AUDITOR General Lucy Liphafa has accused the government of squandering millions of maloti and failing to maintain proper books.
She has issued an “adverse opinion” on the financial statements of the Government of Lesotho, saying non-compliance with relevant legislation, poor accounting standards and non-disclosure of information meant that the accounts do not present the accurate financial position of the government for the year ending March 2016.
Her disclaimer is contained in the Auditor-General’s report on the Consolidated Financial Statements of the Government of Lesotho for the year ended March 31, 2016, tabled in the National Assembly by Minister of Finance, Moeketsi Majoro, this week.
The report also notes that government squandered millions of maloti from the Contingency Fund which was not properly accounted for.
The auditor-general is tasked with auditing the government’s finances.
Her adverse opinion is a major indictment on the government of former Prime Minister Pakalitha Mosisili which was in charge during the period of the audit until the year ending 31 March 2016.
She said the government’s accounts were not prepared in accordance with International Public Sector Accounting Standards.
More than M96 million was taken from the contingent fund and used for various purposes in violation of the constitution and the public financial management act.
In fact expenditure worth M925 million for seven financial years is yet to be properly regularised as required under the Supplementary Appropriation Act, the AG says.
“The statement of cash receipts and payments had not disclosed the beginning and closing cash balances of the government of Lesotho. The financial statements showed a closing balance of M8.914 billion per bank records, however that amount had not been reconciled.
“There was a difference of M292 million between the actual outflows presented in the Consolidated Statement of Comparison of Budget and Actual Amounts and the total cash payments reported in the statements of cash receipts and payments. There is an indication that reconciliation was not carried as required by the standard.”
The 2016 report further revealed that government squandered M96 million from the Contingency Fund of the 2015/16 Financial Year, with the Ministry of Finance spending M38 999 783 on the controversial Bidvest Vehicle Fleet management and an extra amount of M345 069 for motor vehicle assurance to Aon Lesotho for month of October 2015.
The ministry further spent an additional amount of M7 241 934 on salaries and benefits of the Government Secretary (GS) and nine Principal Secretaries from various ministries whose contracts were terminated from 1 September 2015 as well as M1 695 195 for the “processing of terminal benefits of the outgoing principal secretary and government secretary.”
The Ministry of Home Affairs also spent big from the Contingency Fund, spending M18 485 185 for the procurement of blank passports booklets and payment of services provided at the public gatherings held by the then Prime Minister, Thomas Thabane.
The Ministry of Energy and Meteorology spent M17 801 662 from the Contingency Fund’s spending was to cover the “shortfall in various items to March 2016 and for rural electrification”.
The judiciary also spent a M6 050 463 spending from the Contingency Fund to address the shortfall in its budget while the Ministry of Trade and Industry spent M3 513 328 to address the shortfall in salaries while the Pensions and Gratuities was the least spender with M2 158 812 to “meet shortfalls in civil pensions.”
The AG further noted that there were hanging or uncompleted transactions of M170 464 121 and that the Accountant-General reported that efforts were made to investigate causes for uncompleted transactions and effect correct entries.
Ms Liphafa did not spare the popular Integrated Financial Management Information System (IFMIS) as its quality, accuracy, validity and completeness of information “remained doubtful” as there was no cut-off date in postings for the financial year 2015/16.
“The system allowed spending units to continue making postings after the consolidated financial statements had been submitted for audit and it was therefore difficult to verify reported balances,” Ms Liphafa said.
On Capital Receipts, under Grants, Ms Liphafa’s audit revealed that grants to the tune of M906 million were wrongly classified as recurrent revenue under the ministries of Home Affairs (M6,035), Communications, Science and Technology (M7,552), Local Government and Chieftaincy (M30,053) and Water (M861,736) and an amount of M30 053 under the Independent Electoral Commission (IEC).
While the ministries’ financial statements reflected an amount of M909 million as total grants received during the 2015/16, Ms Liphafa noted that the Debt Section reflected M244 million and that the difference was an indication that some ministries had not reported grants received to the Ministry of Finance for Debt Section to capture that information.
“The Ministry of Development Planning revealed a total amount of M44, 906, 183 which was in the IFMIS reports but was neither in the ministry’s accounts nor the Consolidated Financial Statements. The expenditure was for the project Population Census, which was made up of M44, 243, 820 from Government Funding and M662, 363 funded by the UNFPA (United Nations Populations Fund).
“According to the IFMIS report and Ministry of Accounts for His Majesty’s Office, total expenditure for the project Construction of the Palace was M18, 402, 726. However, supporting statement to the Consolidated Financial Statements showed expenditure of M1, 805, 000 resulting in an understatement of the Consolidated Accounts by M16, 597, 726.
“A total amount of M53 517 572 for the Ministry of Trade and Industry has been omitted from the Consolidated Financial Statements. The amount was for three projects namely; Enhanced Integrated Framework Tier1 Phase 2 – M2, 302, 295, Agricultural Productivity and Trade Development Tier2 – M6, 308, 149 and Private Sector Competitiveness and Economic Diversification Phase 2 – M44, 906, 498. My office has audited these projects but their expenditures have neither been incorporated in the Ministry’s Accounts not the Consolidated Financial Statements thus further misstating the consolidated Financial Statements,” part of the report states.
The statements further explained that IFMIS reported that there was a total expenditure amount of M116 364 947 for the Ministry of Energy and Meteorology which was neither in the Ministry’s accounts nor the Consolidated Financial Statements and that as a result, the expenditure figure in the Consolidated Statement of Cash Receipts and Payments was understated. The expenditure related to the Rural Electrification Project to the amount of M112 250 176 and Northern Districts Rural Electrification Project amounting to M4 114 771.
Ms Liphafa said another total expenditure in the Consolidated Financial Statements relating to the Ministry of Forestry was understated by an amount of M12 047 595 and that the ministry’s accounts for the Poverty Alleviation Project, showed total expenditure of M160 827 521 while the Consolidated Financial Statements and IFMIS Reports on the other hand reflected total expenditure of M149, 9997, 470 thus leaving a variance of M10, 830, 051. Furthermore, there was a total expenditure of M1, 217, 544 for the Climate Chance Adoption Project which was in the Ministry’s Accounts but was neither in the consolidated Financial Statements nor in IFMIS.
“It was noted that the Missions of Berlin, New York, Johannesburg and New Delhi had overdrawn balances at 31 March 2016. That contravened Section 25 (3) of the Public Financial Management and Accountability Act 2011, which states that official bank accounts should not be overdrawn without proper approval of the Minister,” Ms Liphafa said.
She revealed that government had two accounts – current and call – with the United Kingdom’s Crown Agents bank and that the bank had been instructed to close those accounts and transfer all balances, including accrued interest, to the Central Bank of Lesotho.
Ms Liphafa said the closing balances as at 31 March 2015 for the two accounts was an equivalent of M45, 926.000 and that the notes to the financial statements disclosed that the accounts were in the process of being managed by the CBL on behalf of government. She however noted that as at 31 March, 2016, the balances in these two accounts could not be easily confirmed.
Government also had seven inactive bank accounts totaling M15, 908, 851 held at the CBL and the Standard Lesotho Bank. “I have repeatedly reported about inactive bank accounts in my previous reports. Though I have noted some progress in closing some of the accounts, there is a still concern if accounts holding millions of maloti can remain inactive and not be accessible for use,” Ms Liphafa said.
On the advances of public money, Ms Liphafa’s report established that there was an outstanding advances amounting to M131, 528, 671 as at March 31, 2016. On Travel Advances, the AG established from the consolidated financial statements that 136 travel advances totaling M2, 387, 049 were outstanding at the Treasury at 31 March 2016 and that it was further noted that M1, 257, 607 representing 53 percent was the balance not cleared from the previous years.
She however noted that the outstanding balance of travel advances could not be relied upon as her further tests revealed that the source document (IFMIS ledger) showed 95 outstanding advances totaling M2, 361, 803.
On advances to sub-accountancies and foreign missions, Ms Liphafa said documents accompanying the financial statements revealed that advances to sub-accountancies amounting to M7, 451, 440 were not cleared at the end of March 2016 and that it was further established that a total amount of M101, 258, 258 was not cleared by the missions of which 85 percent of the amount has been outstanding since 2012.
She however, could not confirm the “reasonableness” of outstanding advances M101, 258, 258 to foreign missions as the IFMIS ledger showed an outstanding balances of M97, 101, 597.
In comparing the Appropriation Act and Book of Estimates, Ms Liphafa discovered that there were differences between the amounts specified in the Appropriation Act 2015/16 and the totals provided in the Book of Estimates for 015/16 for Heads of Expenditure.
“The total per Estimates was M9, 548, 489, 861 against total Appropriated Amount of M9 287 272 315 resulting into unexplained difference of M261 217 546. Furthermore, it was noted that the amounts in the estimates are the ones in the IFMIS. That gave ministries access of spending over appropriated amounts which the comfort of availability of funds. The Ministry of Finance should ensure that parliamentary control is not compromised, by observing the amounts appropriated by Parliament,” Ms Liphafa said.
She added: “The total advances of M96 million issued during financial year 2015/16 remained outstanding, as Supplementary Appropriation Bill was not introduced to parliament for the purpose of replacing advanced amount. I have raised the issue of outstanding advances since my audit of 2009/10 accounts but to date measures have not been taken to address this disturbing issue. The total amount of M925 million for seven financial years is yet to be regularised.”
Ms Liphafa said since the financial year 2009/10, payments made against advances from the Contingencies Fund could not be established, making it difficult to determine whether advances were genuinely required to meet unforeseen expenditure.
The report revealed that the Lesotho Correctional Service (LCS) paid an unnamed contractor M3, 736, 469.70 despite terminating the contract due to unsatisfactory performance. Another amount of M460, 934.66, paid to LCS by Moruo Developments for sub-leasing the land located near Pioneer Mall for 20 years, was wrongfully deposited into the Lesotho Correctional Female Prison Poultry account held at Standard Lesotho Bank.
The AG also wants the LCS to ensure that the Moruo Developments pays the remaining balance of M199, 065.34 which the latter deducted as costs for fencing works done at LCS. Ms Liphafa further noted that the LCS paid a security fee of M88, 320.60 to JHI Real Estates for office space at Mafike House for five years ending February 2015.
“A security fee of M88, 320.60 paid prior to occupation of premises was supposed to be refundable after the expiry of contract provided there was no damage caused to the premises by the lessee. At the time of the audit, July 2016, the security fee was still not refunded and there was no report indicating any damage caused to the premises. Management was advised to facilitate rapid refund of the security fee by the landlord,” Ms Liphafa said.
On the Ministry of Foreign Affairs and International Relations, Ms Liphafa established that the Pretoria Mission failed to accordingly remit M605, 700.00 revenue and instead used it for its operational activities without the approval of the Accountant-General.
She said it was only in June 2014 when the High Commission remitted M320,000 following a directive from the Accountant-General and that at the time of audit in March 2016, the bank balance in the visas account was M450,824 and “there was no explanation given for not remitting accordingly.”
“During financial year 2014/15, the mission purchased two vehicles: Mercedes-Benz Viano 3.0 CDI AMB and Chevrolet-Spark for R765, 500.00 and R103, 594.00 respectively. These vehicles were purchased without any authority from the Ministry of Finance. Only one vehicle, the Chevrolet-Spark registered as DBBM034D was physically verified by auditors while the Mercedes-Benz Viano 3.0 CDI ABM registered as DBBL143D was not available for inspection.
“A Minister Counsellor was overpaid by an amount of M43, 174 for the period from February 2015 to March 2015. Management was aware of the overpayment but recoveries had not been made at the time of audit in March 2016. The chauffer/driver was overpaid on his salary to the tune of M76, 004 for the period from October 1999 to the time of audit. That was due to being placed on incorrect notches.
“The audit team noted that the Establishment List showed consolidated positions for Lesotho-Pretoria Mission and the Consul offices in South Africa. There were a total of 34 established positions, of which 6 were drivers, while the salary bill/nominal roll showed a total of 36 officers. The difference of two positions was caused by recruitment of two extra drivers without any authority granted by the Ministry of Public Service.
The report also notes that a gardener at the Lesotho-Pretoria Mission was irregularly paid a salary against a position of driver. The total amount paid was M291, 589.42 from 2013/14 to the date of audit in March 2016.
There was not even a contract signed by both the High Commissioner and the gardener that the latter would perform the duties of a driver and should therefore be paid for those services.
On medical expenses of the diplomatic staff, their spouses, children and the domestic servant, the AG said it was not possible to ascertain the correctness and authenticity of such payments amounting to R460, 453.00, R752, 239.00 and R833, 789.00 for financial years 2013/14, 2014/15 and 2015/16 respectively made to Discovery Medical Scheme in the absence of relevant supporting documents.
The mission further squandered R108, 157.61 for unauthorised trips to Lesotho as diplomats were required to obtain authority from the Foreign Affairs and International Relations PS prior to taking trips and that the Counsellor and Third Secretary were given accountable travel advances of M5,000 and M20,000 respectively while travelling to Mozambique yet it could not be verified whether the advance was used for the intended purpose in the absence of supporting documents.