The financial positions of Masvingo and Bikita Rural District Councils (RDCs) have come under scrutiny after auditor-general Vimbai Chikwenhere red-flagged both local authorities for material weaknesses in financial reporting, asset management, and compliance with international accounting standards.
In separate audit reports for the year ended December 31, 2024—captured in the 2025 report—Chikwenhere stated that the councils' financial statements generally presented a fair view of their financial positions, except for the specific issues highlighted in the basis for the qualified opinions.
For Masvingo RDC, the auditor-general raised concerns over the council’s accounting for expected credit losses.
The council recognised an allowance of ZiG2.38 million using a flat rate of 10%, rather than assessing the actual credit risk of individual debtors as required under International Financial Reporting Standard (IFRS) 9.
"The council did not apply the requirements of IFRS 9 – Financial Instruments on the recognition of an allowance for credit losses of ZiG2.38 million which was based on a fixed rate of 10%.
This was contrary to IFRS 9 paragraph 5.5.9, which requires an entity to assess whether the credit risk on a financial asset has significantly increased," Chikwenhere said.
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She noted that the accounting treatment materially affected the council’s reported financial position.
Council management responded that the 10%provision was an interim measure while a historical credit loss model was being developed.
The auditor-general also noted that Masvingo RDC had addressed two of four findings raised in the previous audit, partially implemented one recommendation, and left one unresolved.
Meanwhile, at Bikita RDC, auditors identified weaknesses affecting the presentation of its financial position.
These included the incorrect classification of investment properties, failure to recognise depreciation, and failure to assess assets for impairment.
"Had the council correctly classified investment property, the financial statements would have been materially different," Chikwenhere said.
The audit found that properties generating rental income had been classified as property, plant, and equipment instead of investment property, as required under IPSAS 16.
The auditor-general further noted that the council failed to depreciate newly acquired assets in accordance with IPSAS 45 and did not carry out impairment assessments, despite indications that some assets may have lost value.
Council management said the affected properties would be reclassified in the 2025 financial statements, while asset revaluations and impairment assessments would also be undertaken.
The report showed that Bikita RDC had resolved three of five findings raised in the previous audit, including recognising expected credit losses and regularising Hanyanya Investments (Private) Limited.
However, issues relating to impairment testing and the separation of land and buildings in the accounting records remained outstanding.
Chikwenhere urged both councils to strengthen compliance with international accounting standards, warning that weaknesses in financial reporting and asset management could undermine transparency, accountability, and the reliability of their reported financial positions.