Audit reveals Govt financials misrepresentation
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Acting Auditor-General Monica Besetsa has issued an adverse audit opinion in an audit certificate for government financial statements for the year ended March 31, 2019, painting a gloomy picture in Lesotho’s financial accounting.
In a latest report for the financial year ended March 2019, the Acting Auditor-General says she has obtained reasonable assurance through audit evidence sufficient to issue the government an adverse opinion on its financials.
Besetsa explains in the report that an adverse opinion is issued when consolidated financial statements do not represent fairly the financial position of the government, its financial performance, and cash flows for the year under review in accordance with International Public Sector Accounting Standards.
On Cash balances, Besetsa said there is a difference of M471 million between a closing balance of M6.799 billion in the consolidated statement of cash receipts and payments and Bank balance of M6.328 billion reflected in the notes of financial statements.
Moreover, she adds that the financial statements reflect a cash decrease of M1.462 billion from 2017/2018 to 2018/2019 whereas bank balances show a cash increase of M781 million.
She notes noncompliance with international public sector accounting standards under cash basis accounting.
Under non-compliance, she notes: “Financial statements do not consolidate all government-controlled entities, state-owned enterprises, autonomous institutions, and other budgetary funds.
“Centrally managed bank account balances were not fully reconciled as of 31 March 2019.
“The Financial statements disclose a small number of accrual items which had not been cleared at the reporting date, such as accounts payable, advances, provisions, third party trusts, and deposits”.
She points that on cash receipts the disbursements of M940 million reflected in the debt records are different from the figure of M498 million in the consolidated statement of Cash Receipts and payments resulting in an understatement of M442 million.
For below-the-line accounts, the Acting Auditor General said prior to the financial year 2009/2010, the Accountant-General prepared a statement of Assets and liabilities as of the last day of the financial year.
She said below-the-line accounts formed cash assets and liabilities of government; however, the balances of these accounts had not been brought forward since 1 April 2009.
On the regularity of expenditure, Besetsa said there are twelve heads of expenditure that exceeded the budget.
She however said the requirements of Section 112(3) (b) of the Constitution of Lesotho and the Public Financial Management and Accountability Act (PFMA) of 2011 were not complied with as statement of Excess has not been presented before Parliament for regularisation of excess expenditure.
Furthermore, advance warrants from the contingencies fund totaling M123.8 million were directly allocated to some voted heads of expenditure, and that according to Besetsa’s report contravened Section 112(2) of the Constitution.
“…which requires allocations to heads of expenditure to be made only on the basis of appropriation Act” she notes.
This issue is said to have recurred on annual basis since 2009/10 and a total amount of M1.369 billion for ten years ended 31 March 2019 is yet to be regularized through supplementary appropriation Acts.
In the 2016/17 audit report, Besetsa said the auditor general then reported that the Minister’s directive to transfer an amount of M450 million from the Trust Monies account into the consolidated fund for onward transfer to recurrent expenditure account was contrary to the requirements Section 112(2) of the Constitution and Section 24 (4)(b) of the PFMA Act 2011.
The report further read…“the amount of M450 million was from the loan bursary fund administered by the National Manpower Development Secretariat and the transfer from the consolidated fund to recurrent expenditure has not yet been regularized by Parliament”.
Besetsa explains that misstatements can arise from fraud or error and are considered material if they could reasonably be expected to influence the economic decisions of users taken on the basis of financial statements.
“The risk of not detecting a material misstatement resulting from fraud is higher than one for error as fraud may involve collusion, forgery, intentional omissions, or override of internal controls”.
Besetsa said she believes the audit evidence she obtained is sufficient and appropriate to provide a basis for her adverse opinion.