AUDITOR General (AG) Lucy Liphafa has bemoaned the poor state of the government’s financial statements due to, among others, officials’ non-compliance with the country’s financial laws.
Ms Liphafa expressed her unfavourable opinion in the audit report of the government’s consolidated financial statements for the year ended 31 March 2018.
The report was recently tabled in parliament by Trade and Industry Minister Halebonoe Setšabi.
Ms Liphafa’s basis for the adverse opinion includes among others non-compliance with the finance laws of the country; unmatching figures between the consolidated financial statements and the supporting records; and inadequate information technology (IT) controls in the Integrated Financial Information Management System (IFMIS).
“In my opinion, …the accompanying consolidated financial statements do not present fairly the financial position of the government as at 31 March 2018, its financial performance and its cash flows for the year then ended in accordance with International Public Sector Accounting Standard (IPSAS),” Ms Liphafa said in the report.
On the non-compliance of the books with the country’s financial laws, Ms Liphafa said: “Transfers of M22, 322 million from Trust Monies Account to the NMDS bank account exceeded M9, 115 million NMDS funds received during the year by M13, 207 million.
“The transfers from this account contravened the requirements of the Public Financial Management and Accountability Act 2011, as there was no evidence that monies remained unclaimed for a period of five years to be transferred to consolidated Fund or evidence availed substantiating NMDS ownership.
“Advance warrants from the contingencies fund totalling M95, 3 million were directly allocated to some voted heads of expenditure. That contravened the constitution, which requires allocations to heads of expenditure to be made only on the basis of the Appropriation Act.
“This issue recurred on annual basis since 2009/10 and a total amount of M1, 144 billion… Statutory expenditure in the amount of M2, 806 billion was excluded from the Appropriation Act although the amount was included in the budget speech. This contravenes the constitution that requires expenditures to be allocated on the basis of the Appropriation Act.”
On the government’s cash position, Ms Liphafa said there was no certainty in the government’s actual number of bank accounts and the funds in the bank accounts.
“…The financial statements show that there were 367 accounts held at different banks with a total balance of M4, 339 billion as at 31 March 2018. However, bank confirmation statements revealed 411 bank accounts totalling M4, 441 billion as of that date resulting in a difference of M101 million.”
Ms Liphafa noted that there was a discrepancy of M498 million between the bank balance of M4, 339 billion and government’s cash book balance due to lack of bank reconciliations.
The report also shows that underlying records for grants, foreign loans, domestic loans, recurrent expenditure — voted heads, and development expenditure differed with those from the financial statement.
“Figures in the consolidated financial statements were misstated as they differ from figures in the underlying records… Underlying records consist of ministries financial statements and debt records in the case of loans.”
The AG also expressed concern over the inefficiency of the IFMIS.
“The quality, validity, accuracy and completeness of information produced by IFMIS remains doubtful as there was no cut-off date for postings for the 2017/18 financial year. The system allowed spending units to continue making postings after the consolidated financial statements had been submitted for audit hence verification of balances became impossible.
For his part, Finance Minister Moeketsi Majoro said the IMFIS would be upgraded to newer versions this year.
“I am committed to improving the quality of the financial statements to an ultimate point of depicting the true financial position of the government of Lesotho. The IFMSIS is being upgraded to a later version in the 2019/2020 financial year.
“Efforts are being made by the Accountant General to clean data in the IFMIS for accurate balances and reconcile books of accounts on time. Budget execution reports will also be published regularly in order to portray the high level of transparency desired by all stakeholders.
“I would like to extend my gratitude to the International Monetary Funds (IMF), European Union (EU), the World Bank and the African Development Bank for their unwavering support to the Public Financial Management Reform and Action Plan (PFMRAP). This initiative is mainly focused on improving the quality of financial reporting,” Dr Majoro said.