Dennis Madziaenda & 2 Ors v Ministry of Justice, Legal & Parliamentary Affairs

### Preamble
IN THE LABOUR COURT OF ZIMBABWE
JUDGMENT NO LC/H/491/2016
HARARE, 10 MAY 2016
CASE NO LC/H/609/2014
& 19 AUGUST 2016
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IN THE LABOUR COURT OF ZIMBABWE	         JUDGMENT NO LC/H/491/2016

HARARE, 10 MAY 2016 					         CASE NO LC/H/609/2014

& 19 AUGUST 2016

DENNIS MADZIAENDA & 2 ORS					APPELLANTS

MINISTRY OF JUSTICE, LEGAL					RESPONDENT

& PARLIAMENTARY AFFAIRS

Before the Honourables G Musariri & E Muchawa, Judges

For the Appellants	  N Chigoro (Legal Practitioner)

For the Respondent	 J Mumbengegwi (Legal Officer)

MUCHAWA J:

This is an appeal against a determination of the disciplinary authority of the respondent.

The appellants were employed as auditors by the respondent until 24 June 2014 when they were discharged from service.

During the period 1 January 2013 to 31 December 2013, the appellants were assigned to pre-audit the expenditure vouchers of the Zimbabwe Prisons and Correctional Services (“ZPCS”) whose values ranged from US$1 000-00 and above.

Arising out of the pre-audit, the appellants were charged with misconduct in terms of section 44 (2) (a) as read with the first schedule (section 2) paragraphs 2, 3, 13 (a) and (c) and 24 of the Public Service Regulations 2000 as amended. It was alleged that the appellants had pre-audited and certified expenditure vouchers fraught with irregularities and had certified the vouchers in question as correct without reporting the gross irregularities to the Accounting Officer, Treasury and the Auditor General in compliance with the Public Finance Management Act [Chapter 22:19] section 80 paragraph 4 (a).

It was further alleged that such failure had prejudiced the State of a total amount of US$1 769 504-53.

The appellants were arraigned before a disciplinary authority and were found guilty and discharged from service with effect from 24 June 2014.

Dissatisfied, the appellants have lodged this appeal in which they are questioning the propriety of the verdict of guilt in the light of the evidence adduced at the hearing and the roles they were supposed to play as auditors. I deal with each of the factors raised by the appellants hereunder which seem to respond to each of the particulars of the offences raised against them.

Certification of documents

It is the respondent’s case that the appellants in the pre-audit, certified expenditure vouchers fraught with irregularities.

The appellants argue that it was not within their mandate to certify any document as correct and that such role fell within the hands of the officer commanding Matabeleland.

Indeed the documents on record pages 114, 124 and 134, which are described as payment vouchers show that the officer authorizing payment would certify the document as correct, the audit office would then examine and the accountant would pass it for payment.

It is therefore not factually correct to allege that the appellants certified expenditure vouchers. Rather it was the officer commanding Matabeleland region who certified the expenditure vouchers as correct. This is confirmed too by Mr Nyakudya, the chief internal auditor in the disciplinary hearing minutes, on page 23 of the record.

Pre-audit checklist

The appellants argue that they carried out the pre-audit in terms of the checklist prepared by their supervisor and should not be penalized for not focusing on issues which fell outside the scope of the checklist.

Record page 179 contains the checklist in question which the chief internal auditor, Mr Nyakudya confirmed having prepared (See record page 24) to guide the pre-audit. The sample to be considered was payment vouchers with values $1 000-00 and above. The objective was to ensure that expenditure was done in compliance with treasury instructions and the Public Finance Management Act. It then sets out the items to be considered.

On record page 25, the minutes of the disciplinary hearing, it is recorded that the Chief Internal Auditor “ended by agreeing that the three auditors did not go against the audit plan.”

Mr Nyakudya, the Chief Internal Auditor confirms during the hearing, on record page 24 that:

“he designed the document for it it to act as a guide in the pre-audit, it concentrates on key areas and it leaves out unimportant areas.”

I find therefore that the pre-audit had to be carried out as guided by the pre-audit plan. There were no terms of reference prepared for the pre-audit.

DPPFI Forms (Department of Purchasing and Procurement Form 1)

The appellants argue that the DPPFI forms were outside the scope of the audit plan and the allegations (ii), (iii), (iv), (v) and (vii) relating to such DPPFI forms were outside the scope of their work.

It is argued for the respondents that the first document in any procurement would be the DPPFI form and this would therefore be the logical starting point for the audit. The form is said to contain the identity of the supplier, what is to be supplied, for what and the amount.

In charge (i), (ii), (iii), (iv) the allegations are that such DPPFI forms, in some cases seem to have been prepared after quotations, delivery notes and invoices were raised and contracts awarded. It is alleged too that some of the DPPFI forms were not stamped for validity.

Record page 123 has a DPP Form 1. It is a pro-forma letter addressed to the Director of Purchasing indicating a request to purchase/procure certain goods or services. It describes the goods, their quantity, date of delivery, where to be delivered, the charging vote and details of the requesting officer and is to be dated.

The form does not contain the identity of the supplier as alleged by the respondent.

Most importantly the pre-audit plan which Mr Nyakudya prepared and which he said would contain the important items and leave out the unimportant ones does not include the DPPFI form. All the details to be captured by the auditors would be gleaned from the subsequent documents. These would be the date, supplier, voucher number, item description, purchase order, invoice number, delivery note number, GRN, amount, whether the request for authority was attached. Further they would check on whether at least three quotations were attached, whether a comparative schedule and adjudication minutes were attached, and whether the price was within the market range.

In the circumstances of the pre-audit plan and the other documents examined by the auditors such as the payment vouchers and the competitive bidding procurement authority, the Comparative Cost Schedule and quotations, I find that the DPPFI forms were outside the scope of this pre-audit. They would not add any value to what they had been assigned to look out for. In the words of Mr Nyakudya, these were unimportant areas which he left out. In essence this form is just a wish list.

Documents not supported by purchase orders contrary to Treasury Instruction 1201

The appellants were alleged to have certified documents not supported by purchase orders contrary to Treasury Instruction 1201.

Treasury Instruction 1201 provides as follows:

“As far as is practicable the prescribed form of requisition or order shall be issued for all local supplies and services. The fulfilled requisition or order shall be attached to the supplier’s account and these documents when properly certified may then be used as a payment voucher …” (my emphasis)

It is the appellants’ contention that it was not only a purchase order to be supplied but also a fulfilled requisition. That is evident from the Treasury Instruction in question.

In the circumstances there was no basis on which to find the appellants guilty of certifying documents contrary to Treasury Instruction 1201.

Documents with different items on electronic purchase orders and payment documents

The respondent’s allegation is that the appellants had certified documents with different items on electronic purchase orders and payment documents.

As argued by the appellants, Mr Nyakudya, their supervisor exonerated them in the hearing by saying:

“… he did not know about the issue of different items on electronic purchase orders and payment documents.”

It is recorded on record page 25 that he further agreed that the three auditors did not have access to the system but there were purchase orders in the system.

There was therefore no basis due to lack of access, on which this allegation could stick even though the auditors are recorded to have had profiles to view transactions in the computer.

Splitting of tenders

The allegation of splitting of tenders is another one which Mr Nyakudya claimed not to know anything about during the disciplinary hearing. See record page 25. It was only the other Chief Internal Auditor, Mr Mudzungairi who explained that tender splitting was when released funds above $10 000-00 would be split if awarded to one or more companies. He however conceded that the check list used in the pre-audit would be unable to detect tender splitting.

I find therefore that the evidence adduced in this respect was insufficient to sustain the allegations of tender splitting.

Price Market Surveys

The appellants are further alleged to have certified documents with prices above market prices.

It is argued on behalf of the appellants that their role was not to carry out price market surveys which role was that of the procurement committee. I was referred to a document, the Competitive Bidding Procurement Authority on page 127 of record.

The document at the bottom has a section to be signed which reads:

“Certified that prices charged reflect Market Prices.”

This section was to be signed by the officer commanding Matabeleland Region.

The pre-audit checklist has a section where one would check whether the price was within market range. It is the auditors’ understanding that they would check if the officer commanding had certified on the Comparative Bidding Procurement Authority that the prices reflected market prices and not to carry out a market survey.

It was further explained that any purported market survey would be irrelevant at the time the auditors examined the documents as contracts of sale would have been concluded, delivery and consumption already done.

The respondent did not counter this explanation meaningfully as to the actual terms of reference on the price market survey. I deal conclusively with this issue in considering what the scope of a pre-audit is, relative to an investigative audit below.

Documents with requisitions not certified by the Officer Commanding for Matabeleland

It is common cause that the competitive bidding procurement authority on page 118 of record was not signed by the officer commanding Matabeleland yet such signature appears on page 127 on a similar document.

The appellants argue however that the lack of a signature on the competitive bidding procurement authority was not prejudicial in itself as the paper trail for each transaction would include the payment voucher as the final document, which document would be certified correct by the same officer commanding Matabeleland.

The question which remains is whether the auditors did not exercise due professional care as stipulated in the standards for the Professional Practice of Internal Auditing number 280.

Whether the appellants failed to exercise due professional care as stipulated in the Standards for the Professional Practice of Internal Auditing

The respondent contends that the appellants did not exercise due professional care. The standard stipulates that such professional care should be appropriate to the complexities of the audit being performed. Auditors are to be alert to the possibility of intentional wrongdoing, errors, omissions, inefficiency, waste, ineffectiveness and conflicts of interest. Another area of attention is those activities and conditions where irregularities are most likely to occur.

On the other hand, the appellants argue that however alert an auditor is, assurance procedures alone, even when performed with due professional care, do not guarantee that all significant risks will be identified. The parties both rely on the standards which stipulates that due care implies reasonable care and competence, not infallibility or extra ordinary performance.

The standard of care has to be weighed against the complexities of the audit in question.

The appellants were conducting a pre-audit and not an investigative audit.

Counsel for the respondent declined to answer whether there was a difference in scope between a pre-audit and an investigative audit on the basis that the record does not cover this. The answer to this question is however crucial.

I note that this issue was however canvassed in the disciplinary hearing. Mr Nyakudya stated that a pre-audit is also audited. The first appellant stated that the pre-audit is where the investigative audit starts and it entails attachment of relevant documents and collection of same for the actual audit (record page 27 – 28). He further stated that a pre-audit is not conclusive and is audited and that there are chances that findings in a pre-audit may differ from findings in an actual audit. This was not controverted.

In the light of the allegations against the appellants, the nature and complexities of the pre-audit they were carrying out, I find that the appellants were wrongly found guilty as the respondent stretched and expected them to undertake extraordinary performance, be fool proof and infallible.

I find too that the record shows that the monetary value of the prejudice suffered was distorted to reflect $1 769 504-53 instead of only $7 69 504-53.

I have taken notice too that the disciplinary proceedings record that the pre-audit check list was adhered to.

Accordingly this appeal succeeds.

The determination of the disciplinary authority as communicated by the Secretary for Justice, Legal and Parliamentary Affairs is set aside.

The respondent is ordered to reinstate the appellants 1, 2, 3 to their original position with effect from 24 June 2014, being the date of unlawful dismissal without loss of salary and benefits.

In the event that reinstatement is no longer an option, the appellants are to be paid damages in lieu of reinstatement, the quantum of which is to be agreed between the parties, failing which either party can approach the court for quantification of same.

………………………

E MUCHAWA

JUDGE

………………………		I agree

G MUSARIRI

JUDGE

Makiya & Partners, applicant’s legal practitioners

Civil Division of the A G’s Office, respondent’s legal practitioners