Friday, September 25, 2020

Gov’t moves to secure Special Funds from “Vultures”

The Botswana government is implementing measures to safeguard special funds that have of recent became a source of concern, with the executive arm of the government conceding that they are troubled by the mismanagement of these funds.

Kenneth Matambo, minister of Finance and Economic Development, told parliament on Friday that while the establishment and operations of special funds by the government is guided by the constitution of the country and the Public Finance Management Act, some have not been compliant.

There are currently 34 special funds of various types, and of these, 30 are within the ambit of Matambo’s ministry, while four were managed by various fund managers, with deposits held by commercial banks or fund managers. Also, 14 out of the 30 special funds monitored by office of Accountant General ÔÇô part of the finance ministry – earn a 3.5 percent interest on their balances held as part of the government cash balances with Bank of Botswana.

“My ministry as the overall custodian of the country’s public finances is concerned about some aspects of the management of some of the special funds,” said Matambo in his statement. “Among the key concerns are non compliance to the Public Finance Management Act in the administration of the funds.”

According to the minister, the breaches range from the use of funds for unintended purposes; unexplained delays in submission or non-submission of audited accounts; investment of surplus funds without the input of the office of the Accountant General as required by the  Public Finance Management Act.

“Further, certain sections in some Fund Orders are not very clear, leading to various interpretations. This has resulted in some designated Fund Administrators using their discretion in utilising monies held under such funds,” the minister said.

In late 2017 a financial scandal erupted when it came to light that the National Petroleum Fund was a subject of corruption investigations after it emerged that funds were diverted from their intended use. These led to other revelations that showed how lax the government has been lax with the special funds, with some going for years without external audits, contrary to fund orders. The more than P2 billion strong alcohol levy has only been externally audited once since its decade of existence.

“The case of the National Petroleum Fund has emphasised the need for urgent review of government special funds and improvement in their management,” said Matambo. “I’m constrained to say much as the matter is before the courts of law and the legal process has to be respected.”

The minister explained that as a result of the case, and to strengthen the management of special funds in general, cabinet has recently adopted additional measures to ensure these funds continue to serve the purpose for which they were established.

The new tough measures include bolstering the capacity of the office of the Accountant General through a creation of a unit that will ensure that there is compliance with the Public Finance Management Act. Furthermore, the unit will scrutinise existing fund orders with a view to align the old fund orders established under the previous Finance and Audit Act, with the new Public Finance Management Act.

Another immediate measure is to transfer all funds held under special funds into the government remittance account to be managed as part of government cash balances held at the central bank. The immediate transfer of these funds is for closer monitoring by the government. As a result of this move, Matambo said government will with immediate effect cease to pay interest on special funds monies managed as government cash balances, with an exception for those managed on behalf of third parties.

“Money in some of these funds belongs to the government, and therefore, it is not prudent for the government to pay itself interest,” said Matambo who spent a larger part of his career working at the same ministry he is heading now.

Matambo says they will be undertaking a wholesome review of special fund orders in line with provisions of the Public Finance Management Act to ensure consistency with domestic anti-money laundering and counter financing of terrorism laws and standards. The minister hinted that the review may lead to dissolution of some of the funds if considered appropriate.

In what is probably a warning to accounting officers, Matambo said where there is non-compliance with the fund orders, or proof of gross mismanagement, the Finance ministry will step in to exercise its powers, and that appropriate charges will be imposed on such officer in accordance with the provisions of the Public Service Act.

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