Road Maintenance Funds Governance: The Case of the Malawi Roads Fund Administration

1. Road Maintenance Funds Governance: The Case of the MalawiRoads Fund Administration Hennox Mazengera Chief Executive Officer Roads Fund Administration (MALAWI)

2. Definition Of Corporate Governance • The system by which companies are directed, controlled and held to account; • Equated to Effective Leadership (King III); • About checks and balances; • About the use of power; • Has 4 pillars: Transparency, accountability, Fairness & Responsibility. Roads Fund Administration - Malawi

3. Why Good Corporate Governance… • Results in good management, • Results in better use of resources: efficient and effective utilisation of resources, • Minimises fraud and corruption, • Improves communication, • Improves risk awareness and risk management procedures, Roads Fund Administration - Malawi

4. …Why Good Corporate Governance • Improves staff satisfaction, • Helps attract and retain good employees, • Improves image and builds customer/client loyalty and attracts more business, • Good CG creates value for all. Roads Fund Administration - Malawi

5. National Corporate Governance Reports • USA: National Commission on Fraudulent Financial Reporting, Treadway Commission, 1987; Sarbanes Oxley Act • UK: Cadbury Report, 1992; Greenbury Report, 1995; Hampel Report (Combined Code), 1998, Turnbull Report, 1999; • RSA: King Report I, 1994 and King Report II, Mar 2002 (RSA) and King Report III, 2009; • Kenyan Principles on Corporate Governance, 2000 • Code of Best Practice for Corporate Governance in Malawi, 2001. Roads Fund Administration - Malawi

6. International Initiatives • Organisation of Economic Co-operation and Development (OECD), • Commonwealth Association for Corporate Governance (CACG), • United Nations Conference on Trade and Development (UNCTAD), • International Federation of Accountants (IFAC)/Eastern Central and Southern African Federation of Accountants (ECSAFA), • The New Partnership for Africa’s Development (NEPAD). Roads Fund Administration - Malawi

7. Peculiarities of State-owned Enterprises • The criteria for appointment may be different from a private sector operator • Multiple stakeholders and loyalties • Significant public interest involved • Social and political objectives to be considered • Limited independence of directors • Limited powers of the board • Limited control over chief executives • Possibility of a dominant CEO • The control environment likely to be weak • Composition of Board may be difficult to balance. Roads Fund Administration - Malawi

8. Establishment of Roads Fund Administration (RFA) Malawi • Created in 2006 by an Act of Parliament. • Main function is to: • raise, • administer and • account for funds for the construction, maintenance, and rehabilitation of public roads in Malawi. • Became operational in May 2007. Roads Fund Administration - Malawi

9. Why was RFA Created? • To improve transparency and accountability in the roads sector in Malawi, • Previously one body was responsible for managing the road network as well as the Roads Fund, • This body was reporting to the Ministry of Transport and Public works and operationally was very close to this ministry, • There were transparency and accountability concerns, • RFA was created simultaneously with the Roads Authority which manages the roads network, • The RFA reports to the Ministry of Finance while Roads Authority reports to the Ministry of Transport and Public Infrastructure. Conflict of interest minimised. Roads Fund Administration - Malawi

10. Responsibilities of the Roads Fund Administration… • To administer and manage the Roads Fund, • To recommend to the Minister revisions in fuel levy and other road user charges, • To allocate funds for road works, road traffic management and road safety, • To collect all money assigned to the roads fund, • To identify other sources of funding, Roads Fund Administration - Malawi

11. …Responsibilities of the Roads Fund Administration • To co-ordinate the total and timely accountability of the roads fund, • To specify the requirements for certification of direct payments for works & supervision, • To monitor the efficient and effective use of funds disbursed to implementing agencies. Roads Fund Administration - Malawi

12. RFA Board Membership • RFA has 7 Board members as follows: • 1 from financial institutions • 1 from chambers of commerce • 1 from petroleum pricing authority • 1 from National Local Government Finance Committee • 1 representing members of the public • 2 members ex-officio (Ministry of Finance and Ministry of Development Planning and Cooperation) Roads Fund Administration - Malawi

13. Board Appointment • Members of the Board are appointed by the Minister of Finance, • No requirement for consultation with incumbent Board members or Chairman, • Usually consultation is done with Management, • However current Board insists on following the law on Board appointments, • Board composition does not include executive directorship – a common practice in Malawi, • Tenure of office is 3 yrs; continuity on the Board not guaranteed. Roads Fund Administration - Malawi

14. Board Chairmanship • The Chair and vice Chair are elected by other Board members, • Members ex-officio and those employed in the public service cannot be elected as Chair or vice Chair, • The Minister is not involved in the process, • Although the Board reports to the Minister of Finance it operates independently without interference from the Ministry unless approached by the Board itself. Roads Fund Administration - Malawi

15. Duties of the Board… • Sets policy and strategic direction, • Appoints the CEO, • Guides the CEO in the appointment of other senior managers, • Approves the Budget to finance the Annual National Roads Programme, • Approves agreements with implementing agencies, Roads Fund Administration - Malawi

16. …Duties of the Board • Provides oversight on management and demands the Chief Executive to report on the implementation of the organisation’s Strategic Plan at each Board Meeting, • Approves risk management framework, • Approves a Schedule of Authority clarifying what members of management can do on their own what should be reserved for Board resolutions, • Meetings are held once every 2 months. Roads Fund Administration - Malawi

17. Board Sub-Committees • The Board has 2 Committees • One responsible for Finance and Audit matters, • Another responsible for Appointments, Disciplinary and Remuneration matters, • Both Committees have formal written terms of reference, and • The Chairman does not serve on any of the Committees. Roads Fund Administration - Malawi

18. Board Evaluation • The board resolved that it should annually assess its performance and effectiveness, • Assessments include self-evaluation by all members, evaluation of the Board as a whole and evaluation of the Chairman, • The first of such assessments has just been completed and was facilitated by the Company Secretary. Roads Fund Administration - Malawi

19. Training and Development of Directors • All Board members are provided with copies of the law that created the Malawi Roads Fund Administration on first appointment; • A tailor made Corporate Governance workshop was organised for the Board in the first year; • Directors are also encouraged to attend other generic director training workshops; • All directors have had the chance to visit other Road Maintenance Funds on study tours; • Some directors have been sponsored to attend the Senior Road Executives Course in Birmingham. Roads Fund Administration - Malawi

20. Stakeholder Communications… Our stakeholders include: • Ministry of Finance, • Ministry of Transport and Public Infrastructure, • Ministry of Local Government and Rural Development, • Parliamentary Committees, • Roads Authority & other implementing agencies • Local Assemblies, • Contractors & Supervising Engineers, • Donor Community, • Road users and the public at large, • The Media, • Employees. Roads Fund Administration - Malawi

21. …Stakeholder Communications Communication with stakeholders is done through: • The Annual Report which includes a Chairman’s Report, a Directors Report, a Statement of Directors’ Responsibilities, the Chief Executive’s Report and Financial Statements, • Stakeholder meetings (contractors, MPs etc), • Newspaper publications of disbursements made for road works and to other agencies, • Interviews with members of the media, • Publication of general information leaflets, • Admin & PR officer recently hired to strenghthen PR function. Roads Fund Administration - Malawi

22. Transparency and Accountability • Use of Tip-offs Anonymous hot line service, • Member of Malawi Business Action Against Corruption, • Technical and financial Audit department in place, • Technical Audit findings are shared with the Minister of Finance, • Financial Statements prepared using IFRSs and audited by a big 4 firm, • Audited Accounts to be issued within 3 months of the end of the year, • Semi-Annual disbursement schedules to be published, Roads Fund Administration - Malawi

23. Recent Initiatives to Improve Governance • Development of an Anti-fraud and Corruption Policy, • Development of Code of Ethics for staff and the Board, • Proposals to start involving Local Authorities in the planning, procurement and implementation of road works, • Technical Audit findings to start being shared with the Minister of Transport and Public Infrastruture. Roads Fund Administration - Malawi

24. Thank You Merci Roads Fund Administration - Malawi