THE Swakopmund municipality was exposed to fraud and the mismanagement of funds in 2016 due to non-compliance with financial reporting policies and the incompetence of staff in the finance department.
This was among a range of discrepancies presented in auditor general Junias Kandjeke's report on the Swakopmund municipality's finances for the 2015/16 financial year submitted to the National Assembly late last month.
The report stated that the incompetence of staff members in the finance department was attributed to some discrepancies related to non-compliance with required accounting policies, and the non-submission of supporting documents, among others. Apart from staff incompetence, the auditors also stated that the municipality did not have any documented "principles, bases, rules, convention and practices" adopted for the preparation and presentation of the annual financial statements.
As a result, issues such as the provision for leave and the creditors' list were not based on any evidence, the report stated.
Instead, the general manager of finance at the town used his judgement to determine the figures. The provision for leave as well as the provision for doubtful debt was understated by N$4,2 million and N$6,5 million, respectively, due to incorrect application of accounting standards.
For example, the municipality disclosed that the provision for leave was at N$4,4 million, while the "year-end balance for the provision as per the payroll indicated N$8,6 million".
The municipality also provided three different lists of creditors, with conflicting figures. They likewise did not disclose two First National Bank cheque accounts with a balance of N$2,4 million.
The two bank accounts were not disclosed in the municipality's financial statement because they were not included in the general ledger.
According to the report, the accuracy of N$12,7 million of revenue generated by the tourism department could not be verified because the municipality did not provide all necessary supporting documents for auditing purposes. There was also an investigation into the money generated by the tourism department for "financial irregularities committed by staff members of the department".
The report furthermore stated that the assets register provided by the municipality did not provide sufficient appropriate details to allow an adequate assessment of carrying amounts of the register.
This is despite the municipality paying more than N$5 million per year in leasing an electronic fixed asset register accounting information system and related hardware, yet they were not fully utilising the system, the report states.
The municipality could not provide a reconciled schedule for the accounts payable balance of N$16,3 million. Due to numerous errors that have had a negative impact on the reported net income, profitability for the period under review cannot be relied on.
Due to the discrepancies reported, the Swakopmund municipality was then advised to train its staff in the finance department on financial reporting standards to guard the town against fraud and other irregularities.
"Based on the significance of the issues raised in this report, it is evident that the municipality needs to consider training to afford its staff members exposure to advance training to avoid the wrong application of accounting practices and non-compliance," the report further stated.