Missing records, poor receipts, unauthorized payments, usurious loans
BY GEORGINA KEKEA
OFFICE of the Auditor General (OAG) is concerned about the poorly kept financial records of the Provincial Governments and Honiara City Council (HCC).
In the Provincial Government’s and Honiara City Council Report to Parliament 2018, OAG says financial records weren’t kept properly and there was poor control over receipting and payment of moneys.
In addition, OAG says the Provincial Government Act (PGA) 1998 requires provincial governments to produce within nine months after the end of the financial year, financial statements for audit.
Despite financial statements submitted to the Auditor General there was no proper records which makes them (OAG) unable to express an opinion on the financial statements.
“This means that the information contained in the financial statements cannot be relied upon to be materially correct and a true and fair view of the operations of the provincial governments”, the statement from OAG contained in the report said.
The OAG report says lack of control over Ward Development Grants (WDG) is an area of concern where an example was sighted from the Guadalcanal Provincial Government. OAG reported that MPA allowance and WDG fund was made up of 13.6 percent of the total appropriation budget of the province. However, the province did not have a control mechanism over the use of WDG as no acquittal reports were provided on the usage of the funds. Other provincial governments also said to be in the same dilemma.
Non -performance of or incomplete bank reconciliations was another area of concern.
For Makira/Ulawa province it was reported that bank reconciliation statements were not signed off by the preparer and the reviewer. It was not indicated on the bank reconciliation working papers that the preparer and reviewer signed off on the working papers.
At the same time poor control over the collection, recording and banking of receipts was also an audit issue.
In Temotu, the province issued receipt books to revenue collectors and market fee collector. However, no record or register is kept to track the receipts issued to collect revenue for the province.
Next on the concerned list from OAG is the missing, unsupported and unauthorized payment vouchers.
In Rennell Bellona Province, OAG reports that payment vouchers worth $3.9 million did not have supporting documents to verify the amounts disbursed. Further verification done on the files indicated that all the Payment Vouchers were without supporting documents. Also there was no link between the cash book and the payment voucher.
“Payments vouchers cannot be traced to cashbook due to the absent of PV numbers. There is no payment voucher reference number to clearly state where it is recorded in the cashbook” the report from OAG says.
Last but not the least was the poor control over payroll, poor control over imprest and advances, poor control over fixed assets. In Guadalcanal, two provincial employees have been paid more compared to the staff establishment. Audit was unable to obtain any clear explanation or any documentation from both the administration and payroll staff to justify the increase of their basic salary rate.
In Makira/Ulawa, notable increases in salaries by divisions were noted during the audit. An analytical summary of salaries paid by divisions was performed to analyze the trend in salaries incurred during the financial year.
With the concerns raised, OAG also noted instances of illegal and usurious loans being taken out by provincial governments.
In Malaita, the Province still acquire loans from unauthorized lenders which is breaching section 88 and 89 of the Financial Management Ordinance 2008. The interest rate charged by the lenders is 20 percent each fortnight with a possibility of interest accumulated if borrowed money is not settled.
The Provincial Government has an estimated debt of $4.6 Million from the lenders. In addition, most payments issued to lenders were without legal agreements as supporting documents. Only document attached to PV was written A4 paper or stamp invoices from lenders which contain the amount of money the province borrowed with interest.
Usury is, as defined today, the practice of making unethical or immoral monetary loans that unfairly enrich the lender. Originally, usury meant interest of any kind.
The OAG report stated that only three provinces (Choiseul, Isabel and Western) financial statements were issued qualified with adverse audit opinions. The provinces were using International Public Sector Accounting Standards (IPSAS) cash basis to prepare their accounts.
In his Foreword address, Auditor General, Peter Lokay says this Report to Parliament shows the results of audits performed on the nine provincial governments for the financial year ending 31 March 2017.
“These audits were performed in 2018. The report also contains the results of the audit of the Honiara City Council (HCC) for the years 2011 to 2014. These audits were undertaken in 2017 but were not previously reported on to Parliament”, the AG said.
He said the Provincial Governments and HCC continue to receive a disclaimer audit opinion which is a concern to this office.
“I acknowledge the good work done by three provinces (Choiseul, Isabel and Western) who have received qualified audit opinions. There is a correlation between poor record keeping, poor financial performance and results”, Lokay said.