SUSPENDED CONTRACTS : GOVT DEMANDS DUE DILIGENCE REOPRTS

ALL ministries, Government departments and agencies have been given up to September 2 to submit due diligence reports on all contracts that were submitted as of July 31 but whose payments were suspended after it had been noted that the pricing models were based on parallel market rates.

The reports should also include existing procurement contracts and should be in line with the directive that was issued on August 4 suspending payments to contractors.

This comes as Government is taking measures to tame inflation and stabilise the exchange rate with the aim of achieving price stability and market discipline which will engender market confidence.

The latest directive to carry out the due diligence exercise was issued by the Permanent Secretary in the Ministry of Finance and Economic Development, Mr George Guvamatanga, on August 16.

“Ministries’ internal audit departments shall carry out a due diligence review exercise on all running and future contracts with special focus on pricing to all payment runs submitted to Treasury as at July 31, 2022 and were suspended for funding,” he said.

“The due diligence reports for all submitted and suspended payment runs shall be submitted to the Secretary for Finance and Economic Development by September 2, 2022. In future, the Internal Audit Department shall carry out due diligence review exercises on prices for future contracts and procurements and submit their reports attached to the payment runs to Treasury.

“Internal audit heads shall appoint internal auditors responsible for carrying out due diligence review exercises, who will not audit procurements and contracts, as this will be self-review.”

Mr Guvamatanga also said in future, ministry heads shall, in terms of the Public Finance Management Act, ensure that public entities under their ministries carry out the same exercise.

He added that public entities’ internal audit departments shall undertake the due diligence exercise and report to their respective ministries for review while the ministries would ensure that the public entities use the willing buyer willing seller pricing models.

Treasury suspended payments for all contracts submitted as at July 31 after noting that ministries, departments and agencies (MDAs) were submitting pay runs for the disbursement of cash for goods and services procured using parallel market exchange rates.

Such a pricing framework by the suppliers of goods and services was causing inflationary pressures and also fuelling parallel market activities through unjustified movements in the exchange rate resulting in exorbitant prices of goods and services.

The inflationary pressures also resulted in the erosion of MDAs appropriated budgets putting pressure on the Treasury through increasing demand for more funding from Government which was not aligned to the revenues inflows and created fiscal risk of unsustainable budget overruns and deficits.

Therefore, in line with the Public Finance Management Act, the MDAs were also directed to rationalise their payment requests and operate within the confines of the willing buyer willing seller foreign exchange rate.

The MDAs were also directed to, in future, seek Treasury approval on contract prices in order to ensure effective control of public resources as guided by the PFM Act.

In addition, all payment runs submitted to Treasury should have been reviewed and signed off by the accounting officer ensuring value for money in procurement and confirming that the pricing framework is in line with Government policy.

Government has adopted a variety of measures this year to stabilise the local currency and curb inflation such as raising the key interest rate to 200 percent from 80 percent, reintroducing the US dollar as legal tender, and selling gold coins among others. Herald

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