OFFICE OF AUDITOR GENERAL ON USE OF PUBLIC FUNDS

UNCLAS KIGALI 000209 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PGOV PHUM RW SUBJECT: OFFICE OF AUDITOR GENERAL ON USE OF PUBLIC FUNDS Summary -------------- ¶1. (U) The Auditor General sees recurring failings in use of public funds by some government offices, to be rectified by training, appointment of appropriate oversight officials, the production of consolidated financial statements by the Ministry of Finance, and a new Accountancy law. Assistance is most acutely needed by local officials, as the GOR proceeds with its extensive decentralization program. The EU has a two-pronged program to assist the GOR: technical assistance to the Ministry of Finance and assistance with certification of public accountants. End summary. Serious Failings Noted -------------- ¶2. (U) The Office of the Auditor General (OAG) in its recently submitted Report to Parliament (for calendar year 2005) records a number of failings in the executive branch in its use of public funds, including: --Non-preparation of financial statements; some institutions do not maintain proper books of account. --Poor management of bank accounts; reconciliation statements are not produced. --Poor management of fixed assets; some offices have no fixed asset registers, and thus have "no effective control over fixed assets." --Absence of title deeds; most government institutions do not have title deeds; ownership disputes are likely, says the OAG. --Non-compliance with tender procedures. While the law stipulates three levels of tender board depending on the level of proposed tender, approximately eighteen million dollars of projects were awarded without tender board approval. Some tenders were split into smaller tenders to avoid the tender boards. Unsupported expenditure; approximately $7.2 million of expenditures occurred "that were not supported by any verifiable document." --Ineffectiveness of internal audits; "most of the audited entities do not have internal audit functions, and where internal auditors are in place, their work is neither effective nor reliable." --Ineffectiveness of Directors of Finance and Administration in most institutions; "in most cases, qualifications and experience of people holding these positions are not relevant to the position." ¶3. (U) The OAG audited 17 of 32 ministries "and other central administrative units," a number of other national and local governmental bodies, and 24 of 50 "autonomous and semi-autonomous public enterprises." However, only the executive summary of the parliamentary report is available to the public (and this mission),at an OAG website. The individual failings of specific government bodies, and the extent of those failings, is not discussed in that summary. Improvements -------------- ¶4. (U) The executive summary notes that production of "consolidated financial statements," something not previously done by the Ministry of Finance, is scheduled to begin for the 2006 financial year. Training of accountants and internal auditors has commenced, and the "expected enactment" of an Accountancy Law will improve financial management. Help from donors includes assistance from the European Union, which is assisting the Ministry of Finance with implementation of the new Organic Budget Law as well as preparation of a new public accounts software system, nicknamed "Public Books." The EU is also assisting, together with the World Bank, DFID and SIDA, with training and certification of public accountants. The Swedish and Dutch embassies are assisting the Auditor General with training in "performance" audits and in their general auditing of government funds. Recommendations -------------- ¶5. (SBU) In the audit summary, the Auditor General, taking note of the "serious shortcomings" in the financial management of the institutions audited, recommends training of "non-finance managers" as well as board members of public corporations in oversight duties. In recent conversations with mission officers, the Deputy Auditor General (DAG) said that "most errors" in the use of public funds involved a lack of transparency -- what was done was either "not clear or unproven." ¶6. (SBU) The DAG noted that that the Office of the Auditor General had no enforcement function of its own. Instead, its sent its yearly reports to both the Parliament and the Prosecutor General, as well as the Presidency and individual members of the cabinet. However, none had the expertise to evaluate the reports properly. Prosecutors in particular lacked expertise and experience in pursuit of financial crimes. ¶7. (SBU) Of particularly concern, said the DAG, was the low level of financial capacity at the district and sector levels (NGO personnel working at these levels echo this sentiments). The problem was "immense," he said. His office had begun to visit all 30 district offices, and his 70 auditors (the best in the country, he averred) had begun grappling with the task. Recently returned from Uganda, where he held a similar position in the Ugandan government (engaged in a similarly broad decentralization effort, he said),the DAG said he expected "progress, but not overnight." Comment -------------- ¶8. (SBU) The recently released report of the Auditor General received some press play here, devoid of any substantive details, beyond some attention to the general points noted above. Reports of this kind are unfortunately regarded as sensitive documents, to be discussed by government officials in closed sessions, and unavailable to the public. However, in the dry detail of practicing accountants, recurrent failings in the documentation of the use of public funds are noted with some precision in the publicly-released executive summary. As noted by the Deputy Auditor General, and by international NGOs working in Rwanda, while all levels of government need substantial training in accounting for public funds, local government officials are particularly in need of capacity building assistance. The European Union, Dutch and Swedish missions are assisting both the Ministry of Finance and the Office of the Auditor General with public accounting and the accounting profession. End comment. ARIETTI