Here’s the Auditor-General’s qualified audit opinion of the Municipality of Windhoek for the financial year ended 30 June 2008, which means that all is not well.
The Auditor-General qualified his opinion based on the following:
1. Provision for bad debts
The provision for bad and doubtful debts has been understated by an amount of N$157 785 019.
According to the financial statements, debtors and other receivables amount to N$390 755 673 less a provision for N$31 949 176.
Had this provision been correctly stated, it would have amounted to N$189 734 195.
This means that debtors total should amount to N$201 021 478 and have as such been over-stated by the above-mentioned amount.
This is a material amount, which will most certainly give the reader a totally wrong picture of the assets.
Taking into account that the Municipality closed the year with an operating deficit of N$65 120 015, it would mean that the actual deficit would amount to N$222 905 034.
Adjustments during the year brought the deficit down with
N$19 240 651, but it still means that the deficit for the year should be N$203 664 383 while the accumulated deficit should be N$251 245 583 and not N$93 460 564 as stated in the financial statements. In the previous year, the loss had amounted to N$75 051 107.
2. Provision for normal staff leave
The auditors are of the opinion that the provision for normal staff leave has been understated by N$12 342 909.
The accumulated leave of staff members needs to be paid out upon resignation, death or other reasons for leaving the service.
This means that a provision for such occurrences needs to be made and this provision needs to be as accurate as possible.
The under-provision has similar effects on the financial position as illustrated above.
3. Bonus leave
The provision for bonus leave has been understated by N$4 753 700.
Staff receives bonus leave after a certain number of years of service and this creates a liability for the Municipality.
Such a liability needs to be calculated accurately to give a true and fair view of the financial status of the Municipality.
4. Audit information
Information needed for audit purposes could not be provided.
The Auditor-General requests certain information from local authorities in a circular, which needs to be submitted to him for inclusion in the annual report.
The Municipality was unable to submit information in relation to:
Visits to foreign countries
Motor vehicle schedule
It is debatable whether or not this missing information will mislead the reader of the financial statements in a way that would warrant a qualification of such statements.
The Auditor-General raises a very serious point in the introduction of his report; that the submission of this report has been considerably delayed due to the inability of Council to submit financial statements timeously.
The statements were only signed during November 2010 and submitted to the Office of the Auditor-General at a later stage.
The report was tabled on 8th March this year in the National Assembly.
This is bad news with regard to the capabilities of our capital city.
One wonders what the town treasurer is being paid for whilst not being able to draw up financial statements annually and on time.
What do the financial reports which are necessary to monitor the Municipality’s cash-flow on a day to day basis and other management issues look like?
The balance of the Fund Accounts and Reserves totals an amount of
N$2 208 932 888.
Investments only add up to N$152 015 870, long-term debtors total amounts to N$108 810 096 and cash resources to N$54 075.
This means that the various fund accounts are not cash-backed by far and can as such not be utilised for the purposes for which they have been created.
Internal loan charges to the funds are not reflected in the financial statements but the report states that internal loans amount to N$803 469 018. This still leaves a serious cash shortage.
Current liabilities exceed the current assets by N$115 672 661.
In a normal business situation, this would mean that the Municipality is bankrupt, especially taking into consideration the under provisions mentioned above. Where are we headed?