Tanzania: Don't Spend Out of Budget, Cag Counsels Atcl

THE Controller and Auditor General (CAG), Charles Kichere has recommended Air Tanzania Company Limited (ATCL) to incorporate all important activities and procurement plans in the annual budget to avoid the possibility of implementing unplanned activities, which could result in unnecessary loss to the company.

Presenting the 2019/2020 audit report in Dodoma on Thursday, the CAG said the company's Annual Procurement Plan (APP) shows that there was an execution of seven procurement contracts worth 464.13m/- and 757,307 US dollars out of the set budget, contrary to the 2013 Public Procurement Regulation as amended in 2016.

"ATCL explained that the procurements were implemented outside the APP because of its urgency and importance to the company's survival. However, I attribute the noted anomaly to inadequate procurement planning," he explained.

He further said these procurements included items such as procurement of kit fitting and kit hydraulic pipe swage repair; procurement of brake aircraft; procurement of boarding passes and baggage tags in fanfold and rolls and proposed office partitioning at ATCL house third floor.

"Unplanned procurements may lead to unrealised intended objectives of the planned projects," he remarked.

The CAG said that despite the increase in total revenue from the provision of commercial passengers and cargo airline services by 41 per cent from 111.67bn/- in 2018/19 to 157.60bn/- in 2019/2020, the direct cost related to the provision of commercial passengers and cargo airline services increased by 45 per cent from 133.64bn/- in 2018/19 to 193.44bn/- in 2019/20.

Moreover, the CAG added that during the review, it was noted that the increase in loss was contributed among others by an un-proportional percentage increase in direct cost compared to the increase in revenue from passengers and cargo airline services, implying that the revenues generated from airline business are less compared to the direct cost incurred.

Mr Kichere said the loss was also caused by inadequate management of administration expenses. For instance, allowances amounting to 1.53bn/- were paid to staff although such payments are not stipulated in the company's Human Resource Policy of 2008. The allowances included vacation and transport allowances.

"Without undertaking cost-cutting measures and enhancing control on expenditure incurred, ATCL may continue to record losses," he explained.

The CAG recommended for the entity to enhance its operational efficiency and establish cost-cutting measures to achieve higher cost savings, and establish turn around strategies for all nonperforming investments. According to Mr Kichere, ATCL reported long term receivables from 42 companies with a total balance of 3.86bn/-.

The correctness and validity of the balance could not be verified because the concerned debtors did not respond to CAG letters to confirm the authenticity and correctness of the debts. The other four companies confirmed only 193.67m/- out of 566.79m/- reported as receivable by ATCL.

This was caused by inadequate follow-up and reconciliation of balances with the respective companies despite most of them being in Dar es Salaam.

"I therefore recommend that ATCL improves its debt management and collection mechanism to ensure full recovery of the debts," he said.

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