Tanzania: Controller and Auditor General Uncovers Yet More Rot

Photo: Daily News

President John Magufuli (file photo).

By Alawi Masare

Dodoma — The National Audit Office (NAOT) has tabled reports for the financial year ending June 30, 2016, which expose losses and embezzlement of billions of shillings in public establishments.

From weak revenue collection mechanisms, collusions that led to tax evasions, abuse of exemptions privilege and growing national debt, the Controller and Auditor General (CAG), Prof Mu...

ssa Assad, tabled a set of nine reports covering different issues in the public entities with regard to procurement, expenditure and contract management.

Prof Assad also raised concern over the implementation of his recommendations, saying only 14 per cent of those contained in past reports have been fully implemented.

"My duty as the CAG is to expose shortcomings and recommend the action the government should take; unfortunately, out of the 234 recommendations I presented in the previous report, only 32 or 14 per cent of them were fully implemented and the implementation of 102 others are ongoing. A total 100 others have not been touched," he said.

Revenue management

the reports reveal abuse of tax exemptions by non-beneficiaries amounting to Sh3.46 billion.

Prof Assad said the review of Tax Investigation Report dated May 31, 2016, notes a total of 238 motor vehicles, trailers and trucks imported between 2012 and 2014 under the names of the two beneficiaries but it was confirmed that they were registered and owned by persons other than beneficiaries of the exemptions.

He said that both importers denied importation of the said motor vehicles. This, said the CAG, is an indication that the scheme was undertaken by perpetrators to defraud the government without the knowledge of the importers.

He also reported that the utilisation of exempted fuels for Buzwagi Gold Mines noted 20,791,072 litres for a period of 18 months from July 2014 to December 2015 and found that such fuels were transferred to subcontractor, M/S Aggreko Company Ltd, who was not eligible for exemption.

The transfer of fuels with the total tax exemption of Sh10.2 billion to non-beneficiary contradicts government notice which required remission to cease if the exempted fuel is transferred to another person not entitled to benefit from similar privileges.

Too few EFDs

As Tanzania had 9,743 value-added tax (VAT) registered traders, the examination revealed that 84 per cent of them or 8,165 had no electronic fiscal devices (EFDs) between July 2015 and November 2016.

Budget execution

In the 2015/16 financial year, the government planned a Sh22.5 trillion budget, but according to the CAG, the actual collections were Sh21.1 trillion, equivalent to 93.8 per cent.

However, Prof Aassad said, development expenditure was only Sh4 trillion or 20 per cent of the budget while the recurrent expenditure nearly 80 per cent (Sh15.97 trillion).

He also recommended that the government comes up with a realistic budget as its resources were just 62.5 per cent of the budget while the remaining part counts on grants, domestic and foreign loans.

National debt

Prof Assad said the national debt was reported at Sh41 trillion as of June 30, 2016. However, he said, it was not realistic as it excluded the Sh3.2 trillion the government owes pension funds (Sh2.99 trillion) and overdue (defaulted) debt guarantees worth Sh225.6 billion.

On the other hand, the government had obligations amounting to Sh934 billion to pension funds which were under verification process.

Although the Debt Sustainability Analysis (DSA) results for 2016 show public debt remained sustainable, Prof Assad said the debt service to revenue ratio was nearly breaching the benchmark of 24 per cent.

Domestic debt stock worthiness was reported to be Sh11.19 trillion and the external debt stock was valued at Sh29.84 trillion.

The total had increased by Sh7.49 trillion, equivalent to 22 per cent compared to the debt stock of Sh33.54 trillion reported as of June 30, 2015.

"Public debt is continuously on the rise, a fact that is attributed to persistent budget deficits (mismatch on government revenue and expenditure), rollover of liquidity papers, new borrowings for various development projects and foreign exchange loss arising from a sharp depreciation of Tanzanian shilling against strong currencies," said Prof Assad.

Ghost workers

The auditor also revealed that Sh7.3 billion were paid as salaries to absconded, deceased or retired civil servants and Sh2.5 billion were paid as statutory deductions from the workers.

This kind of audit involved 19 state-run entities.

Theft at Dar Port

The CAG said a special audit on payment of wharfage charges at the Dar es Salaam Port was conducted following a request from the Permanent Secretary in the ministry of transport of 23rd March, 2016.

The audit aimed at identifying clearing agents involved in evading payment of wharfage charges and determining the amount of loss (if any) caused by evasion of payment of the wharfage charges.

The audit revealed that a total of Sh15.02 billion was not collected by the Tanzania Ports Authority (TPA) as wharfage charges on various instances.

The audit further revealed weaknesses in the payment systems as there are no integrations/interface/cross referencing between TPA, TRA and the CRDB Bank on payment information.

"As such, the TPA revenue department couldn't have been able to exactly determine the amount of wharfage to be charged until the clearing agent submits the release order," said the report.

Tanesco woes

The report says Tanzania Electric Supply Company (Tanesco) had a huge accumulation of debts in the form of capacity and energy charges from five Independent Power Producers (IPPs)/Emergence Power Producers (EPPs).

This has been aggregated by the fact that Tanesco buys power at an average price of Sh544.65 per unit and sells it at Sh279.35 to customers leading to a loss of Sh265.30 per unit.