CAIRO: Central Auditing Agency (CAA) Chairman Gawdat El-Malt said on Monday that he sent around a thousand corruption reports to various government institutions from July 2004 to July 2010, but they were largely ignored.
According to state-run newspapers, El-Malt said the reports contained evidence of misallocation of public funds and fraud, which need to be addressed promptly as the nation works towards reform and attempts to purge corruption.
El-Malt told Al-Ahram that the reports were sent to the president, the head of the People’s Assembly, the prime minister, the president of the administrative control authority, various ministers and governors, and to chairpersons of public sector companies.
According to El-Malt, mismanagement eventually led to the deterioration of the countries’ deficit and debt performance. The gap between expenditure and actual resources in 2004/05 amounted to LE 61 billion, and grew to LE 124 billion in 2009/10, financed by the sale of treasury bonds and the issuance of foreign securities.
Net balance of domestic public debt in June 2010 amounted to LE 888 billion pounds, 73.5 percent of GDP, and that the total net balance of public debt, internal and external, reached LE 1.08 trillion increasing to 85.5 percent of GDP, both of which are beyond viable limits.
Finance Minister Samir Radwan told Reuters that Egypt expects its budget deficit to be 8.2 to 8.4 percent of gross domestic product for the year to the end of June (GDP), up from the 7.9 percent forecast before political protests began.
The CAA was formed by presidential decree in July 2004 with a mandate to be the main financial supervisory mechanism of the state.
According to the independent Al-Shorouk, the CAA statement by El-Malt said that the reports detailed corrupt practices of various senior officials, and addressed, among other things, the monopolization of the steel sector by tycoon Ahmed Ezz — who controls 60 percent of the steel market — as well as the sale of cement companies and their impact on the Egyptian market.
Other reports include fraudulent practices and mismanagement of land sales, citing the cases of Solaimaneyah and Palm Hills, the use of pesticides and carcinogens in agriculture, and the sale of national landmarks.
Ahmed El-Maghraby, former minister of housing, and even former Prime Minister Ahmed Nazif, were reportedly implicated in different reports over the years.
Reports by the CAA repeatedly warned that scientific research and development in Egypt had faced numerous obstacles during the previous government’s term, resulting in Egyptian universities falling out of international rankings.
The agency constantly criticized Nazif’s Cabinet for their failure to respond to crises and disasters, which they sometimes helped exacerbate, citing cases such as the wheat crises, a number of train crashes, the Duweiqa rockslide disaster, the sinking of ferries due to inadequate maintenance, repeated food shortages and increases in food prices and fuel shortages and increases in fuel prices.
Efficient auditing
Khaled Zakaria Amin, associate professor at Cairo University and a public administration expert, explained the reasons that the CAA has been ineffective and outlined what should be done to improve the financial situation and fight corruption in government bureaucracy.
The CAA is the external auditing arm for government’s financial transactions, providing reports to the People’s Assembly which is then supposed to monitor executive authority and hold government officials accountable for their actions. The CAA performs its role based on the state’s budget, accounting and procurement laws, as well as relevant executive regulations and decrees.
Infringements include exceeding budget limits, inefficient expenditure, lack of revenue or tax collection, discrepancies in financials, any violation in tenders and bids, transaction registration procedures and financial disclosure.
According to Amin, the mission of the CAA is impossible because it has to audit the financial transactions of thousands of governmental entities across all governorates.
Egypt has around 700 budget authorities and thousands of accounting units at the central and local levels.
“The CAA is supposed to file all observed violation cases and send them to the People’s Assembly. Then it is up to the People’s Assembly to question the government…and set up interrogation or investigation committees. This mechanism has not been frequently practiced before because the vast majority of parliament consisted of ruling party [NDP] members,” Amin said.
Amin pointed out that an internal audit system does not exist in the Ministry of Finance and that the auditing is always conducted externally. “This puts pressure and load on the CAA,” he said.
Building on international experience, Amin calls for an internal audit mechanism with qualified staff to follow up on the work of the government, and it should be within the Ministry of Finance. This entity should have a special status — administrative and financial independence — within the ministry, and should be affiliated directly with the minister as the first line of audit.
He also said that the government should empower the CAA. “There should be investment in the CAA itself. There is now very advanced software which can automate the auditing process in the government for greater efficiency by linking to transactions conducted by the Ministry of Finance and automatically updating the auditing mechanism,” he said.
“The CAA should be totally independent. In the present system, the president appoints the head of the auditing authority and this shouldn’t be the case, it should be appointed by parliament so it is more democratic,” he added.
Amin also called for the creation of affiliated external auditing agencies at the local level because that is where most of the corruption is concentrated. “There is a need to have direct fiscal scrutiny and control at that level,” he said, adding that even NGOs have a fiscal auditing role to play.
According to international experiences, specialized NGOs should have the right to monitor government’s fiscal actions as a social accountability mechanism through developing and disseminating reports to the local community and media to increase accountability.
Of course, increased transparency is key, and the main prerequisite to government supervisory reform. “There should be a system in government that allows transparency so these reports could go to all stakeholders; all records developed by the CAA are currently not transparent at all. Most are classified except for the annual report on final accounts,” he said.
“This is the time to draft a freedom of information act to increase transparency and accountability, which is necessary for reform,” he said.
