CAG uncovers massive flaws in LGAs financial management

THE 2021/22 audit report of the Controller and Auditor General (CAG) has exposed massive flaws in the collection and expenditure of funds in the Local Government Authorities (LGAs)-leading to loss of billions of shillings.

Presenting the audit report, on Thursday in Dodoma, CAG Charles Kichere said his office found out that authorities were paying for goods and services without acquiring fiscal receipts.

CAG has audited the submitted financial statements of 184 LGAs. The report indicates that a total of 11.78bn/- was found to have been paid to sellers of goods or service providers without using the Electronic Fiscal Device (EFD).

Section 36 (1) of the Tax Administration Act, Cap. 438 requires a person who sells goods, provides services or receives payment for goods supplied or services rendered to issue a fiscal receipt or fiscal invoice using electronic fiscal devices.

“On the contrary, I learnt that payments totaling 11.78bn/- were not adequately supported with fiscal receipts. Out of that, 71 LGAs paid 10.08bn/- to vendors without requesting EFD receipts, and 40 LGAs paid 1.7bn/- without supporting the expenditure with relevant documents and/or particulars,” Mr Kichere stated.

The lists of 71 LGAs that had payments not supported by EFD receipts and 40 LGAs with payments not supported by expenditure particulars included invoices, delivery notes, pay lists and attendance sheets.

The National Audit Office of Tanzania (NAOT) also has found out that 14 LGAs made payments amounting to 1.5bn/- to various vendors by cash, contrary to the requirement.

“Making payments to vendors by cash may attract misuse of public funds and non-payment of the related taxes to the government. I advise that management of the respective LGAs to comply with relevant laws and regulations by prohibiting the use of cash when making payments to their suppliers,” he pointed out.

Regarding the LGAs’ loans to women, youth and people with disabilities through the Revolving Fund, Mr Kichere said he found out that several LGAs were not able to recover loans issued to such special groups, amounting to 88.42bn/-.

This was due to inadequate capacity of Community Development Departments at the LGA level in carrying out due diligence for loan applicants, processing, managing, and ensuring loan recovery, as well as providing business development services to beneficiaries.

Of the unrecovered amount, 2.25bn/- relates to groups that ceased business operations, raising uncertainty about the recoverability of the concerned amount.

Additionally, three LGAs disbursed 895.94m/- to 48 non-existing groups.

“I found out that 201 groups in eight LGAs were loaned a total of 774.66m/-, which had been deviated from approved or intended purposes,” he informed.

Among the priorities of the government for the budget of the financial year 2021/22 budget was collection of domestic revenue.

To achieve this, business environment for taxpayers were improved, including harmonising, abolishing or reducing tax rates, levies, and nuisance fees.

Furthermore, efforts were made to improve tax administration at the local government level by promoting the use of ICT systems and enhancing Government’s electronic Payment Gateway (GePG), whereby all institutions were required to use GePG system.

Following these government’s efforts, the 184 LGAs managed to raise revenue collections from their own sources whereby in 2021/22 they collected 891.84bn/- which was 102 per cent of the budget estimates of 873.9bn/-.

This is an increase of 122.4bn/- compared to the collection of 769.4bn/- in the financial year 2020/21.

Mr Kichere, however, said, while there has been a positive trend in revenue collection in the past five years, it was important to ensure that all potential sources of revenue are fully utilized in order to achieve the set targets as depicted in years 2017/18 to 2021/22.

A total of 37.34bn/- was not collected from 146 LGAs from potential sources, such as rental charges of shops located at the Council’s bus stands and markets, market stalls, house rent, leased open spaces or beach areas, sale of plots, hunting fees, business licenses and liquor licenses.

“I urge LGAs to develop precise collection strategies by identifying potential sources of revenue and venture into new sources within their areas of jurisdiction.

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