22 June 2018

Lesotho: Govt Abused M450 Million

Money spent in violation of the law

Abused money was meant for student loans

Pascalinah Kabi

FORMER Prime Minister Pakalitha Mosisili's government abused a whooping M450 million meant to fund national scholarships in flagrant violation of the law.

The shocking revelations are contained in the latest report of the Auditor-General on the state of the government's finances as of 31 March 2017.

The report takes aim at the mismanagement of public funds by the Mosisili coalition and gives it an adverse audit opinion.

The scathing report, compiled by Auditor-General Lucy Liphafa, exposes a pattern of abuse of public funds by a government which managed public money in complete disregard of the constitution, other laws governing public finances as well as international standards on managing public funds.

The auditor-general is tasked with auditing all government finances and ensuring that public funds are properly deployed for their purposes. But Ms Liphafa's report exposes a former government that operated without any regard to its mandate to manage finances properly for the benefit of Basotho.

For instance, the Mosisili government had reported in its financial statements to the AG that it operated 468 bank accounts at different banks with a total balance of about 5.8 billion as of March 31 2017. However, the AG noted that actual bank confirmation statements had revealed 448 bank accounts holding about 5,6 billion as of that date, proving a discrepancy of more than M200 million in unaccounted for funds.

Another eight accounts holding M422 million had not been disclosed in the government's financial statements at all. It is not clear what happened to the money in those accounts. Another 93 foreign currency accounts amounting to M193 million at the Central Bank of Lesotho had only been reported for the first ever time in the financial year 2016/17. A clear indication of probable abuse of money held in those accounts as well.

Among the more startling revelations in Ms Liphafa's report is how the Mosisili coalition abused M450 million meant to fund the activities of the National Manpower Development Secretariat (NMDS). The NMDS is responsible for funding national bursaries for students. Yet its money was redirected to fund a number of unbudgeted for expenses in a manner that violated the constitution of Lesotho and the Public Financial Management and Accountability Act of 2011. The Act was established to ensure that public office bearers manage taxpayers money and other public funds prudently.

The unbudgeted activities that the M450m million was misdirected to fund included bizarrely the use of M28, 4 million of that money to fund the procurement of cyber security equipment. The money was also used to fund the termination of the controversial Bidvest fleet services tender which was mired in corruption as well as the June 3 2017 elections.

The auditor general described the way in which the M450 million was diverted from the government's Trust Monies Account into the Consolidated Fund as "unconstitutional" and "irregular".

In ordering the Central Bank of Lesotho to effect the transfers to fund the unbudgeted for activities, the auditor general said then Finance Minister Tlohang Sekhamane had done so in a manner that violated the national constitution and the Public Financial Management and Accountability (PFMA) Act.

By so doing the former government prejudiced the National Manpower Development Fund. The M450 million it used for the unbudgeted activities was taken from the Loan Bursary Fund that is administered by the National Manpower Development Secretariat (NMDS).

The NMDS is a department in the Ministry of Development Planning. It is tasked with overseeing the loan bursary fund for Basotho students enrolled at local and foreign tertiary institutions.

The NMDS is essentially a broke institution and students have perennially complained that they are either under-funded or not funded at all. They have even staged strikes over the issue.

The Mosisili coalition lasted from March 2015 until its replacement by the current Thomas Thabane-led four party coalition after the 3 June 2017 elections.

The elections were convened after Dr Mosisili lost a no confidence motion in parliament on 1 March 2017. Instead of relinquishing power Dr Mosisili chose to advise King Letsie III to call for elections.

The former government had already courted controversy by awarding the vehicle fleet services tender to Bidvest without going to tender in August 2016.

The Bidvest deal which was for 48 months, was prematurely terminated in April 2017 at the huge cost of M108 million, the Auditor General's report confirmed.

Then Finance Minister, Mr Sekhamane, had then directed the CBL to transfer funds into the Consolidated Fund to finance the termination fees and other activities. That was nevertheless done in a manner that the AG has now declared unlawful and unconstitutional.

According to the AG's report, M247 389 280 and M107 713 780 were spent on the elections and termination of the Bidvest tender respectively.

Other unbudgeted activities that were also funded through the illegal transfer of funds were salary arrears for teachers and foreignservice staff (M16 220 135 and M7 million respectively) and the design for a beef production project (M16, 7 million).

The auditor general also found that the former government had used M28, 4 million of the M450 million to fund the procurement of cyber security equipment. It is not clear why such equipment was needed and what it was to be used for. But governments often acquire it to snoop on the private communications of citizens.

"In March 2017, under the directive of the (former) Minister of Finance... the Accountant General instructed the CBL to transfer an amount of M450 million from the Trust Monies Account into the Consolidated Fund for the funding of General Elections 2017, Bidvest Contract Termination, Teachers' Salaries,Foreign Service Staff Salaries, Design for the Beef Production Project and Procurement of Cyber Security Equipment," Ms Liphafa states in her report.

"The (Finance Minister's) directive was contrary to the requirements of the constitution and of the PFMA Act of 2011.

"The transfer of funds from the Trust Monies Account to the Consolidated Fund should only be made if the monies held in trust remained unclaimed after a period of five years. There was no evidence that the monies remained unclaimed for the stipulated period," Ms Liphafa said.

She said the constitution further required that the Appropriation Act should approve the issue of funds from the Consolidated Fund to meet expenditure under separate votes for a head of expenditure.

Ms Liphafa said it was therefore against the requirements of the constitution for Mr Sekhamane to "instruct a withdrawal from the consolidated fund to the recurrent expenditure account without the Appropriation Act... ... ".

However, Mr Sekhamane this week said the AG's observations were "misdirected" as the courts had ruled that the finance minister could make withdrawals from government funds even if he had not presented a budget before parliament.

Mr Sekhamane said the former seven-party coalition government had successfully argued for its actions to do what he did in courts of law. The AG had thus "misdirected" herself in issuing the damning findings, the former finance minister said.

"There was a high profile case regarding this matter and the court ruled in our favour. We won that case, the courts exonerated me," Mr Sekhamane said in reference to an April 2017 court ruling that the finance minister could withdraw from government coffers despite his failure to present budget estimates before parliament.

The judgment was handed down after the Basotho National Party (BNP) spokesperson, Machesetsa Mofomobe, filed an urgent constitutional challenge to prevent the then finance minister from making withdrawals from the consolidated fund as he had failed to table financial estimates in parliament.

Mr Sekhamane failed to table the financial estimates as parliament had been dissolved by King Letsie III on the advice of Dr Mosisili immediately after he lost a no confidence motion on 1 March 2017.

Mr Mofomobe and a political activist, Mohato Seleke, subsequently filed an application seeking to prevent Mr Sekhamane from making withdrawals from the consolidated fund.

They said they had learnt that Mr Sekhamane was about to make withdrawals from the consolidated fund in terms of section 113 of the constitution.

Section 113 makes provision for the finance minister to make one third of withdrawals of the budget if the financial year starts before the budget is approved by parliament.

Mr Mofomobe and his co-applicant argued that the minister could only make withdrawals if the budget estimates had been tabled before parliament.

But the judges dismissed the claim ordering that the minister could make withdrawals in terms of section 113 of the constitution.

Nonetheless, the AG's report insists that laws and the constitution were violated in re-directing money into the consolidated fund. The report paints a picture of a government that wantonly and systematically abused public funds.

For instance faced with the problem of salary arrears for teachers and staff at its foreign missions, the government simply diverted close to M24 million of NMDS funds to resolve those challenges while students struggled to access bursaries.

The report's revelations on the government's costly transactions with Bidvest are more poignant. The government had originally controversially awarded its fleet services tender to Bidvest and thereafter prematurely terminated that contract.

In addition to the M107 713 780 which was spent in paying for the premature termination of the Bidvest tender, the government also paid M408 552 875 to Bidvest for its services in the 2016/17 financial year.

"This represented a significant increase of 56 percent from the previous year's figure of M261 833 030," Ms Liphafa states in her report.

She further noted that the then government incurred further costs of payingM806 190 from October 2016 to March 2017 to 35 drivers who were made redundant by the government's decision to order all ministries to return 75 percent of the Bidvest vehicles they had in their possession.

"193 drivers who were idling and those who alternated the duties were also a cost to the government ... as they were being paid full monthly salaries thus contravening Section 46 of Public Service Regulations 2008 which states that a public officer shall be paid for the services rendered," Ms Liphafa states.

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