Tuesday, January 17, 2023
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Interview“The executive is happy when taking budget, but unhappy when they see...

“The executive is happy when taking budget, but unhappy when they see our auditors,”

 Meseret Damtie

The primary responsibility for monitoring how the government uses its resources falls to Meseret Damtie. She was chosen by Prime Minister Abiy Ahmed (PhD) in June 2022 to fill Gemechu Dubiso’s vacant position as head of the Office of the Federal Auditor General (OFAG), which has been vacant precisely for one year. Before replacing Gemechu, she has been the OFAG’s deputy director general since 2016.

Meseret must navigate between the new normal and her legacy in the face of escalating corruption in the country and a lackluster response from the executive branch to public financial mismanagement.

Meseret was also previously in charge of the Human Resources department of the former Ethiopian Revenue and Customs Authority (ERCA). She has more than 20 years of experience in the field of public financial administration and holds a first degree in accounting from Civil Service University and MBA from Bahir Dar University.

Selamawit Mengesha and Ashenafi Endale of The Reporter conversed with the Auditor General on the measures taken to ensure proper public resource administration, among others. Excerpts:

The Reporter: What are the new changes you have brought to the table since you became the auditor general?

Meseret Damtie: The OFAG’s activity is based on international principles. There is nothing that changes at the office, whether I or another person becomes the director general. The task of any OFAG director is to strengthen and maintain those existing principles.

OFAG’s mandate derives from the constitution, and there are also several international declarations. These laws are necessary to avoid alterations to national auditing principles whenever there is a regime change.

Before, we used the Regulatory Audit Manual (RAM). This year, we launched the Financial Audit Manual (FAM). This includes the compliance and financial aspects of the audit. We gave this manual to all regional states.

According to Audit standard, auditors’ reshuffling is basically reviewed every three years. But in Ethiopia, it has not been reviewed for the past 10 years. We did the reshuffling of the auditors last year. 

We also launched a master’s degree program for auditors in cooperation with the AAU. We are auditing the budget expenditures of the last fiscal year, and they will be made public soon.

A lot of the government’s expenditures remain unattended. Is there any progress to make the government accountable?

In the past, there were many public projects requiring up to 200 percent price adjustments due to dalliance. Project performance in Ethiopia used to be very poor and substandard, but projects managed by the PM have changed this history and are finalized on time.

We are prepared to conduct an audit if there is evidence that public projects are being delayed. We need evidence more than hearsay.

We obtain all budget documents, especially loan and aid documents, from the Ministry of Planning and Development (MoPD) before conducting the audit. Then we prioritize the issues and launch the audit.

How many institutions are you auditing? What are the types of audit reports? What is the capacity of the OFAG?

We audit all federal institutions. There are 175 federal institutions, and this year, 15 are being audited by the Audit Service Corporation. The OFAG is auditing the rest. We conduct financial audits, performance audits, and special audits. The IT audit is also mentioned in our proclamation, which is currently in the pilot stage. We will continue it fully in the future.

For decades, the government has been undermining the auditor general’s recommendations. Is there any progress after the change in government? Among other things, universities have been the center of financial mismanagement.

For instance, in the 2019-20 OFAG report, the audit report of 39 institutions was not accepted. The Ministry of Finance (MoF) and other respective regulators have taken the necessary measures against those institutions that failed the audit. This reaction was a big step forward for the government, acting on OFAG’s recommendations.

This year, we managed to return over 4.1 billion birr to the government, which was unlawfully spent. There are a lot of public financial mismanagement cases that we have forwarded to the Ministry of Justice (MoJ) for further criminal investigations. Cases involving several institutions are currently in the legal process. Even though the degree varies, most public institutions are accepting and implementing our recommendations now.

Is the OFAG monitoring the proper use of regional states’ budgets and resources?

Basically, we did not audit regional states before. Regional states had their own auditing jurisdictions. But a new proclamation has been introduced that enables the OFAG to interface with them.

This year, we are attempting for the first time to include all twelve regional states in the federal auditing system. So we are trying to implement a uniform audit format across the country. We are sending OFAG auditors to train regional states.

This system is called the Single Audit Act. We are working with the US Center of Excellence to adopt this system. As a result, their experts will arrive in the coming months to train OFAG staff as well as members of the parliament’s government expenditure standing committee.

Because of the Act, we can make sure that all government institutions, both federal and local, are accountable. Previously, when the federal government allocated budgets to regional states, they became subject to regional state jurisdiction, and regional states had full autonomy over their internal audit. So, based on the Single Audit Act, we introduced a new proclamation that enabled us to create a similar audit format. Currently, we are building the capacity of all regional states based on OFAG principles.

So from now on, regional state auditors will audit based on OFAG formats and principles. This will avoid duplication of efforts. If the OFAG conducted its own auditing across the country, it would have needed 10,000 auditors. But now we can rely on regional state auditors and make it part of OFAG’s reports.

Once the regional states adopt similar auditing formats and principles, it will be easy for us to integrate. We plan to send mentors and regularly check that the quality of the auditing is intact.

The single audit system proved successful in the US. The US has a federal structure, and the system can be successful in Ethiopia too.

For the current fiscal year, four regional states have become part of the federal auditing system. Oromia, Addis Ababa, Sidama, and the southern regions have now become part of OFAG’s auditing system. Next, all regional states will be integrated into the system.

Donors especially want us to audit the utilization of their funds on the ground. This is reported every three months, but we usually do not comment on it. So one of the biggest changes we have made is including regional states in the federal auditing system, starting this year.

Which institutions are currently difficult to tame?

Most of the institutions under investigation and facing measures are universities. Measures are also being taken against state-owned enterprises (SOEs) based on our recommendations. 

Why doesn’t the OFAG have the power to take direct action against institutions that don’t follow the law?

Ethiopia uses the Westminster auditing model. This means that the auditing institution must present its findings to the legislature. Then the attorney general takes legal action. Countries that have a parliamentary system, basically adopt the Westminster way.

In the court-system auditing model, the auditing institution can also take legal action. There is also a board system. Different institutions represent the board.

Since Ethiopia has a parliamentary system, the OFAG can only report to the Parliament. But whenever we find out about any wrongdoing, we directly present the evidence to the attorney general. We also work with the Anti-Corruption Commission.

The OFAG has no power to react to its findings. Can Ethiopia shift its auditing model from the Westminster to the court system?

The model is determined by the type of political structure a country adopts. Only the Westminster system is possible in a parliamentarian country. The court system model is adopted by countries that have a presidential system.

If Ethiopia’s constitution is changed and we shift to a presidential system, then it might be possible to change our audit system to a court system.

Public project costs have increased by over 200 percent. Such price revisions are ballooning the budget deficit. The budget revision, on the other hand, is fueling inflation, and many projects also involve corruption. There is a lot of public budget resource mismanagement because the government did not react to OFAG’s recommendations. Does the OFAG understand the implications for the economy? Why is the government not responding to OFAG recommendations in a timely manner?

The implications for the economy are very serious. The value of one birr is changing fast. This is causing project costs to increase substantially every time the project is delayed. On the other hand, the country is not getting the return of that project because it has not been finalized on time.

The public is also not benefiting from the project. The additional cost of some projects can finance new projects.

The OFAG used to harshly criticize the executive organ of the government, especially during the previous regime. Some people say the OFAG has been silent in the past few years, just doing the reports, presenting them to Parliament, and keeping silent afterwards. What kind of leverage do you have to influence the executive?

I have been at the OFAG for the past six years. It presents its findings to the Parliament before the officials from the audited institutions come to Parliament to take comments. This trend did not change.

For instance, last year, open criticism was conducted at 26 institutions. We never hesitate to expose wrongdoing. The parliament is our primary venue for reporting and criticizing executive wrongdoing. That is our stage. To make our findings public, we collaborate with the parliament’s government expenditure standing committee, but we cannot go beyond our auditing scope.

The kind of high corruption we used to dread in Nigeria is now proliferating in Ethiopia. Public procurement, awarding of big projects, public service provision, donor fund management, and other economic areas may be infected with corruption. The PM recently established an anti-corruption committee because it was beyond the capacity of the anti-corruption commission. Can we really say everything is in order at face value?

Most of the corruption tricks and schemes in Ethiopia are not document-based. They are difficult to detect and find evidence of. They are done without documentation. It is difficult to discover via auditing. They are systematic, but we indicate such issues in our reports.

If the government had taken serious action on OFAG recommendations from the start, the current problem could have been avoided. We have been giving our recommendations on every mismanaged project in the country.

For example, billions were squandered on MeTEC. But because it is difficult to correct the wrongdoings of the past, we chose to leave them there. If the respective institutions had taken the right action at the right time, such a waste of public resources could have been avoided.

Unless the implementers take them seriously, audit findings have no meaning. Before, the Anti-Corruption Commission was established but was not powerful and active. There would have been no need for a new committee to combat corruption if the commission had been strong enough.

The task of fighting corruption is the mandate of the anti-corruption committee. Creating an additional anti-corruption commission was unnecessary. Any anti-corruption activity should be independent from the executive branch of government.

The executive organ has its own tasks and mandates. Of course, the government has a responsibility to fight corruption. But it must be through an independent institution.

The government’s role is to create independent institutions that can genuinely fight corruption.

You mentioned that the corruption in Ethiopia is systemic and difficult to capture by auditing because it is undocumented. Does the OFAG have a methodology to look into this undocumented corruption?

We use forensic auditing mechanisms to trace undocumented corruptions. Investigators always need evidence from us to investigate OFAG’s findings.  

But the major tool available to fight corruption is prevention. It is the task of the commission to put prevention mechanisms in place.  The value chain of corruption in Ethiopia is very long. Feasibility studies intentionally inflate project costs, projects are awarded without market studies, and there is favoritism in the procurement and project award systems. Such issues can be traced through a special audit.

Usually universities are blamed for awarding procurements without bids and for unaccounted spending as well. But this has not improved year over year despite OFAG’s findings. Universities are even demanding the revision of the public procurement proclamation to allow procurement without a bid.

I do not think the problem with universities can be solved just by revising legislation. Of course, universities need legislation that fits the nature of their procurement.

But if universities have to be detached from the resource embezzlement problem, they must exit activities like students’ cafeteria service, construction works, and other related procurement activities. Universities must focus on their core missions, which are teaching and conducting research. Currently, all university presidents are spending their full time on procurement. These procurement tasks should be outsourced.

Currently, some public universities are trying to become autonomous, independent from the government budget. Even becoming autonomous will not cut the corruption problem in universities.

For instance, currently the government allocates 15 birr for university students’ meals. But we know the actual expenditure per head is much higher than that threshold. Whether the universities are getting the additional money from internal or external sources, additional money is being spent. Yet, students are still not happy with the services.

So university procurement systems should be completely outsourced, and a new discipline and set of standards must be introduced for that.

There are university officials who do not want the separation of procurement from academic activities. They object to the creation of a clean and transparent procurement system because they benefit from the existing one. They do not want to lose the benefits they are getting from procurement corruption.

This can be solved by creating a system, not by issuing directives. Strict discipline and responsibility standards must be introduced and implemented.

What are you doing to make sure that all government agencies have a system for managing public money that is open and accountable?

So far, our audit system emphasizes financial aspects and lacks the auditing of public properties.

A new committee was recently formed. I received the letter from the MoF two weeks ago. The MoF, OFAG, the Public Expenditure Standing Committee of Parliament, the Minister of Education, and the Director of AABE are members of the new committee. This committee will study and determine what type of model and principles Ethiopia should adopt for its government accounting system.

So basically, the committee will come up with a new government accounting system.

How does the OFAG audit budget allocations, subsidies, and SDG finance allocations for regional states? New regional states are also emerging. Are regional states properly utilizing their resources?

By the way, donors do not disburse money unless they see the audit reporting of the performances on the ground. They agree only after seeing the audit reports. And we give our reports to the MoF and also to the regional governments themselves.

There are also a lot of investment incentive privileges being abused, subsidy schemes especially designed for the poor not reaching the poor, and other unattended expenditures. How is OFAG following up on these?

Performance audits typically cover issues ranging from the federal level to regional states. A financial audit is restricted to specific budget expenditures.

Abiy has repeatedly stated that the parliament cannot question him about projects for which no budget has been allocated. Even if the PM brings the money from his own sources, the projects are resting on land that is public property. So the PM’s projects involve public resources, though the PM says otherwise. So are you auditing such projects under government initiative outside of the parliamentary financing system?

We basically audit projects for which the parliament approves a budget. We also audit SOEs through the Audit Service Corporation.

For instance, the Green Legacy project is led by the PM. But the budget for this initiative comes from the Ministry of Agriculture. So it is audited when the MoA is audited. The PM is also in charge of Riverside projects in Addis Ababa, which we will cover when we audit the PMO.

We will also audit the new projects recently introduced by the PM initiatives. We have been auditing mega projects. For instance, we have been auditing METEC’s projects, and there are cases pending at the courts. So if we have concrete evidence of malpractices, we can audit any institution or any project. Anyone can present evidence.

Auditing has its own scope. We do not indulge in everything. But if there is any public complaint or discontent in a certain case, we audit.

Can you tell us about some of the performance audits you’ve done since you became director?

Performance auditing has its own discipline and international standards. Every country has its own plans. For instance, when it comes to Ethiopia, the Ten Years Perspective Plan (TYPP) is one of OFAG’s points of reference. Our second point of reference is the Prime Minister’s and President’s annual opening speeches to Parliament. Therefore, these determine the direction of the OFAG.

We also focus on environmental audits, megaprojects, SDGs, and gender issues.

Recently, the PM disclosed that he is building a satellite city that includes a palace, dubbed the “Chaka Project.” It will cost at least half a trillion birr. Have you asked where the fund is sourced from? Did the project follow proper approval channels?

I learned about this project after the Prime Minister informed Parliament. I had no knowledge of the project prior to the speech in Parliament.

Though it is being built by the PM, the PM said it is a public project. Either the palace administration or another institution will take responsibility for overseeing the construction of the project. For sure, it will have a category. Probably, when we audit the PMO, we will audit the Chaka project too.

What are the plans for this year regarding special audits?

We have established a new directorate dedicated to special audits. It will focus on an in-depth audit of selected cases that cannot be covered by the normal audit. It can be a financial or performance audit.

So far, we cannot proceed with a special audit. There is a huge demand for auditing. For instance, currently there are many requests from the federal police to audit institutions and projects. A lot of requests are also arriving from the courts and the attorney general. So there is a lot of pressure on us.

Once the country is back on track and stable, we will be more focused.

Is the capacity of the OFAG sufficient to cover all the auditing needs?

There is a big capacity gap. The demand is much higher than our capacity. For instance, the OFAG needs 1,113 staff at this point, according to our strategic plan. But we have only 678 staff members now. Of these, 465 are auditors.

We had a need for salary increases, and the government recently responded positively. But before, there was a lot of turnover. Especially since last year, a lot of senior professionals have left the institution, and we have to fill that gap.

Auditing needs experienced professionals. We cannot just use fresh graduates. Of course, we hire juniors and provide them with valuable experience. But since we have a lot of gaps currently, we are preparing to outsource certain sections. Sometimes we even outsource to private auditors.

Is the low salary the reason for the high turnover?

The salary situation has improved for the time being. But there are questions we have to fulfill, especially since the per diem is very low. Today, the lowest price of a bedroom in woreda towns in regional states is 300 birr per night. But the per diem for our auditors at woreda levels is 300 birr.

Low benefits push employees to seek other options. We are preparing a new plan on this, and we hope the government will give us a positive response.

How do you evaluate the relationship and interaction of the OFAG with the executive branch and the HPR?

Our primary relationship is with the parliament, as OFAG is accountable to it. We find the executive organs only during auditing time. There is no other platform to find the executive.

The relationship of the executive institutions is basically with our auditors. Otherwise, we have no relationship with the executives. Usually, the executive institutions do not present documents to our auditors in a timely manner.

Is the current executive organ committed or passive toward the auditor general?

It depends on the government’s leadership. I basically believe that the OFAG has to find new leaders in the executive branch. Government officials usually do not understand the necessity or role of the auditor general. So they fail to respond to our auditors’ queries.

The auditor general is created to check and control public resources. The executive is happy when they take the budget, but they are unhappy when they see our auditors. They must always have documents on hand.

The executive has no power to refuse to provide documents to the auditor general. They have a responsibility to be accountable for public expenditures. But there is no similar awareness across all institutions. There are public institutions that do not even know about OFAG. I do not blame them.

This year, we managed to talk to all the universities that received a bad audit report from OFAG. We organized this communication in cooperation with the MoF and the Ministry of Education. We discussed our audit findings with the universities and told them about the deficits. The universities used to believe the OFAG was the source of the problems, but now they understand the problem.

This was the first time the executive organ, universities, and the OFAG met on the same stage, which has never happened before. Some universities have been complaining that such approaches affect their independence. But the truth is otherwise.

Awareness is very crucial for the government regarding audits. If they knew about the auditor general, they would not claim what is not in their power.

Tigray’s budget has been pending since the war. Do you follow up on how it can reach the public?

So far, we have not. But after the budget is disbursed, we will follow up on the utilization.

There are complaints regarding the forex allocation in the banking system. Do you follow up on such issues?

We conducted an audit on the forex retention and LC approval systems. Our audit found out that there are institutions and business operators who are retaining and utilizing hard currency without being eligible for such privilege. They collect revenues in hard currency, but they do not report to the government.

The foreign currency regime in Ethiopia must be overhauled. When we travel to other countries, we use only their currency and cannot use the birr or other currencies.

People enter Ethiopia carrying hard currency, which feeds the black market. This system must stop. Every person arriving in Ethiopia carrying hard currency must change it to birr. So the whole legislation regarding hard currency management must be revised. Nobody should be allowed to carry dollars and enter Ethiopia. They must exchange money at banks.

It was the legal loopholes that opened sources for the black market, and this cannot be solved without correcting the system. We recommended these issues after our audit findings.

Institutions that require foreign exchange for imports should obtain hard currency in accordance with their priorities. The government must work hard on import substitution. Standardization of products is also essential. Ethiopia also needs to stop exporting raw materials.

Of course, we have been through war up to this point, but we have to correct this now.

But the ultimate solution is to make holding hard currency illegal in Ethiopia. Holding USD inside Ethiopia must be considered a crime. I do not know why the government does not create such a system. Remittances are currently going through informal networks. The dollar Ethiopia is losing to the black market is substantial.

It is possible to eradicate the black market.

Which institution is allowing such breaches and giving room for the black market to grow?

The black market is part and parcel of the corruption system in Ethiopia. Around the national theater, black market operators ask us if we want to exchange openly. They do not care if we are in government vehicles. The government must stop this. It needs a systemic approach.

The NBE introduced a directive, following our audit findings and recommendations. But still, it needs follow-up, whether the directive is reducing the black market or not.

Basically, directives have shallow effects. Introducing directives is just firefighting. It cannot solve the problems permanently. The black market can only be permanently solved if we address the issue at its source, which is at airports and borders.

A system must be created to bring black market operators into the legal channels.

Why do you not audit the effectiveness of government policies?

Auditor generals do not audit policy. We audit proclamations, regulations, and directives. But we can recommend directions regarding policy corrections.

Basically, policy is the tool of the winning party, which is ruling the country. So far, policies in Ethiopia have no problems. The problem is their implementation.

For instance, the forex problem is happening because the exchange rate policy in Ethiopia is fixed by the NBE instead of being determined by the market. Is this not a policy problem?

The fundamental source of the forex problem is huge import demands. We import much more than we export. This created a trade deficit. We cannot allow the forex system to be determined by the market until our trade balance deficit is corrected.

It is the deficit that is forcing the government to stick to the fixed regime. I expect the government will float it once our exports improve. 

Have you done an environmental audit so far in Ethiopia?

We installed a new directorate, and we have planned to conduct five environmental audits this year. It includes chemical usage in Ethiopia, agriculture, and others.

Have you audited GMO usage in Ethiopia?

We did it last year and also in the previous year’s audit. Our performance audit findings indicated that there are several deficits in GMO usage in Ethiopia. Especially regarding animal breeding, we found out there are various problems. Some information should not be made public for the safety of the sector.

For instance, some genetic materials are imported without authorization. Then the seed or genetic material is multiplied here and used as seed. There are gaps in the legislation. We recommended that the gaps be filled.

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