As stated in the previous edition, the Town Council of Helao Nafidi received a qualified audit opinion from the Auditor-General on its financial statements which means that all is not well.
In that edition attention was drawn to the accumulated surplus, special fund accounts, cash available to cover these fund balances and the shortfall on the provision of bad and doubtful debts
Six of the eleven reasons given by the Auditor-General for his qualified opinion were dealt with and here are the other five reasons:
The Council was unable to provide supporting documentation to the auditors for the transactions in the following cases:
Movement in the Funds & Reserve of N$ 1 575 888
Fixed asset additions to the amount of N$ 1 700 000
Refunds of N$ 779 262
Sundry income of N$ 536 646
Permission to occupy income of N$ 2 039 006
This is serious stuff, especially as a similar situation has been reported by the Auditor-General in his previous report. One can only ask the question, how is it possible to pass transactions without the supporting documents or mislay them in such a way that they cannot be found? Every supporting document should be neatly filed in the sequence of the payments, receipts or journals and referenced to the source document, e.g. cheque, receipt or journal. It certainly gives rise to concern that nobody seems to care.
The Auditor-General said in his report that “The ability of the Town Council to continue as a going concern is dependant on a number of factors. The most significant of these are the continuation of profitable operations and the recovery of long outstanding debtors and the maintenance of existing levels of finance by major creditors”.
Investments are reflected as N$ 27 .8 million in the balance sheet and cash in the bank as N$ 5 606 069. The accounts payable reflect N$ 2 175 128 which to my mind means that the Council is still in a very good cash-flow situation which does not really warrant a qualification on a going concern. The high provision of N$ 12.9 million for bad and doubtful debt is however an indication that debtor controls are failing the Council. Revenue for services rendered is the main source of income of any Council and everything needs to be done to ensure that outstanding amounts are recovered.
3. Appropriation account
A journal has been passed to the appropriation account to the amount of N$ 455 065, related to a bank reconciliation correction but no supporting documentation could be provided for this transaction.
My comment raised at item 1 above also applies to this transaction. It is sad to notice that a similar occurrence has been raised by the Auditor-General in his previous report. It really is a pity that no one seems to care to follow correct procedures.
4. Capital Development Fund debtors
The auditors noticed that the sale of erven income is recorded in the Capital Development Fund. However, no debtors have been raised for the unpaid portion of the sale of erven.
The allocation of funds received for erven sold to the Capital Development Fund is correct, as this Fund is there to fund further purchases of land and the development of erven for sale. Debtors must be created for the portion of unpaid sales, without which there is no control on who paid what and when.
The Council did not accrue for various creditors to the amount of N$ 197 479 in the current year and a material difference of N$ 288 628 was found in the accrual made for NamWater and the financial statements.
The above situation results therein that the accounts payable amount reflected in the balance sheet is incorrect and gives the reader a wrong impression of the financial situation of the Council. Books normally only close at round about 30 September each year which should give the Council ample time to check all payments going through after 30 June each year for any transactions relating to the previous year and to create the necessary provision for creditors in the books.
The Minister of Finance has tabled quite a number of reports of the Auditor-General on the Government Offices and Ministries for the financial year ended 31 March 2011. In the next edition we will take a look at their situation.