Zupco can't account for ZW$3bn

THE loss-making Zimbabwe United Passenger Company (Zupco), which has been embroiled in numerous corruption scandals, has failed to account for ZW$3.4 billion in revenue it generated in urban areas, due to non-submission of information, raising the risk of possible fraud.

Zupco, which has been under fire for being a cashcow for politically-connected elites, is struggling to operate, with most buses having disappeared from the roads after the re-introduction of privately owned commuter omnibuses.

 In May last year, the parastatal's operations opened a can of worms amid reports that Parliament was blocked from making inquiries on the procurement, ownership and whereabouts of over 500 purchased buses in the wake of a severe transport crisis.

 While thousands of Zimbabweans, particularly in urban centres, struggle for transport on a daily basis, President Emmerson Mnangagwa has on several occasions officially unveiled buses that are rarely seen on the roads except on Zanu-PF occasions, a puzzle that has raised questions.

 Findings by acting Auditor-General (AG) Rheah Kujinga in her report on State-Owned Parastatals for the year ended 31 December 2022 have shown that the parastatal has been struggling to account for the revenue generated  from its operations in urban areas, amid indications of late payment of other payables.

 "I was unable to obtain sufficient appropriate audit evidence that management had properly accounted for urban revenue amounting to ZW$3.4 billion due to the non-submission of information to support the reported figures. I was therefore unable to confirm the accuracy and completeness of the revenue recorded through other alternative means," read the report.

"Included in cost of sales is diesel amounting to ZW$3.4 billion and operator fees ZW$2.6 billion. The system of control over the recording of diesel and expenses of mini-buses operators' fees was not effective. I was unable to verify these expenses due to the state of the accounting records and non-submission of information by management in support of these expenditures. I was unable to perform other alternative procedures in order to confirm that cost of sales had been accurately recorded."

The acting AG said she was also unable to obtain sufficient appropriate audit evidence on cash and cash equivalents balances totalling ZW$36 million due to non-submission of information, making it difficult to confirm Zupco's cash and bank balances.

Zupco has also failed to maintain accounts for money owed to operators who have been leasing their vehicles to Zupco, with payments during the year not supported by invoices, raising fears of fraud.

"There were no accounts payable sub-ledgers for bus operators who were leasing out mini[1]buses to Zupco. As a result, management did not provide a list of individual creditors and supporting third-party documents. There were no reconciliations of individual creditor balances to creditor statements. I was therefore not able to verify the trade and other payables balance of ZW$749.5 million," reads the report.

"The Company was earning some rental income from properties it was leasing out during the year. However, these properties were classified as part of property and equipment in the Company's financial statements. This was contrary to the provisions of IAS 40 – ‘Investment Property', which requires assets to be accounted for as investment property. I also noted that management was processing payments using manual records maintained by the depot managers which were not adequately supported. As a result, there were variances amounting to ZW$241.9 million between balances disclosed in the financial statements and balances in the company records."

Zupco is also operating on the brink, with current liabilities exceeding current assets, which the AG said is likely to plunge the parastatal into economic uncertainty.

"I draw attention to the fact that the Company had a net liability position (current liabilities exceed current assets) of ZW$312.8 million (2019: ZW$368.1 million) as at December 31, 2020. In addition, the Company incurred an operating loss of ZW$3.8 billion (2019: ZW$2.7 billion)," reads the report.  

"These conditions indicate the existence of material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. My opinion is not modified in respect of this matter. The controls around the Company's revenue collection systems were inadequate. There were no reconciliations being done on the banking summary to the revenue posted into the system. As a result, there were variances of ZW$26.48 million from cash collected to the cash deposits/banking."

 The acting AG also flagged Zupco over inadequate controls on fuel procurement, amid indications of fraud, as there were no documents to support expenditure for procurement of diesel amounting to ZW$290 million.

"In addition, there were variances between the quantities of diesel invoiced by suppliers and the quantities of diesel received," reads the report.

 "There were no adequate controls over billing for bus hire customers as waybills which are used as primary source documents for billing were not properly completed by the customers. As a result, some waybills did not show key details important for accurate billing such as the route and the distance covered."