Namibia: Kandjeke Warns City of Insolvency Risk

22 November 2021

There is material uncertainty in the ability of the City of Windhoek to pay its creditors in the foreseeable future, auditor general Junias Kandjeke warned last week.

In the AG's Municipality of Windhoek 2019/2020 financial report tabled in parliament last week, Kandjeke said as of 30 June 2020, the municipality's current liabilities of N$2.3 billion exceed its current assets by N$1.2 billion.

He gave the municipality a disclaimer of opinion, which means that no opinion is being given regarding the financial statements of a client as the auditor may not have been allowed or been able to complete all planned audit procedures.

He said, "I believe that the audit evidence I have obtained is insufficient and inappropriate to provide a basis for my opinion."

Kandjeke listed various reasons for this, including property, plant and equipment is overstated by N$32 776 050 (2019: N$33 808 607) due to differences in property sizes and values between the fixed asset register and E-planner; no evidence the municipality is implementing the asset management policy with regards to classification of properties;

properties being developed by private public-partnerships for sale are not included in the inventory as at 30 June 2020, and there are unsubstantiated fund assets of N$206 362 649 (2019: N$177 879 230) disclosed as cash and cash equivalents in the statutory funds reconciliation that are not separable nor identifiable from the operating cash equivalents.

Kandjeke also stated the "annual financial statements submitted did not meet the requirements of the International Public Sector Accounting Standards regarding the disclosure of variance analysis and accounting policy notes."

The municipality incurred a deficit of N$103 million. Thus, there is a risk of the municipality to settle with its creditors in a normal course of business, Kandjeke said.

Also in the report, the AG said the annual financial statements submitted by the city did not meet the requirements of the International Public Sector Accounting Standard regarding the disclosure of variance analysis and accounting policy notes.

Similarly, there have been no information audits performed by the city for the past five years on E-Venus for prepaid services, the CRS system for payroll and the TCS system for fines.

Equally, Kandjeke said legal cases involving the municipality with a probable loss amounting to N$124 000 in 2020 as confirmed by the municipality's lawyers were not disclosed in the annual financial statements.

N$8 million vehicles loans

The city granted vehicle loans to city executives to the tune of N$8 million. This was done in accordance with city policies, which permit senior staff to be entitled to vehicle loans at an interest rate of 5% per annum, repayable over a maximum of five years.

Former chief executive officer (CEO) Robert Kahimise took a vehicle loan of N$1.3 million in the 2018/19 financial year, and another N$443 360 in the 2019/2020 financial. As of June 2020, Kahimise owed the municipality around N$1.2 million towards both loans.

Similarly, City Police chief Abraham Kanime took a vehicle loan of N$55 820 in the 2018/19 financial year, and another N$890 700 in the 2019/2020 financial year. As of June 2020, Kanime owed the municipality N$327 582.

City strategic executive for human capital and corporate services George Mayumbelo in the 2019/2020 financial year took a vehicle loan of N$586 862, and N$324 313 was still outstanding as of June 2020.

Likewise, former city strategic in the executive electricity department, O'Brien Hekandjo, was in the 2019/20 financial year granted a vehicle loan of N$750 000, of which N$468 426 was still outstanding as of June 2020.

City executive for infrastructure, water and technical services Ludwig Narib was granted a loan of N$762 220 in the 2019/20 financial year and by June 2020, only N$51 556 was outstanding.

Similarly, strategic executive for urban and transport Pierre van Rensburg was granted a loan of N$450 000 in the 2019/20 financial year, of which N$83 391 was outstanding by June 2020.

Heavy wage bill Earlier this year, this newspaper reported that the City of Windhoek resorted to lump residents with tariff increases as the council's expenses, including a N$1.5 billion wage bill, continue to put pressure on limited resources.

Salaries and wages make up the bulk of the wage bill at N$785 million, followed by housing allowances at N$268 million, the medical aid fund at N$138 million and N$137 million for pension contributions.

Then acting CEO Mayumbelo said although the wage bill represents 35% of its budget, the city only had 2 535 staff, of whom 1 920 are permanent, 615 temporary, 422 City Police employees, and 446 interns.

During the approved budget presentation to the media in August, the acting CEO explained that the city is facing pressure due to limited resources, and therefore needed to increase tariffs. Mayumbelo said although the city's financial year starts in July, this year's budget was only approved by minister of urban and rural development Erastus Uutoni a month into the new book year.

Caption: (City) Risk... The Auditor General's office has said there is material uncertainty on the commercial insolvency of the City of Windhoek, putting services to residents at risk.

Photo: Nampa

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