AAU Steps Forward to Clear Two Decades of Audit Irregularities

 by Hiwot Birhane

 

In a bid to clear its two decades of audit irregularities, the Addis Ababa University (AAU), the oldest and biggest university in the country, has hired Merit Management Consultancy, a local auditing company, with a cost of 6.3 million Br. This makes the institution the only public university to clear long years of audit adversity.

The move came two weeks after the Office of the Auditor General discovered a significant amount of illegitimate transactions in the University in the previous year audit report of the institution.

The rationale of the project is to partly or wholly reconstruct the financial accounts of the institution since 1995 – a year when all prior accumulated financial irregularities of government institutions were cancelled.

The financial account will be rebuilt by sorting and processing primary documents of the University in line with effective laws and setting accounting records and checking its accuracy.

Merit is expected to reconstruct the financial accounts in ten branches of the University in the next four months, of which two of the branches are autonomous, Addis Ababa Technology Institute and the Ethiopian Institute of Architecture, Building Construction & City Development.

There were seven companies which have shown an interest to compete in the bidding process.

Grant Thornton, an international audit firm, was the company which originally won the bid with 6.3 million Br. But, in no more than two weeks, the company changed its plan and decided to drop the project, which forced the University to award the project to the forerunner, Merit, which has offered 8.4 million Br. Later on, after a negotiation, Merit agreed to undertake the project with 6.3 million Br.

This, however, is not acceptable for some industry insiders.

“With such a small cost, reconstructing two decades of accounts does not give a sense,” said an audit expert, who has a decade of experience in auditing and owns an audit firm. “Also, it is difficult to do this in less than a year.”

The Manager of Merit shares the argument of the expert.

“We know the amount we agreed to undertake the project is too low,” said Hassen Teshome, manager of the Company. “But, we hope it will be easy to finish on the right time as the University has promised to provide assistance in finding documents.”

Founded in 2007, Merit has worked on various projects such as financial management capacity assessment for the United Nations Development Programme (UNDP), the World Food Programme (WFP) and the United Nations International Children’s Emergency Fund (UNICEF), according to Hassen.

Before the Auditor General was tasked to audit the University three years ago, AAU was audited by the Audit Service Corporation. However, this, according to the management of the University, had not saved it from being financially unclean.

“The audit of the Corporation has only focused in the areas of finance, excluding compliance requirements such as procurement,” said Dessalegn Geremew, director of procurement administration at AAU.

A request from donors and financiers to bring a clean audit report is another reason for the reconstruction of the financial statement.

“Even though we get the chance to secure finance from some financiers, there were many instances that financiers have refused to release the full fund due to the audit issues of the University,” said Dessalegn.

Such cases are usual to hear in the University.

Recently, the University has won, with other African universities, a 20 million dollar support from the World Bank to create a Centre of Excellence in three colleges of the country. The Bank, however, requested a clean audit report to avail the funds fully.

“They are not willing to commit all the money as we are financially unclean,” said Dessalegn. “The Bank gives us to sort out all the financial irregularity in a year.”

Established in 1950, AAU is one of the front-runners among leading public universities with audit irregularities, having illegitimate transactions of 1.4 billion Br. Of these, 60pc is the gap that arises from an accumulation of uncollected revenues, and the rest is due to payments that are not made at the right time.

Making payments for unknown employees, illegitimate procurements, unproven expenses, improper payments and a flawed accounting recording system are the biggest problems of the University, according to the Auditor General.

In a meeting organised by the Standing Committee for Public Account Supervision two months ago, AAU was blamed by the Public Procurement & Property Disposal Agency (PPPDA) for refusing to use less costly procurements.

“We administer large chunks of various societies, such as students, which makes our expenses usually unpredictable,” said Asemahegn Asres, interim director for the office of public relations at AAU. “To hasten procurements, we might be forced to work without the proper procedure.”

AAU is not the only problematic public university with audit irregularities. Summing up the gaps, about 3.7 billion Br in illegitimate transactions was discovered at public universities by the Auditor General in the past fiscal year alone.

Also, the Auditor General reported billions of Birr in audit irregularities in 158 institutions, of which 53 audited institutions have serious audit gaps. Unnecessary expenditures, unaccounted expenses, uncollected revenues and overuses of the budget by the institutions are the major irregularities discovered by the Auditor General.

Samson Berhane

Fortune staff writer