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Saturday 3 March 2012 | KON

Report shines rare light on Somali gov’t finances

NAIROBI, Kenya (AP) — While tens of thousands of its citizens were dying from famine, the U.N.-backed Somali government spent only $1 million on social services despite having $58 million in revenue, according to a report by a former Somali government official.

Teaser Image Report shines rare light on Somali gov’t finances

The whistleblowing report shines a light on chaotic and secretive financial dealings and says the Somali government did not explain how the $58 million it recorded receiving last year was actually spent.

Somali government officials disputed the report. It was written by Abdirazak Fartaag, the former head of the Public Finance Management Unit, a Somali government body charged with overseeing the country's financial management.

"The government is very committed in terms of fighting corruption," said government spokesman Abdirahman Omar Osman. "That report does not reflect the reality on the ground and it lacks credibility and data."

Just over $2.6 million was budgeted for social services, according to the report.

Fartaag was fired around the time he wrote another report saying tens of millions of dollars was missing from government coffers. Improved accounting of the money that comes in and out of the government is vital to solving Somalia's 21-year-old civil war, analysts say. As long as warlords and corrupt officials are able to benefit from the chaos, they have little incentive to end it.

At a conference attended by world leaders in London last week, donors and Somali officials agreed to set up a joint board to manage Somalia's finances.

The failure to keep track of Somalia's cash has been deadly. Politicians fight for control of the cash but little of it reaches the needy. A promise to end corruption was a key recruiting tool for the Islamist insurgency fighting against the government.

The fighting was a key cause of last year's famine, which killed between 50,000 to 100,000 people, according to the British government. A refusal by insurgents to allow many aid groups access to distribute food also played a major part. The U.N. is appealing for $1.5 billion this year to aid Somalia.

"Somalia needs a solid framework that improves transparency," said Comfort Ero, the Africa program director for think tank International Crisis Group. "(The government) hasn't provided basic services."

The report has not been publicly released but was presented to Somali legislators last month. After being contacted by The Associated Press for reaction last Thursday, the government denied the report and promised documents to prove it. The AP waited for one week but the government did not respond to repeated requests for the documents.

The report was based on banking records, the government budget and other financial documents. Some were seen by the AP.

Last year the government raised about $58 million, according to the report. About $20 million was raised in domestic revenue, the report said. An additional $3.7 million was seized at the airport as part of a confiscated pirate ransom. A deposit slip indicates it was deposited in the Central Bank but no such entry shows up in the bank's records. The government also received at least $34 million in cash donations from mainly Arab nations, said Fartaag.

About $41 million was withdrawn in cash by individual politicians, militia leaders and other leading Somalis who gave no identification other than their names. Most of the rest of the money was also taken in cash, by individuals who provided the Central Bank of Somalia with their name and the ministry they worked for. An additional $1.2 million in cash went to hotels, phone companies and airlines in Mogadishu, according to the report.

But during the whole year, only about $1 million was recorded as being spent on social services, the report said. It was unclear how the money was spent, as it was part of the $41 million withdrawn in cash. Some of the cash withdrawn is believed to have been spent on government salaries but it is unclear how much. The government did not respond to requests for records.

During that time, Somali children were dying in the streets and starving families were flooding into the ruined seaside capital, fleeing the drought and war consuming their villages. In September, the U.N. said 100 children were dying every day. The government spent $165,000 on "disaster preparedness" during the famine, according to the report.

"Everything is done on a cash basis and no one has to account for it," said Fartaag. "Nothing is functioning, everything is a briefcase institution ... That's why they can't provide services like water, hospitals or schools."

The British government wants to address Somalia's tangled finances by establishing a board made up of mixed Somalis and foreigners to oversee the failed state's finances. A Somali and a foreigner would have to sign off on each withdrawal. It is also encouraging nations who make payments to the Somali government to publish the figures.

"The findings of the Fartaag audit are unconfirmed, but the joint financial management board is intended to tackle exactly the types of corruption and mismanagement that it raises," said Matt Baugh, Britain's ambassador to Somalia. "The (board) will also reduce any risk of corruption in the assistance provided to Somalia by international partners, and improve the accountability and transparency of that aid."

Better management could make a huge difference. Fartaag says the government could easily earn itself $179 million dollars a year, mainly by collecting a 3 percent tax on telecommunication companies, and by taxing remittances, the sale of the narcotic leaf qat and by properly collecting revenues from the main port in Mogadishu.

Despite the circumstances described in the report, Somalia's government has made some small improvements. Some civil servants were paid last year, although many did not receive their salaries in the last months. Government revenues are up from 2010, and more foreign donations are also being declared.

The government is also currently debating a bill which would impose a yet unspecified tax on telecoms companies. Fartaag estimates their revenue at about $540 million annually.

By KATHARINE HOURELD, Associated Press

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