CLARIFICATIONS ON THE DEBATE BY THE EAST AFRICAN LEGISLATIVE ASSEMBLY ON THE AUDITED FINANCIAL STATEMENTS OF THE COMMUNITY FOR THE FINANCIAL YEAR ENDED 30/6/2017

EAC SECRETARIAT

 OFFICE OF THE SECRETARY-GENERAL

  23^RD JUNE, 2019

During its ongoing session of June 2019, the East African Legislative Assembly (EALA) has debated on the report from its Committee on Accounts, arising from the report of the EAC Audit Commission on the Audited Financial Statements for the financial year ended 30^th June 2017. After the report was adopted by the Assembly, a section of the media has engaged in partial reporting of some issues in a manner that does not reflect the conclusions made by the EAC Audit Commission, hence negatively impacting on the reputation of the EAC Secretariat, as well as its current and former officials named in the EALA report unlawfully. A wrong impression was created that money was lost, and funds mismanaged.

A section of the media in the region erroneously reported that more than 1,000 assets worth US$1.88 million belonging to the Community cannot be traced and that more than US$1 million in cash cannot be accounted for.

The EAC Secretariat wishes to clarify that the issues highlighted two years ago for the year ended 30^th June 2017 as reported by the Audit Commission were of a procedural nature rather than financial, and have since then been fully acted upon. Indeed, the same Audit Commission verified the available evidence provided during the audit for the year ended 30^th June 2018 (yet to be debated by EALA) and confirmed the successful implementation of its recommendation and issued a clean audit report signed on 12^th December 2018. There was no money reported as stolen or mismanaged as reported by some media houses.

The purpose of this Press Statement is to provide clarifications on the issues raised in the previous audit report for the year ended 30^th June 2017 that EALA members debated and media reported on, so that EAC Citizens and other stakeholders are properly informed.

The clarifications are summarized as follows:

1.The alleged loss of funds on fixed assets valued at US$829,058 was rather reported by the Audit Commission as “Assets captured in various assets classes in block figures which were not individually identified” in November 2017.  The Secretariat thereafter engaged a professional valuer to break down the figures which later on were restated in the financial statements for the year ended 30^thJune, 2018, and the Audit Commission verified and cleared the matter.

2. The matter of assets amounting US$64,816 reported as work in progress as at 30^th June, 2017: the assets were later on delivered and put into use, verified by the EAC audit Commission. This matter was as well cleared in the audit report signed on 12^th December, 2018.

3. The matter of six vehicles valued at US$236,808 distributed to the Partner States that could not be verified in November 2017: the vehicles were purchased under the framework of implementation of Avian Influenza Project, with the support from the European Union and transferred, in 2011, to the Ministries responsible for Livestock in the Partner States. In November 2017, the Audit Commission did not manage to go and verify the existence of the vehicles in the Partner States. The Secretariat has since then received letters from Partner States indicating the state of the vehicles which have subsequently been removed from our books as ownership was transferred to the Partner States. The matter was also cleared by the same Audit Commission in its report signed on 12^th December, 2018.The matter of alleged unsupported expenditure and transfer of funds.

4. The EAC Secretariat also received a grant disbursement of US$356,000 in March 2016 for the implementation of Action for Reinforcing Veterinary Governance in Africa from the African Union Commission – Inter-African Bureau for Animal Resources (AU-IBAR). In November 2017, the Audit Commission could not confirm the propriety and validity of the reported expenditure and transfer of US$178,761 and US$117,000 respectively as at 30 June, 2017 since the original supporting documents were not provided for audit review. The grant agreement clearly stated that original copies are a property of AU-IBAR which has its offices in Nairobi. AU-IBAR made copies of the original documents and certified them and availed the certified copies for the expenditure of US$178,761 and a receipt acknowledging receipt of US$116,949 from the project Headquarters. After a physical visit to the AU-IBAR offices, the matter was also cleared by the same Audit Commission in the audit for the year ended June 2018.

5. Payroll variances noted between the interface file and the general ledger for Secretariat: during the period under review, the short term (temporary) staff were paid using an Excel template and reflected in the accounting software (Sun systems). Further, annual allowances such as Education and Spouse Allowances which are paid only once per year were not paid through the monthly payroll. The Audit Commission did not report this as a loss of money, but a recommendation to capture all staff, permanent and temporary, in the personnel management software. This has since been implemented and confirmed by the EAC Audit Commission.

6. Reallocation of funds within the Staff Emoluments Budget of the EAC Secretariat: The 35th meeting of the Council of Ministers directed the EAC Secretariat to reallocate funds within its current budget to cater for the recruitment exercise (EAC/CM 35/Directive 62). This approval of reallocating the US$1,342,550 constitutes a one off waiver from application of said provision on restriction by the Financial Rules and Regulations.

7. Kitchen equipment worth US$212,987 procured and delivered to the EAC Secretariat in 2014: The Audit Commission performed a physical verification of the assets of the community and saw kitchen equipment delivered and valued at US$212,987. At the time of audit in October 2017, these equipment had not been put to use, due to the fact that, through the procurement process, EAC had not been able to find a provider of catering services to run the kitchen and restaurant. The current status is that during a recent procurement process, EAC Management had managed to procure a service provider to operate the cafeteria and in so doing utilize the kitchen equipment. The service provider has been provided a Letter of Award and a contract is being drafted by the Office of Counsel to the Community, the EAC’s chief legal adviser, for the selected service provider. With this, the EAC management will ensure full utilization of the kitchen equipment.

8. In 2012, a contract was entered into between EAC and M/s. Avtech Systems Ltd for a sum of US$582,485.93 for the supply, delivery and installation of security equipment. As provided for in the agreement, 50% of the payment be made on the signing of the contract and supplier providing a valid Bank Guarantee, and 30% paid based on proof of shipment and/or delivery/installation of equipment. Due to deficiencies in the equipment, to date the Secretariat has not paid 20% of the contract, i.e. US$116,497.18.  As of May, 2019, the matter is under Arbitration (Arbitration No. 1 of 2018) at the East African Court of Justice.

9. Alleged shrinking support from Development Partners: Two years ago, the Audit Commission Report described a slight decrease in direct funding from Development Partners to the EAC Organs and Institutions. The EAC Management would like to clarify that the mode of support provided to Secretariats of Regional Economic Communities (RECs) to coordinate regional projects is changing towards Development Partners’ preference for Indirect Funding to Partner States Institutions implementing the projects.  That notwithstanding, the EAC Secretariat registered an increase of 15% in Direct Funding from its Development Partners during the financial year 2017/2018. Records on funds mobilized by the Secretariat (US$298,584,305 from USAID, African Development Bank, the World Bank, the Swedish International Development Agency, etc., plus Euro 131,686,466 from the European Union, KfW, etc.) and transferred by Development Partners to implementers in the Partner States (indirect funding) reflect a significant increase in Donors support.

We wish to assure East Africans that, contrary to what has been reported in a section of the media, the Secretariat has and will always endeavor to uphold the integrity and prudent management of all funds and resources at its disposal.

We applaud the work being done by the East African Legislative Assembly in its legislative, representative and oversight functions as enshrined in the Treaty. We further appreciate efforts by the media in the region to sensitize EAC Citizens on the integration process and appeal to them to report on matters handled by the EAC Audit Commission with accuracy, fairness, and objectivity.