Funds are milking govt
Questions have been raised over the value of independent entities established within ministries.
28 August 2019 | Government
Members of the parliamentary committee on public accounts held several hearings last week and repeatedly expressed puzzlement over the existence of funds embedded in ministries but proclaimed in law as separate, independent entities.
“The government is channelling money to institutions that do not make sense,” said the chairperson of the committee, RDP MP Mike Kavekotora, adding that funds are “milking” the government, which then has to cut back on other social programmes.
“Some institutions were established to create jobs for the well-connected. Everything we do has an impact on the ability to do something else. We channel money to institutions that do not make sense,” Kavekotora commented.
Last Thursday the reason for the existence of the Diamond Valuation Fund (DVF) also came under the spotlight.
The DVF was established in terms of the Diamond Act of 1999 to defray the cost of valuation of unpolished diamonds, and its income is derived mainly from duties charged on the exports of unpolished diamonds.
It functions as a separate entity within the ministry of mines and energy, which led parliamentary committee members to question its existence since it has not been capacitated with properly skilled staff since its inception.
“What skills have been accrued to the fund since its establishment since everything is seconded to other staff in the ministry?” Kavekotora asked.
“What is the value for money in the creation of the DVF? Considering government’s scare resources, would it not have been prudent to keep the fund [DVF] just as a function within the ministry?”
The parliamentary committee members also questioned the Fund’s reason for existence since the establishment of Namibia Desert Diamonds (Pty) Ltd (Namdia).
Paying for others
In 2017, the DVF allocated N$46.3 million to Namdia as start-up capital at the instruction of the treasury. It has also had to pay close to N$3 million for offices rented by Namdia, and paid close to N$50 000 for the ceremony where Namdia’s sales and marketing agreement was signed.
Although Namdia was created to valuate Namibian diamonds, it has outsourced this function to C-Sixty Investments (Pty) Ltd, for which DVF paid close to N$13 million in 2017.
In the 2017 financial year DVF also paid N$2.7 million to the African Diamond Producers Association, which is an intergovernmental organisation that seeks to strengthen the level of influence African diamond-producing countries have on the world diamond market.
It also paid N$7.6 million to Namgem Diamond Manufacturing Company, a private diamond sorting company.
Adverse audit opinion
DVF was given an adverse audit opinion for the financial year ending in December 2017, partly because of a N$1.9 million understatement of debtors and because there were no supporting documents for travel and accommodation allowances amounting to N$105 668.
Maria Moses, director of administrative services in the DVF, said as far as the debtors value was concerned, the mines ministry had done its own analysis, which found that the outstanding amount was not N$1.9 million but N$10.7 million. This was reflected in the revised audited financial statement.
Moses said this mistake crept in because the money, which belongs to the DVF, was “wrongly” paid into the account of the Diamond Board.
Similarly, she said the debtors were not recognised due to the antiquated accounting systems used until recently.
Moreover, she said the bank had processed the N$105 668 as “various payments”, but that this transaction was reversed because no such payment vouchers exist. She said the correct payment amount was in fact N$105 940, which was rectified and processed under the correct payees’ names.
Lack of capacity
Moses said the DVF intends to take corrective measures to deal with its lack of capacity by migrating from a manual-based accounting system to the computerised Pastel system.
As a temporary arrangement, she said the DVF has been “sourcing” skills from the Diamond Board to “clean up” its systems.
“Our biggest challenge is that the structure is not very clear. The DVF structure is managed within the directorate of diamond affairs where there are no accountants,” Moses said.
According to the 1999 Diamond Act, the executive director [formerly the permanent secretary] is responsible for the full administration of the DVF, and yet the ministerial staff are not allowed to audit the books of the DVF.