Auditor General gets increased mandate

To audit the utilization of swelling Ethiopian foreign loan


By Yonas Abiye


A new draft bill, which provides for the amendment of the existing establishing proclamation of the Office of the Federal Auditor General Office, has proposed more responsibility to the Office including undertaking audit on utilizations of loans that government receives from lenders as well the information technology (IT) projects been implemented by many federal government institutions.


The draft bill, which proposed the amendment of the existing Proclamation 669/2010, was tabled before the House of People’s Representatives on Tuesday. The bill suggested lifting the minimum threshold of one million birr, which was used as basis to audit the accounts of private contractors and companies that have contractual relation with the federal agencies. According to the draft amendment, this threshold has been lifted to 10 million birr owing to the current rate of inflation and the purchasing power of the birr.


 “…. audit the account of private contractors relating to the Offices of Federal Government contractual works which involves a sum exceeding Birr 10,000,000,” the draft bill proclaims in a newly proposed bill that states the power and duty of the Office.


Accordingly, a new provision will be added which will allow the Office to audit foreign “loans” extended to federal offices and organizations. Recently, concerns are being raised from various corners regarding the accumulation of foreign loans and the debt servicing burden on the national budget. Currently, Ethiopia’s foreign debt stock is estimated well over 30 billion dollars the majority of which comes from Chinese banks. On the other side, the debt serving burden on the national budget is also raising concerns with the figures successively increasing over the past three years.


The expenditure budget for the current fiscal year reserved some eight billion birr for debt serving, a steady rise from six billion birr stashed a year before. However, the expenditure figures for the upcoming year also depict a similar picture with a whooping 13 billion birr allotted for the loan repayment.


With the rise of project-tied foreign loans in Ethiopia, the performance of the projects and the capacity of repayment of the loans which was accessed is an issue which is silently creeping up on the government. Recent, parliamentary discussion has reviewed disappointed failures of the performance of projects like national sugar projects, which has some 2 billion dollars in foreign loan.


Apart from sugar, the national railway system is another foreign loan magnate currently fondling some even billion dollars in foreign aid and hazy prospect regarding its capacity to repay the full amount it has borrowed depending on the fare it charges.


Nevertheless, commentators are concerned that the nature of most projects under the federal government jurisdiction is suitable for audit since they have adopted an EPC contract style. EPC contract are a design and build contracts by their nature there by lacking lasting financial and construction plan which makes it difficult to audit.


Meanwhile, the amendment also added new provisions which will enable the Office to audit a wide range of information technology system which are being implemented by the various federal agencies. “….audit or cause to be audited the Information Technology system, utilization and Administration of the Offices of the Federal Government and Organizations,” read the draft amendment.


Similarly, with the addition of the powers and duties of the Office of the Auditor General, it also proposed raising the number of deputies for the Auditor General from three to four with the new deputy tasked with overseeing the auditing activities in the IT aspect.


Meanwhile, the Office will no longer undertake other regulatory activities including issuance of licenses and permits to private audit firms and corporations, regulating their activities, certifying their capacity, renewing and revoking licenses, suspension and related activities as it is transferred to the Ethiopian Accounting and Audit Board, a body established in 2014 under Proclamation 847/2014.


The reason for the transfer of these particular duties was to help the office focus more on its auditing responsibilities and boosting its audit coverage by alleviating its regulatory burden.


After deliberating on the draft bill, the House referred it to the Public Account Affairs Standing Committee, for further revision jointly with Legal, Justice and Administrative Standing Committee.