1 billion birr.

Although 124 government institutions were implicated, three ministries were responsible for over half of the total amount.

Specifically, the Ministry of Health carries nearly 6 billion birr in overdue receivables, followed by the Ministry of Irrigation and Lowlands at 1.1 billion birr, and the Ministry of Education at 1 billion birr.

The audit report also addressed issues related to federal government construction projects, highlighting instances where legal violations allowed contractors to handle projects improperly.

In particular, the report identified the allocation of 12 construction projects valued at approximately 11 billion birr to only two contractors, which constitutes a violation of established procurement regulations.

In her report, the chief auditor emphasized the detrimental impact of suspended public projects on government resources. A survey conducted on 41 such projects revealed a loss of 17 billion birr. The report attributed this significant loss primarily to the Ethiopian Construction Authority’s inability to recover advance payments made to contractors after project suspensions.

Dube Jilo was among the MPs who expressed deep concern regarding the audit findings and the apparent inability of government institutions to comply with established regulations.

He stressed that the audit report’s findings highlight the critical need for robust monitoring and control mechanisms for public finances, with government officials bearing the primary responsibility for ensuring accountability.

During the parliamentary session yesterday, several legislators criticized the conspicuous absence of most officials responsible for overseeing budgetary institutions (HoPR)

Another MP, Bartema Fikadu, criticized the conspicuous absence of most officials who oversee budgetary institutions during the parliamentary session. 

“To whom is this audit report being presented?” he questioned.

Bartema noted that this pattern of absenteeism has persisted in previous sessions.

“Unless government officials are present to hear the findings and take corrective action,” he stated, “it is impossible to achieve meaningful rectification of these issues.”

Lomi Bedo, Deputy Speaker of the House of Peoples’ Representatives, underscored the validity of Bartema’s concerns.

“Officials were notified about this parliamentary session,” she said, adding, “This issue must be rectified in the future.”

The audit report further identified a critical issue: uncollected income and tax revenue arrears totaling 6.4 billion birr for the 2022/23 fiscal year, primarily attributable to the Ministry of Revenues and Customs Commission. 

These unsettled arrears have been overdue for periods ranging from one to seven years.

Auditor General Meseret noted that a similar issue of significant uncollected income and tax arrears was identified in the previous fiscal year.

Disappointingly, she highlighted that relevant government institutions have yet to implement the recommendations made by her office to address this issue.

“Since collecting sufficient government revenue is essential to finance economic and social development projects, we urge public agencies to comply with the audit recommendations,” she told legislators.

Dube also highlighted the necessity for public agencies to adhere to robust financial practices.

“This is particularly crucial in times of budgetary constraints,” he stressed.

In the recent presentation of the budget proposal amounting to nearly one trillion birr for the forthcoming fiscal year, Finance Minister Ahmed Shide underscored the budgetary constraints by drawing attention to a concerning trend: a widening disparity between the anticipated tax revenue and the actual collections achieved.

Minister Ahmed also linked the decrease in federal tax revenue to the escalating portion allocated to regions from the shared tax revenue.

To address the declining revenue, the government intends to introduce new tax classifications and broaden the tax base with the objective of generating an additional 92.5 billion birr in tax revenue.

These initiatives entail revising the current value-added tax (VAT) and excise tax statutes, along with introducing new levies such as property and environmental taxes. AS

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