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REPUBLIC OF ZAMBIA REPORT OF THE COMMITTEE ON LOCAL GOVERNMENT ACCOUNTS ON THE REPORT OF THE AUDITOR GENERAL ON ACCOUNTS OF LOCAL AUTHORITES FOR THE FINANCIAL YEARS ENDED 31ST DECEMBER, 2015, 2016 AND 2017 FOR THE FOURTH SESSION OF THE TWELFTH NATIONAL ASSEMBLY APPOINTED ON 21ST SEPTEMBER, 2017 Printed by the National Assembly of Zambia REPORT OF THE COMMITTEE ON LOCAL GOVERNMENT ACCOUNTS ON THE REPORT OF THE AUDITOR GENERAL ON THE ACCOUNTS OF LOCAL AUTHORITIES FOR THE FINANCIAL YEARS ENDED ST 31 DECEMBER, 2015, 2016 AND 2017 FOR THE FOURTH SESSION OF THE TWELFTH NATIONAL ASSEMBLY APPOINTED ON 21ST SEPTEMBER, 2017 TABLE OF CONTENTS Item Paragraph Page 1.0 Composition of the Committee 1 2.0 Functions of the Committee 1 3.0 Meeting of the Committee 2 4.0 Procedure adopted by the Committee 2 5.0 Arrangement of the Report 2 PART I Auditor General’s Preamble 2 PART II 6.0 Submission by the Secretary to the Treasury Introduction 3 Scope and Methodology 4 Budget and Funding 4 Staff Constraints 5 Internal Control 5 Background 5 Sources of Funds 6 PART III Submission by Principal Officers 7.0 Chadiza District Council 12 8.0 Chama District Council 15 9.0 Chililabombwe Municipal Council 22 10.0 Chinsali Municipal Council 28 11.0 Chipata City Council 36 12.0 Chirundu District Council 50 13.0 Choma Municipal Council 60 14.0 Chongwe Municipal Council 68 15.0 Ikelenge District Council 76 16.0 Isoka District Council 83 17.0 Kabwe Municipal Council 95 18.0 Kalabo District Council 109 19.0 Kaputa District Council 122 20.0 Kasama Municipal Council 126 21.0 Kawambwa District Council 138 22.0 Livingstone City Council 141 23.0 Luano District Council 144 24.0 Lufwanyama District Council 163 25.0 Lundazi District Council 169 26.0 Lusaka City Council 179 27.0 Mansa Municipal Council 197 28.0 Mbala Municipal Council 201 i 29.0 Mongu Municipal Council 205 30.0 Monze District Council 214 31.0 Ndola City Council 226 32.0 Petauke District Council 242 33.0 Rufunsa District Council 247 34.0 Serenje District Council 252 35.0 Sesheke District Council 269 36.0 Siavonga District Council 278 37.0 Solwezi Municipal Council 281 38.0 Zambezi District Council 290 39.0 Overall Recommendation 303 40.0 Conclusion 304 Appendix 1: List of National Assembly Officials 306 Appendix 2: Report on Outstanding Issues on previous reports of the Committee (As an attachment to the report) ii REPORT OF THE COMMITTEE ON LOCAL GOVERNMENT ACCOUNTS ON THE REPORT OF THE AUDITOR GENERAL ON THE ACCOUNTS OF LOCAL AUTHORITIES FOR THE FINANCIAL YEARS ENDED 31ST DECEMBER, 2015, 2016 AND 2017, FOR THE FOURTH SESSION OF THE TWELFTH NATIONAL ASSEMBLY, APPOINTED ON 21ST SEPTEMBER, 2017 Consisting of: Mr E J Muchima, MP (Chairperson); Mrs P G M Jere, MP (Vice Chairperson); Mr D Chisopa, MP; Mr G G Zimba, MP; Mr K M Sampa, MP; Mr A C Mumba, MP; Mr D Mulunda, MP; Mr E Mulenga, MP; Ms P C Kucheka, MP; and Mr L K Fungulwe, MP. Following the appointment of Mr E Mulenga, MP to a ministerial position, the composition of the Committee changed and, Mr L Kaziya, MP was appointed to replace him on the Committee. The Honourable Mr Speaker National Assembly Parliament Buildings LUSAKA Sir, The Committee has the honour to present its Report on the Report of the Auditor General on the Accounts of Local Authorities for the Financial Years Ended 31st December 2015, 2016 and 2017. 2.0 Functions of the Committee In accordance with National Assembly Standing Order No 157(2), the functions of the Committee are to: i. study, report and make appropriate recommendations to the Government through the House on the mandate, management and operations of the Government ministries, departments and/or agencies under its portfolio; ii. carry out detailed scrutiny of certain activities being undertaken by the Government ministries, departments and/or agencies under its portfolio and make appropriate recommendations to the House for ultimate consideration by the Government; iii. make, if considered necessary, recommendations to the Government on the need to review certain policies and certain existing legislation; iv. examine annual reports of Government ministries and departments under its portfolio in the context of the autonomy and efficiency of Government ministries and departments and determine whether the affairs of the said bodies are being managed according to relevant Acts of Parliament, established regulations, rules and general orders; 1 v. consider any Bills that may be referred to it by the House; vi. consider international agreements and treaties in accordance with Article 63 of the Constitution; vii. consider special audit reports referred to it by the Speaker or an Order of the House; viii. where appropriate, hold public hearings on a matter under its consideration; and ix. consider any matter referred to it by the Speaker on an Order of the House. In this regard, the main focus of the Committee is to: x. consider the reports of the Auditor General on the accounts of local authorities, and; xi. consider the reports of the Auditor General on the management of Constituency Development Fund and grants to local authorities. 3.0 Meetings of the Committee During the period under review, the Committee held twenty four meetings to consider the Report of the Auditor General on the Accounts of Local Authorities for the Financial st Years Ended 31 December 2015, 2016 and 2017. 4.0 Procedure Adopted by the Committee With technical guidance from the Auditor General, the Committee considered both oral and written submissions from local authorities that were cited in the Report of the Auditor General on the Accounts of Local Authorities for the Financial Years Ended 31st December, 2015, 2016 and 2017. 5.0 Arrangement of the Report The Report is in three parts, as follows: Part I of the Report is the Auditor General’s preamble and a summary of all the queries; Part II deals with the response from the Secretary to the Treasury; Part III captures the responses from principal officers (Sub- Warrant Holders) on the individual audit queries; Part IV highlights overall recommendations from the Auditor General’s Report. Appendix 1 is a list of officials and Appendix is 2 is an attachment containing outstanding issues on previous reports of the Committee. PART I Auditor General’s Preamble The Committee was informed that the local authorities (councils) were public institutions established under Section 3 of the Local Government Act, Chapter 281 of the Laws of Zambia and they were Government institutions. The main objective of establishing councils was to provide services on behalf of Central Government to residents within their areas of jurisdiction. Councils were a key factor in socio-economic development because their operations were directly linked to community services. Currently, there were 116 councils across the country. 2 The Committee also heard that the Constitution of Zambia as amended by Act No. 2 of 2016 devolved powers to the Councils to decentralise the operations of Government. All Government departments and institutions would be managed at the local authority level. This, therefore, entailed that there should be greater accountability on the part of the councils. In this regard, Article 250 (1) (i) of the Constitution of Zambia as amended by Act No. 2 of 2016 mandated the Office of the Auditor General (OAG) to audit the accounts of the councils. The audits assisted in promoting transparency and accountability in the management of resources in councils. PART II SUBMISSION BY THE SECRETARY TO THE TREASURY - MINISTRY OF FINANCE Executive Summary The Committee was informed that this audit report on the councils provided the audit findings on councils for the financial years from 2015 to 2017. The councils’ sources of income included funds raised through rates, local taxes, fees and charges, licenses, levies, permits and other incomes. In addition, councils also received grants from the Government such as the Local Government Equalisation Fund (LGEF) and the Constituency Development Funds (CDF) meant to enhance development in the local communities and constituencies, respectively. The Audit Report contained paragraphs on thirty two councils. The principle findings included failure to prepare financial statements, lack of updated valuation rolls, lack of title deeds, failure to fill key positions, failure to maintain properties, and failure to adhere to the provisions of the Environmental Management Act. Other issues contained in the report included non-remittance of statutory contributions to the Zambia Revenue Authority (ZRA), the National Pension Scheme Authority (NAPSA) and Local Authorities Superannuation Fund (LASF), unsupported payments, unaccounted for stores, irregular procurements, questionable payments and failure to settle retirees’ benefits among others. These are summarised in the table below. AMOUNT ISSUE K Failure to Remit Statutory and Other Obligations 423,641,615 Failure to Settle Staff Obligations 152,081,443 Misapplication of Funds 12,891,514 Unsupported Payments 27,020,572 Unapproved Payments 1,048,306 Unretired Accountable Imprest 2,876,131 Unaccounted for Revenue 502,006 Unspent Funds 699,143 Failure to Collect Revenue 33,672,990 Failure to Follow Procurement Guidelines 527,148 Failure to Insure Assets 36,560,778 Irregular Payment of Allowances 3,073,934 Missing Payment Vouchers 14,334,890 Overpayments 163,889 Questionable Payments 120,631 Unaccounted for Stores 23,075,525 3 The Committee also learnt that the audit findings on the local authorities included governance, operational and financial matters which required to be addressed in order for the councils to provide quality services and development in their respective communities. The Secretary to the Treasury responded as set out below. Treasury Response The Secretary to the Treasury submitted that the observations of the Auditor General in the Executive Summary were appreciated, especially the highlighting of the role of the local authorities in the Government programme of devolution of powers and functions in the quest to decentralise the operations of all the Government departments and institutions in districts to the local authority level.
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