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Retention funds cost Zim millions

This comes after Zimbabwe National Roads Administration (Zinara) retained the highest amount of $204,6 million it collected last year, followed by the Home Affairs ministry — which oversees the police — retaining $59,3 million,  according to the Parliament Budget Office’s analysis of statutory and retention funds tabled in the National Assembly on April 5.

Home Affairs permanent secretary Melusi Matshiya told the parliamentary portfolio committee on Home Affairs probing the 2017 National Budget, that the various departments under his ministry, including the police, Registrar-General’s Office and Immigration, had properly accounted for the retention funds.

The Registrar-General’s Office retained $27 million last year, while the Immigration department retained $1,2 million.

“Treasury gave us the authority to retain funds, they get our audit reports and they have confidence in us,” he said.

“Those police officers found on the wrong side of the law have been prosecuted and some even committed suicide after they were found to have abused funds, but the fees collected are audited to the extent that last year but one we got a clean audit report.”

He said the Home Affairs ministry was battling to raise $87 million from fees and fines in order to shore up the ministry’s “meagre” 2017 budget allocation of $384 million.

The Auditor-General Mildred Chiri has already raised a red flag over lack of transparency and accountability with regards to most of these statutory and retention funds.

This comes amid calls for the country to revert back to the old system where all revenues were deposited into the Consolidated Revenue Fund (CRF), and all allocations and disbursements were made from these subject to the permission of Parliament through the budget process.

Most of the retention funds in Zimbabwe were created as a survival tactic during the peak of government fiscal challenges caused by the Reserve Bank of Zimbabwe printing so much of the local currency in 2007-8 that inflation hit an annual rate of almost 500 billion percent.

This was to allow government departments to retain part of their revenue to fund critical operations during the hyperinflationary era where a slightest lag in releasing funds from the CRF would significantly compromise government operations and service delivery due to the rapid loss of value for money.

Treasury authorised, albeit without legal backing, certain departments to retain all collected funds to finance critical areas such as capitalisation.

But the proliferation of these funds and reports of lack of transparency in the use of the funds is now a matter of concern, according to Parliament’s Budget Office.

It reported that the combined revenues collected by government institutions or departments outside the budget could have well reached over $1 billion in 2016, had they been properly and accurately accounted for.

“This includes revenues from fines and user charges collected by the Zimbabwe Republic Police, Zinara, Environmental Management Agency, Judicial Services Commission and the Registrar General’s Office, among many other government agencies,” the analysis said.

This comes at a time when Zimbabwe’s budget has remained static at $4 billion annually as fiscal revenues continue to dwindle, at a time the budget deficit is exploding.

“This situation has eroded the stimulus power of the budget to propel the economy and move the country to middle income status,” the office said.

“The increase in cases of abuse of public funds justifies calls for Treasury to be the only department entrusted with the responsibility to manage public resources.

“It has also been noted that a lot of money is spent on nonessential goods and services at the expense of critical issues. This is the highest level of disservice to the citizens and taxpayers when privileged departments splash on luxuries like cars whilst critical service provision like health delivery are underfunded to the extent of failing to provide basic painkillers.

“It defeats the whole purpose and is illogical for the same institutions with retention funds to then look up to treasury for financial support especially for salaries. Universities are a clear case in point.”

Parliament’s Budget Office called on the Finance minister Patrick Chinamasa to revoke the retention authority and enforce the constitutional requirement that all funds must be remitted to the CRF and where appropriate, the concerned departments can be allowed to retain a small percentage, just like what Zimra does to meet fund administration expenses.

Treasury directed all government departments who collect statutory funds or retain other funds to open accounts with the central bank with effect from January 31, 2016 to enhance transparency and accountability, failure of which they threatened to revoke the retention authority. All the concerned departments have complied with this directive.

“However, it should be noted that this has not addressed the issue of abuse of funds and the constitutional requirements provided for in Section 302,” the Budget Office noted.

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