As in the case of the Village Council of Berseba, Kalkrand also received the worst possible audit opinion from the Auditor-General on its financial statements for the financial years, which ended on 31 March 2008 and 2009; a disclaimed audit opinion. This means that the books and records of the Council are in such a poor shape that the Auditor-General is unable to express an opinion on the financial statements and the financial situation of the Council.
The Auditor-General disclaimed his opinion based on the following shortfalls:
Internal controls and accounting records
There were neither sufficient systems of internal controls nor proper accounting records on which the auditors could rely on at the Village Council
Without proper controls and accounting records, the Village is doomed. How does the tax payer know where their money goes if the Council is unable to account therefore? Internal controls are there to make sure that transactions are recorded correctly and all income and expenditure is accounted for. The Council should seriously consider implementation of such controls and keep proper accounting records. The Municipality of Mariental should be able to provide guidance.
2. Property, plant and equipment
No proper asset register was available at the Village Council and no verification of assets for existence, carrying value or completeness could be performed by the auditors.
An asset register should show the purchase price of the asset, date of purchase, the type of asset, depreciation and/or disposal thereof with a reference to the Council resolution and balance of the value at year-end. The total balances must then agree to the figure reflected in the financial statements. An example of such a register should be available within the Municipality of Mariental. Without such a register, the Council would not be able to control its assets of which some may disappear unnoticed.
3. Trade receivables
The auditors commented on the following issues:
The list of trade receivables reflected an amount of N$54 484 in the year, that ended on 31 March 2008 more than the control account and the Council was unable to explain the difference.
The auditors are of the opinion that the provision for bad debts has been understated by N$832 006 in the year that ended on 31 March 2009 and
N$832 921 in the year that ended on 31 March 2008.
The contracts for the Build Together Fund were not signed by Council officials and no bonds were registered for the security of the loans. The Council’s Build Together contracts may thus not be legally binding due to the lack of the mentioned signatures. No significant repayments have been made on the loan advances.
Debtors should be monthly reconciled, i.e. opening balance for the previous month, total amount of bills sent out during the next ensuing month, payments received for the month and the outstanding balance. Provisions for bad debts should always be reviewed and should reflect a reasonable accurate amount. If the provision is materially wrong, it would lead to a misstatement of assets in the balance sheet and mislead the readers thereof. The control on the Build Together loans must be improved; otherwise, the Council would be due for some considerable losses.
4. Trade and other payables
No reconciliations of trade and other payables were available for audit purposes.
No records for the provision of leave were available at the Village Council.
A provision for creditors must be made in the books of the Council every year. The amount consists of invoices received after year-end, which relate to the prior year. Normally, such accounts would be those received from NamWater and for electricity purchases. If books are closed on 30 June; April, May and June invoices need to be checked for invoices relating to the previous year and listed individually. The total amount should then be reflected in the financial statements.
5. External loans
External loans were, as in previous years, not repaid. Repayments, including interest, were not provided for. No interest on arrear loan installments was calculated and provided for.
Where external loans cannot be repaid to the lender, new agreements should be drawn up and unpaid amounts should be reflected as creditors in the balance sheet. Provision for interest on arrear payments should also be made.
6. VAT and P.A.Y.E
Not all P.A.Y.E returns were submitted timeously to the directorate: Inland Revenue. The provisions in the financial statements might not be sufficient to cover arrear amounts, penalties and interest thereon.
Included in the trade and other payables is an amount of N$273 263 (2009) and N$219 593 (2008) for VAT payable. No supporting documentation was available to verify this amount.
Corrective measures speak for themselves.
7. Other receivables – Build Together advances
Included in other receivables as reflected in the balance sheets is an amount of N$534 690 (2009) and N$550 369 (2008) for Build Together advances. These balances could not be verified to individual debtors.
As already mentioned above, controls need to be improved. Every individual loan record should reflect the amount paid to the lender, interest charged on a monthly basis, receipts for repayments and the owing balances. Monthly payments and receipts must agree with the cash-book.
Income and expenses
Income and expenses could not be verified due to lack of a supporting documentation.
All invoices and receipts should be filed in a numerical order and kept for audit purposes.
No supporting documentation was available for investments of N$1 022 274 (2009) and N$579 619 (2008).
Certificates should be obtained annually from the bank reflecting the value of the investment by 31 March of the respective year and kept for audit purposes.
No bank statements were available to verify the correctness of the bank reconciliations.
Bank statements must be obtained monthly from the bank and filed for audit purposes.
Training, training and training is recommended.