By: Justicia Shipena
The Okahao Town Council was found to have purchased vehicles without proof of payments.
This is according to auditor general Junias Kandjeke’s latest financial report on the town.
“It was observed that there is no proof of payment of the purchase of vehicles filed in the personnel files of management,” said Kandjeke.
Kandjeke also found that the council is paying a high car allowance per year to management, contrary to what is recommended in the ministerial directive circular of 26 April 2018.
“It is recommended that the council file all necessary documents in personnel files of employees and pay allowance as directed by the ministry of urban and rural development,” he said.
On cash flow, he said he observed a difference amounting to N$9,997,016 between the amount recalculated by auditors of N$8,778,827 and the amount computed by the client of N$1,218,189.
He added that the council did not submit supporting evidence for bad debts amounting to N$19,264.
“The occurrence, accuracy and completeness of accounts receivables could not be verified,” he said.
In addition, the report states that the council expensed off the total provision amounting to N$940,730 in the 2019 financial year in the statement of financial performance instead of N$1, 611,426.
He also observed that the council does not have financial accounting procedures in place; hence there was no adequate approved documentation of day-to-day financial operations implemented at the council.
“It is recommended that the council draft, support and implement sound financial accounting procedures.”
In his auditor report, he stated that the total leave days due for each employee at the end of each cycle for the 30 June 2019 financial year could not be recalculated as no updated leave records were provided in the leave file.
He also found that the Okahao council wrongly classified inventory as trade receivables at N$ 242 060.
Kandjeke said the council did not determine the long-term portion of the Build Together receivable loan amounting to N$ 4 397 478, which has a loan period of 20 years.
The Okahao Build Together Program was launched in 1997 and has since constructed about 214 housing units at over N$8.1 million.
“On VAT receivables, a difference amounting to N$ 815 552 between the re-performed reconciliation and the financial statements was observed,” he said.
He further found that the council did not accrue the 5 per cent rates and taxes of N$271 573 due to the Omusati regional council for 2019.
Furthermore, the report states that the council recorded invoices amounting to N$399 S58 which were wrongly recorded in 2020
financial period instead of the 2019 financial period.
“The council did not provide journal entries for transactions amounting to N$1 552 125 for Ehao expenditure.”
The audit report shows that the council understated the total expenditures for 2019 in the annual financial statement by an amount of N$522,964 due to an incorrect classification of appropriation income.
No legal costs, Kandjeke said the council did not provide further information regarding legal matters related to transactions
amounting to N$112,231.
Moreover, he found that capital projects under the council with a cost of N$2,036,012 that were completed during the accounting period were not transferred to property, plant and equipment.
“The council recorded transactions amounting to N$1 701 11.43 VAT inclusive. This resulted in capital expenses being overstated with an amount of N$221 886.71 and the VAT account being understated with the same amount,” he adds.
Once again, the auditor general’s audit could not confirm the completeness and existence of items of property, plant and equipment due to improper records to trace assets to and from the fixed asset register.
In addition, the report stated that the council incorrectly classified the Ehao fence constructed at the cost of N$ 751 102.06 as plant and
machinery instead of classifying it as land and buildings.
“A class of land and buildings valued at an amount of N$18 274 159 disclosed in the financial statement, the land value is not separated from those of buildings,” said Kandjeke.
Regarding the investment in electricity supplier Nored, the auditor general’s report stated that the auditors could not confirm the existence and valuation of the investment as disclosed in the 2020 financial statements amounting to N$ 20 990 854. This, it said, was due to the unavailable shareholder’s agreement or share certificate, showing the correct value of equity acquired.
In this light, he recommended the council provide sufficient and appropriate evidence to substantiate the existence and valuation of equity investment in Nored.
Kandjeke said the non-submission of documentation posed a significant limitation on the auditors to ascertain whether reported performance information is valuable and reliable in terms of whether the actual reported performance did occur.
“Because of the significance of the key audit findings section of my report, I have not been able to obtain sufficient appropriate evidence to form a conclusion on the key performance information of the council,” he said.
He concludes that the financial statements do not present the financial position of the town council of Okahao 2019 and its financial performance and cash flows for the year ended under International Financial Reporting Standards (IFRSs).