The Auditor-General’s report on the accounts of the Ministry of Defence for the financial year ended 31 March 2011 was submitted to the National Assembly (NA) in March this year (which is within the time limit prescribed by the State Finance Act, 1991).
The Ministry received a clean audit opinion. Congratulations to Mr Shivute, the permanent secretary in the Defense Ministry. However, in his findings, the Auditor-General highlighted a few areas of concern:
The following unauthorised expenditure was reported by the Auditor-General:
Although Treasury’s approval was obtained to utilise certain expected savings for the defrayal of excess expenditure by way of virements during the year, 10 subdivisions were exceeded by a total amount of N$2 462 870.93. This excess expenditure is contrary to Section 6(a)(iii) of the State Finance Act, 1991.
The Act prescribes to the Auditor-General what comprises unauthorised expenditure and that he must report such expenditures. The above-mentioned excess expenditure is as such defined as unauthorised expenditure.
It is of utmost importance that a complete and up to date commitment register is kept at the Ministry. This register is independent on the IFMS (Integrated Financial Management System) and should be used as a yardstick as to whether funds are available or not. Such a register would assist in determining where any excess expenditure is about to occur and where the necessary savings can be found. It is as such not impossible to avoid unauthorised expenditure although some unexpected occurrences may happen at the end of any financial year. These can, however, be easily explained when any over-expenditure occurs there from.
In his report, the Auditor-General pointed out five main divisions where the actual virements in the general ledger deviated from those approved by Treasury.
Virementation has been explained above. Once Treasury has approved a virement, there is no way that one may deviate from there. Should the virement be insufficient or be overtaken by events, it would mean that the expected saving would no longer be sufficient to cover the virement, a new virement request would have to be prepared and submitted for approval. The commitment register mentioned above can assist in preventing such occurrences.
3. Departmental Revenue
The Auditor-General pointed out four revenue headings where the approved budgeted amounts did not agree with the amounts reflected in the general ledger. The differences were as follows:
Budget General Ledger Difference
N$ N$ N$
Ministerial fines 300 000 700 000 400 000
Sale of serviceable stores and equipment
Lost equipment and stores 10 000 50 000 40 000
Miscellaneous 600 000 273 750 000 267 750 000
Such differences are amazing and one wonders how they might have been brought about. The Accounting Officer should compare his print-out of the general ledger with the approved budgeted figures and address any differences with the Ministry of Finance for corrections.
It would be a good idea if the auditors could produce a report on the reasons for such deviations.
4. Trade Account
The suspense account known as the Mangetti Farm Trade Account reflects a credit balance of N$407 707.79. The Mangetti farms are in the process of being transferred to the August 26 Group of Companies. Unsupported income (N$76 285.50) and expenditure (N$28 875.51) transactions took place during the year.
The Auditor-General recommended that the account should be properly reconciled before such a transfer takes place.
This issue has been ongoing for a long time now and should be brought to an end. Unfortunately, the audit report does not reflect on the problems experienced by the Ministry.
Generally, there were a few other smaller issues raised by the Auditor-General in his report dealing with compensation payments, bank accounts of the attachés in the USA not submitted, difference of expenditure reported by the Accounting Officer and the amount reflected in the general ledger (N$388 624.08) and losses of cattle on the farms operated by the Ministry.
The Accounting Officer further deserves a big compliment for achieving the outstanding subsistence allowance account in the general ledger balances with his auxiliary records. This means that good controls are in place. It appears though that the report implies that outstanding advances are not recovered within the allowed timeframe of 30 days.
A great achievement is that the actual expenditure on all main divisions of the vote is within a 2% margin of the budgeted amounts. He did not have to explain any deviation from the budget in terms of the law. The total deviation from the approved budget was a mere 0.28% and only N$3 557 306 from a total budget for development expenditure of N$544 525 000 remained unspent. Fantastic!
It has to be acknowledged with appreciation that the following values of donations in the form of vehicles, trailers, equipment, medical supplies and others have been received from the following countries/institutions:
Germany: N$10 170 403
China: N$7 000 000
International Training and Education Centre: N$1 403 999