Mutare council ruled offside over abuse of overdraft facility

Spread This News

By Staff Reporter

THE Mutare City Council (MCC) is compromising service delivery by financing its operations with an overdraft facility.

This has been revealed in Auditor General Mildred Chiri’s 2018 report on Local Authorities.

The audit report exposed weaknesses related to governance, service delivery, revenue collection and debt management.

According to the report, the local authority is financing capital and recurrent expenditure through a $4 000 000 facility and a $1 400 000 loan whose interests are spiralling out of control.

Chiri said Mutare city management’s use of estate funds to finance recurrent expenditure was in contravention of the Urban Councils Act.

She said the council was losing 67% of its treated water and this added to the huge financial burden placed by loan and bank overdraft facilities had a cumulative effect of deteriorating service delivery.

“Service delivery is compromised as significant funds are channelled towards paying finance costs. During the year under review, council was indebted with an overdraft of $4 000 000 and loans amounting to $1 400 000. Interest fees amounting to $805 546 was charged on the overdraft facility and loans during the year under review.

“Council was utilising estate funds for recurrent expenditure contrary to Section 300 of the Urban Councils Act which requires estate funds to be utilised for capital related expenditure (purchase and servicing of land).

“During the year under review, the Council utilised $1 432 844 from estates account for recurrent expenditure and only $59 935 was utilised for estates related expenses.

“I noted that 67% of the Council’s treated water (22 677 156 cubic meters) was not billed as it was lost mainly due to leakages, non-metered connections and accounts not created in the system. The situation was worsened by the fact that the Council had 15 872 non-functional water meters,” read part of the report.

Deputy Mayor, Councillor Kudakwashe Chisango said there have been positive steps to address some of the gaps identified in the audit report as it related to audited documents for 2014.

He said council was working progressively to address service delivery challenges and have secure a strategic partner to assist it address perennial water challenges.

“We are addressing some of the challenges identified in the audit report but some of the issues raised were in 2014 and we have been resolving them progressively.

“At the moment Mutare is having challenges in securing foreign currency to purchase the pipes which are needed to rehabilitate the water pipeline in Dangamvura.

“So as of now we have found a donor who is willing to assist us in procuring the materials which are now priced at US$160 million.

“It is still a challenge, we are still negotiating and we are flighting tenders to secure contractors, this money was quoted US dollars so that is the primary challenge. We need to secure that foreign currency to ensure that we solve the problem,” said Chisango.