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Finance ministry flouts financial regulations in banking mine tax

COMMENT - Aauditor General Anna Chifungula is doing yeoman's (yeowoman's) work.

Finance ministry flouts financial regulations in banking mine tax
By Mwala Kalaluka
Sun 14 Feb. 2010, 04:33 CAT

THE action by the Ministry of Finance to deposit the collected Windfall Tax amounting to K126,071,221,141 in an account other than Control 99 in 2008 was a contravention of Financial Regulations, Auditor General Anna Chifungula has stated.

And Chifungula has highlighted that accounting and other irregularities have persisted at Zambia’s foreign missions going by an examination of financial and other records maintained at the Ministry of Foreign Affairs.

According to the report of the Auditor General on the accounts for the financial year ended December 31, 2008, Chifungula highlighted that not only was the Ministry of Finance’s action on the Windfall Tax a contravention of Financial Regulation number 130, but it also deprived the government of the required resources.

“Further, the amount was not recognised on Statement A1 and therefore understated the revenue reported as having been collected by government during the Financial Year ended 2008,” the report read. “In the 2008 budget, the Minister of Finance and National Planning (MoFNP) introduced the Windfall Tax for the mining sector.

This measure was intended to apply whenever prices of the metals increased beyond two times the cost of production. The measure was intended to ensure that the government gains from the sector as a result of the high metal prices on the market.”

The report stated that according to the Mines and Minerals (Ammendment) Act of 2008, failure to submit a return within fourteen days after the due date shall attract penalties, but that there was no evidence that penalties were charged on late submissions of returns.

“ZRA had provided a schedule indicating that a total amount of K126, 071, 221, 141 was collected against a total collectable amount of K896, 205, 033, 397 under the Windfall Tax leaving a balance of K770, 133, 812, 256 outstanding. However, there were no returns provided for audit scrutiny.

In addition, contrary to Financial Regulation No. 130 the Windfall Tax collected had not been remitted to Control 99 as of November 2009,” the report stated.

“In his response dated 25th November 2009, the Controlling Officer stated that the Windfall Tax collected by ZRA was deposited in the MoFNP Mineral Royalty and Windfall Tax at the Bank of Zambia and that the outstanding balance on the Windfall Tax was as a result of disputes raised by some mining companies that did not settle the Windfall Tax liability as they considered the new mining fiscal regime to be in conflict with the development agreements that existed with government, a matter which was still unresolved.”

The report stated that according to the Controlling Officer no amount of Windfall Tax was used in 2008 and that as at December 31, 2008, there was an outstanding balance of K307, 383, 881, 916.

“And that this was so because the government was still providing modalities on the utilisation of the funds,” the report read in part.

“However, the action by MoFNP of depositing the Windfall Tax amounting to K126, 071, 221, 141 in an account other than Control 99 was not only contrary to Financial Regulation No. 130 which requires that all revenue collected should be deposited into Control 99 but also deprived the government of the required resources for various government programmes.”

And the report revealed that contrary to Financial Regulation No. 20, travels documents that were received by the Zambian Mission in Washington in April 2009 had not been registered in the register and that there was lack of segregation of duties in that the receptionist was also in charge of processing passports and receiving revenue.

“Twenty (20) travel documents ranging from 272681 – 272700 that were received by the Mission in April 2009 had not been recorded in the register. In this regard, there was a risk that unauthorised issuing of travel documents may not be detected resulting in loss of revenue,” the report stated.

“Contrary to Financial Regulation, there were delays in banking of revenue collected during the period from January to December 2008 amounting to K1, 149, 775, 000 (US$254, 400) for periods ranging from two (2) to eighty eight (88) days.”

The report stated that contrary to Financial Regulations the staff at the Mission did not have expenditure returns to show how the revenue collected by them or expended under the head for which they were responsible were utilised.

It also indicated that there was an irregular payment of Foreign Service allowances outside the provision of Foreign Service Regulation number 56.

“A scrutiny of accounting and other records, however, revealed that the Ambassador was away from station from November 2007 to February 2008, a period of more than fourteen (14) days and was paid subsistence allowance totaling K24, 522 from the Ministry of Foreign Affairs while she was in Lusaka,” the report highlighted in part.

“It was observed that contrary to the regulation, the Ambassador was paid representational, entertainment and extra-accreditation allowances totaling K63, 576, 867 (US$17, 033.32) during the same period.”

Other highlighted irregularities was that on the payment of telephone bills where the report observed that in addition to the US$350, which is paid to head of missions on a monthly basis as telephone allowance for their residential and mobile phones, the Mission settled telephone and cell phone bills totaling K11, 819, 058.75 (US$3, 089.90).

“As of August 2009, no recoveries had been made,” the report revealed.

The report also stated that contrary to government accounting procedures the mission paid advances totaling K206, 705, 020 (US$53, 498) to 17 officers in 2008 without maintaining an advance register, making it difficult to verify whether all the advances paid were being recovered.

“Further, no imprest register (Accounts form 17) was maintained by the mission contrary to Financial Regulation No. 93,” the report stated.

“Imprest in amounts totaling K149, 159, 335.82 (US$39, 815.63) involving forty four (44) transactions issued to twelve (12) officers during the period from January 2007 to December 2008 had not been retired as of August 2009.”

The report stated that amounts totaling K10, 959, 300 (US$27, 289.50) were paid to BP AMOCO for the procurement of fuel for the Mission vehicles but that there were no disposal details as well as reconciliations availed to the audit to show the usage of fuel for each vehicle.

“Contrary to procurement guidelines, the Mission purchased goods and services amounting to K167, 077, 908 (US$43, 185.53) without obtaining three (3) competitive quotations,” the report read in part.

Labels: ANNA CHIFUNGULA, CORRUPTION, MINING, MINISTRY OF FINANCE, WINDFALL TAX

posted by MrK @ 7:59 AM