…as Auditor-General issues adverse opinion
…over massive discrepancies, weak controls and conflicting financial records
Mohloai Mpesi
AUDITOR-General, Mathabo Makenete, has issued a damning adverse audit opinion against the government after uncovering unexplained discrepancies amounting to more than M3 billion in its Consolidated Financial Statements (CFS) for the financial year ended 31 March 2024.
The report paints a troubling picture of weak financial controls, inconsistent reporting, unexplained cash movements, ballooning liabilities and persistent failures in public financial management.
The latest scathing findings – in the latest audit report of the “Auditor-General on the Consolidated Financial Statements of the Government of Lesotho for the year ended 31 March 2024” come barely two months after Ms Makenete raised alarm over another unexplained M3.5 billion discrepancy in the previous audit cycle (2022/23), suggesting that the government had failed to address longstanding weaknesses in treasury management and reconciliation systems.
In the latest adverse opinion, Ms Makenete said the government’s financial statements could not be relied upon to fairly represent the country’s financial position.
“In my opinion, because of the significance of the matters discussed in the Basis for Adverse Opinion paragraphs, the accompanying Consolidated Financial Statements (CFS) do not present fairly the financial position of the Government as at 31st March 2024, its financial performance and cash flows for the year then ended, in accordance with the International Public Sector Accounting Standards financial reporting under Cash Basis of accounting,” Ms Makenete states.
The Auditor-General states that the Consolidated Statement of Cash Receipts and Payments reflected the government cash balances of M5.91 billion as at 31 March 2024, while Note 15 in the same financial statements reflected only M2.82 billion, leaving an unexplained discrepancy of M3.09 billion.
“The Consolidated Statement of Cash Receipts and Payments showed that the Government had a cash balance of M5.91 billion as of 31st March 2024. In contrast, Note 15 showed a total cash balance of M2.82 billion, thus resulting in a discrepancy of M3.09 billion between the two balances,” the report states.
The report further notes that while Note 15 reflected a cash increase of about M600 million between March 2023 and March 2024, the main cash receipts and payments statement reflected a cash increase of M1.31 billion, creating another unexplained variance of M710 million.
“Note 15 to the CFS shows a cash increase of M600 million from M2.22 billion to M2.82 billion between 31st March 2023 and 31st March 2024, while the Consolidated Statement of Cash Receipts and Payments show a cash increase of M1.31 billion, resulting in a discrepancy of M710 million,” the report further states.
Ms Makenete also flags unsupported reconciliation entries processed through the Central Bank of Lesotho, which understated government cash balances by M13.1 million.
“The cash balance in the Consolidated Statement of Receipts and Payments is understated by M13.1 million due to unsupported reconciling payments processed by the Central Bank of Lesotho that have not been recorded in the Government’s Cashbook,” she stated.
The Auditor-General additionally found that the Consolidated Fund was understated by M80 million after the Independent Electoral Commission allegedly failed to remit unspent funds at the close of the 2023/24 financial year.
“The Consolidated Fund is understated by M80 million as of 31st March 2024, due to the Independent Electoral Commission (IEC) failing to remit unspent budget allocations at the close of the 2023/24 financial year.”
The report also exposes inconsistencies in government debt reporting and treasury instruments.
“The Treasury Bills opening balance of M867.54 million on 1st April 2023 decreased to M747.90 million on 31st March 2024, without an indication of movements (issues or repayments) during the year,” Ms Makenete notes.
She further warns of conflicting figures relating to government loan guarantees and contingent liabilities.
“There were discrepancies on outstanding Loan Guarantees in Schedule 7, Table 12 in the CFS; there was no record of transactions for repaid or new guarantees from the opening balance of M48.78 million to the closing balance of M54.91 million.”
The Auditor-General says the Consolidated Financial Statements reflected a loan guarantees balance of M54.91 million, while the Public Debt Financial Statements showed a nil balance and the Ministry of Finance and Development Planning reported M64.91 million.
“The above two discrepancies created uncertainty over the accurate valuation of the Government’s contingent liabilities,” the report reads.
The report further uncovers inconsistencies in domestic interest payment reporting amounting to nearly M89 million.
“The Consolidated Statement of Cash Receipts and Payments and the corresponding Note 9 of the CFS and the PDFS each reported other domestic interest payments amounting to M461.79 million. These figures differed from those in Note 9 of the PDFS, which reported M550.73 million, resulting in a variance of M88.94 million.”
The Auditor-General’s report also raises concern over mounting public liabilities and fiscal pressures facing the country.
According to the report, Lesotho’s public debt increased from M23.72 billion to M25.81 billion during the 2023/24 financial year, driven partly by Treasury bond issuances and pension obligations.
“Total stock of public debt increased during FY2023/24 from M23.720 billion to M25.812 billion,” the report notes.
The report further reveals that government arrears ballooned dramatically from M924 million in 2022/23 to M2.81 billion in 2023/24.
“The situation causes the government to incur arrears that must be cleared in the subsequent financial years. Arrears for the financial year 2022/23 amounted to M924 million whilst for 2023/24 the outstanding balance stands at M2.810 billion.”
Part of the increase stems from a M1.8 billion pension shortfall which the government has committed to settle over a 10-year period.
“There was a contingent liability of M3.2 billion resulting from under funding according to the Pension Fund’s actuary report. The Government has committed to pay M2 billion in ten annual instalments of M200 million.”
The report also references looming litigation risks involving major claims against the state.
“There are also contingent liabilities that have occurred as a result of pending litigation in the courts of law. Pending cases that seem to hold the highest amounts are that of Frazer Solar GmbH which is estimated to cost M1.2 billion and Tšepong with M2.3 billion.”
The Auditor-General also revisited the infamous M58 million treasury fraud scandal first uncovered during the 2022/23 financial year.
“There was a fraud of over M50 million from the Consolidated Fund in 2022/23,” the report states.
The report says investigations revealed that about M58 million had ultimately been confirmed missing, with multiple suspects arrested both in Lesotho and South Africa.
“There are about eighteen suspects that were arrested and seventeen of them have been released on bail,” the report notes.
This fraud case is yet to be prosecuted by the Directorate on Corruption and Economic Offences (DCEO).
Ms Makenete further warns that delayed submission of financial reports by ministries continues to undermine accountability and financial reporting integrity.
“The delay for the CAOs to submit financial reports is still a persisting challenge. The submissions were done from July 2024 to October 2024.”
She says most of the unresolved queries raised by the Treasury continue to relate to cash balances and reconciliation failures.
“CAOs must start to own the preparation of the reports for their spending units so that they are able to account for their budgets and the level of service delivery.”
Despite the damning findings, the report notes that the Treasury has continued implementing reforms aimed at achieving a clean audit, including strengthening bank reconciliations, expanding the Integrated Financial Management Information System (IFMIS), introducing electronic funds transfers and tightening compliance enforcement measures.
