Pricing due diligence directive for ministries

GOVERNMENT has directed all line ministries to activate audit sections within their departments and carry out periodic due diligence review on all running and future contracts with special focus on pricing to all payments submitted to Treasury as at 31 July 2022 as it tightens screws on procurement and contract processes.

Last week, the Government said it will take punitive measures against public officials who are complicit to overpricing and procurement malpractices while suppliers involved in illicit financial activity will be blacklisted from future supply contracts.

In a circular dated 18 August issued by the Finance and Economic Development Permanent Secretary, Mr George Guvamatanga, the due diligence reports for all submitted and suspended payment runs should be submitted by 2 September.

Mr George Guvamatanga

The circular titled, “Internal Audit Due Diligence Exercise” on suspended funding of payment runs submitted as at 31 July 2022 and review of existing procurement contracts is addressed to permanent secretaries and commissions.

“Ministers’ internal audit departments shall carry out due diligence review exercises on all running and future contracts with special focus on pricing to all payments runs submitted to Treasury as at 31 July 2022 and were suspended for funding,” reads part of the circular.

“The due diligence reports for all submitted and suspended payment runs, shall be submitted to the Secretary of Finance and Economic Development by 2 September 2022.”

contracts

Mr Guvamatanga said going forward, 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.

“Ministry heads shall, in terms of Section 10 (4) of the Public Finance Management Act ( Chapter 22:19) ensure that public entities under their ministries carry out the same exercise.

“Public Entities Internal Audit shall undertake the due diligence and report to their respective ministries for review,” he said.

“In future, ministry heads should ensure that public entities use the willing buyer willing selling pricing models.”

Last week, in a statement on the implementation of the “Value for Money Process” on Government procurement contracts, Finance and Economic Development Minister, Professor Mthuli Ncube, said Treasury had observed that certain pricing behaviours and weaknesses in the procurement framework had contributed to distorted pricing practices by the market.

To that end, he said adoption of additional comprehensive measures to further strengthen procurement systems and to improve management of payment cycles for Government contracts was an urgent imperative.

“Government through the Treasury will be strict in enforcing measures to enhance economic stability and punitive measures shall be taken against officials found to be complicit to overpricing and procurement malpractices while suppliers will be blacklisted for future supply contracts,” said Prof Ncube.

economic stability

While the Government remains committed to maintaining macro-economic stability and elimination of harmful and destabilising arbitrage conditions, which have pervaded the economy at the expense of the generality of citizens, Prof Ncube said the combined effect of such illicit behaviour has resulted in erosion of budgeted resources.

“The pricing framework adopted by suppliers is characterised by a behavioural tendency for forward pricing and benchmarking prices to front-loaded parallel market exchange rates,” he said.

“These pricing models are leading to extortionist pricing of goods and services supplies to Government ministries, departments and agencies not anchored on economic fundamentals,” said Prof Ncube.

“Government has also noted with concern the fact that substantial differences in pricing are obtaining in the market for goods and services supplied to the Government as compared to other customers.”-chronicel.c.zw