The Role of ASSL
The role of ASSL is to independently review the economy, efficiency and effectiveness of government as the custodian of public funds and to ensure that these moneys are used in the manner intended by Parliament as well as being clearly and accurately reported.
We are the guardian of Sierra Leone’s economic security and as such we act in a professional, ethical and transparent to assure the productive stewardship of the investments of taxpayers and other stakeholders, and to safeguard the citizen's interest in the public sector.
General Comment on the Findings of this Report
The most significant outcome from my audit work for 2011 has been my professional judgment that a Disclaimer of Opinion on the Financial Statements of the Government of Sierra Leone was appropriate in the circumstances.
The pervasive reasons running through the financial statements as a whole that gave rise to this are laid out in my Auditor’s Report in Chapter 4 but are briefly summarised as follows:
I was not able to obtain sufficient appropriate audit evidence that the External Public Debt disclosed in the Public Accounts is free from material misstatement.
I was not able to obtain sufficient appropriate audit evidence that Domestic Revenue disclosed in the Public Accounts was free from material misstatement
I was unable to ascertain that Government bank balances disclosed in the Public Accounts were free from material misstatement.
Issuing a Disclaimer of Opinion is not a matter I considered lightly. It is based on the facts revealed in the Public Accounts audit and the many other audits undertaken by my office throughout the audit year 2011.
In doing so I am intent and hope that the government and all public officials will address the profound need to get implement the very basics of internal control and to address the public financial management issues that my predecessor and I have been reporting for many years and on which progress has been snail-paced at best.
There are three related themes running through this Annual Report that go to the heart of my Disclaimer of Opinion on the Public Accounts.
There is a wide disregard for reconciling cask book records to bank statements on a regular basis, preferably monthly. Given the pervasiveness of this basic internal control weakness and the ease in getting it done it has to be a victory of unwillingness over skill. There is very little skill involved in preparing bank reconciliation. With procedures and forms it can be taught in less than a day to any clerk with basic numeracy and does not need the training of a professional accountant. There has, however, to be a willingness on the part of managers at all levels to impose the discipline to get the job done and to rigorously follow-up the errors and omissions revealed by the process.
Public officials must learn to follow the money wherever that may lead. The return on a very small training investment to do bank reconciliations for a large number of selected public officials across the country would be enormous and should be undertaken without further delay.
Governance at the National Revenue Agency is weak and systems of internal control there are still weaker. The findings of two audits conducted by my office, details of which are provided in Chapter 5, speak volubly to this view. Also, the alleged non-responsiveness of the NRA to the legitimate and oft-repeated queries of the Accountant General’s Department to matters regarding bank balances seriously impedes his work. Indeed the internal financial control and administrative weakness of the NRA places compliance with the government’s tax law and policy at risk of being disregarded if not ignored by the citizen and corporate taxpayers of Sierra Leone. Urgent and immediate action from the highest levels to bring good governance, management discipline and rigour to the activities of this key agency is essential.
Failure to comply with procurement law and regulations is endemic and is a bigger problem to tackle successfully. The elimination of collusion between suppliers and between public officials and suppliers is an issue in many jurisdictions and is inherently difficult to detect. In Sierra Leone it requires rigorous enforcement of NPPA requirements by managers who should be held to account and where necessary close cooperation with the Anti-Corruption Commission. If ASSL is the watchdog over the public purse then the ACC is the bloodhound. Closer cooperation between NPPA, ASSL the ACC needs to be addressed. Our respective roles are different but complementary.
Having to issue a Disclaimer of Opinion is all the more unfortunate because it may seem to minimize the good work being done by many public officials and others across this country to address public financial management. This is not my intention. Their efforts also have been recognised by Transparency International and in the media at home and overseas Sierra Leone’s embracing of democracy has been universally saluted. I compliment them and encourage them to keep up their efforts and not to be discouraged. In a very real sense we are in this together and we will prevail.
In the following sections of this executive summary high level if summarized views of what was revealed by our audits are presented. I commence with common issues that are found across all MDAs, PEs, Councils and Schools.
Seven matters that are common to virtually all MDAs, PEs, Councils and Schools are as follows:
Payments without any or inadequate supporting documents.
Witholding tax not deducted.
Monthly bank reconciliations not prepared.
Fixed Asset registers not maintained or up to date.
No or ineffective Internal Audit units.
These are developed in greater details in the Chapters that follow.
The National Revenue Agency
We found some progress, albeit slow, in the institutional development of the NRA but much to be concerned about as well. This is true even in the face of the NRA collecting Le1,429 billion in 2011 which exceeded the target agreed between it, MoFED and the IMF by 8.1%.
Sierra Leone’s tax to GDP ratio – a rough economic measure of tax effort – is improving but at 11.3% in 2011 is well below the ECOWAS rate of 16.1% and a low income country rate of 18%. The number of taxpayer audits of SMTOs remain relatively low at 9 and 37 in 2010 and 2011 respectively from an SMTO population of over 3,300 taxpayers.
Within the NRA there are fundamental problems in need of being addressed at the most basic levels of administration and internal control. These affect the capacity of the NRA to protect itself from inaccurate accounting, fraud and corruption as well as unnecessary broadening of the tax gap through revenue leakage.
The NRA has made progress on the ICT front with the introduction of ASYCUDA but much more remains to be done to reduce the opportunities for face-to-face interaction between officials and taxpayers which tends to create opportunities for fraud and corruption.
Overall the NRA is making some progress on its basic mandate but the pace of improvement is slow and the failure to address fundamental weaknesses in internal control leads us to conclude that the Board of Directors is failing in its role of providing control and supervision as required under Section 5(1) of the National Revenue Act.
We reported five comprehensive audits as Special Reports to Parliament during 2011. The overall results are described in Chapter 6 and the complete reports are available on the ASSL website. What follows here, under the title describing the subject, is a succinct note on the results of each.
Seed Rice Distribution
There had been serious irregularities in the procurement process for seed rice. Several of the fundamental procurement regulations had been violated and the procurement records had not been submitted to the National Public Procurement Authority (NPPA). We also found that there were no established criteria for the distribution of seed rice or tractors to different districts.
The targets set for reducing the burden of malaria have not been achieved. Indeed during the period under review no significant drop in the prevalence of malaria was recorded. The supply of drugs and other supplies to health facilities was frequently irregular and inadequate and treatment often started late and without prior laboratory testing. The distribution of bed nets was often late and national guidelines were interpreted differently in different parts of the country leading to some people getting several nets and others getting none.
Revenue from Fisheries
Local councils have not implemented adequate monitoring and controls over fish revenue collection and fisheries observers on board the licensed fishing vessels often found themselves in a weak position in relation to the captain of the vessel when trying to enforce the correct fishing practices. In addition, the monitoring of fishing activities by MFMR has not ensured good fishing standards and the patrolling of Sierra Leone’s fishery waters is not effective.
Monitoring of Vehicles by SLRTA
SLRTA did not carry out its duties in line with Road Traffic Act and its contribution to road safety has been limited. Road accidents and road deaths continue to rise. There are no data available on the causes of accidents and therefore it is not possible to determine the proportion of accidents that can be attributed to defective vehicles, rather than to other factors such as reckless driving or poor roads conditions. All vehicles should have their licences renewed annually and commercial vehicles every six months. Yet it was found that many vehicles were not licensed even once a year. With 160,000 registered vehicles in the country the issuing of 50,000 licenses per year is clearly inadequate.
The Supply of Potable Water by SALWACO
Despite Sierra Leone’s abundant water resources, access to raw water has been problematic. During the dry season, existing raw water reservoirs dry out and all the stations depend on water pumped from rivers or streams. At the time of our audit only one pump that seemed to function well with the result that water treatment process frequently came to a standstill and in some cases treatment had been stopped for several months.
With the exception of Makeni the stations did not have equipped laboratories and water testing kits and therefore were unable to routinely test the water to verify whether it was suitable for human consumption.
SALWACO has not been efficient and effective in scheduling adequate maintenance and attending to issues of repairs of damaged pipes.
SALWACO has not been able to recover operational costs from the revenue generated. From 2007 to 2010 water rates and charges covered less than 10% of total expenditure. The rates set by the Board were not implemented. Rates set by the stations were generally higher than those set by the Board, but still not high enough to secure cost coverage. In spite of what is stipulated in the Act there was only one utility meter for measuring water use, in all of SALWACO’s operational areas.
Ministries, Departments and Agencies
We estimate there have been cash losses to the public purse of Le 110,914,263,391. As in previous years this has occurred for a number of reasons, some inter-related that overall strongly suggest that public financial management has much room for improvement in all MDAs.
Monthly bank reconciliations are not carried out in most MDAs. This is fundamental failure of internal control over cash and banking procedures. This control should also be undertaken by persons with no access to the physical cash or bank statements, i.e. there should be segregation of duties between those handling cash and accounting for it.
There are significant weaknesses in the management of revenue in most if not all of the revenue generating entities. For instance, transferring funds to NRA is subject to unnecessary delay.
We noted many cases where withholding taxes are not deducted from suppliers or contractors. A perennial problem, payments without adequate supporting documents persists in almost all the MDAs.
Several significant lapses were observed in procurement procedures resulting in incomplete transactions and hence unsatisfactory service delivery.
Moneys intended to be managed by imprest accounts are not properly closed out or accounted for with the result control over imprest accounts is weak and allocating expenditure accurately to ledger accounts is seriously impaired.
Fixed asset, stores and fuel records are not adequately recorded in applicable registers and other records.
In addition, all too frequently requested documents were not made available to our auditors for review although this has improved over previous years. The extent to which our recommendations for improvement in controls remain unimplemented is not acceptable and many entities have failed to make adequate, if any, responses to our findings. The findings do not inspire confidence that resources are being managed optimally with due regard for economy, efficiency or effectiveness or fully in accordance with the intent of Parliament.
Public Enterprises, Commissions and Donor Funded Projects
In general and across virtually all Public Enterprises and Commissions the significant matters identified in the audit examinations fall into the following areas:
Poor bank, cash and imprest account management practices;
Missing supporting documentation for transactions;
Inadequate use of or a failure to use Asset Registers; and
Failures to deduct withholding tax from supplier remittances.
There are also instances of poorly managed or largely non-existent document filing systems; inadequate personnel records; payroll calculation errors and less than well-functioning internal audit departments.
These observations suggest a need for greatly improved financial management with a clear focus on basic principles of internal control, e.g. regular bank reconciliations, appropriation segregation of duties and sound procedures for authorizing, recording and reporting transactions.
The audits of the operations of the local councils indicated that the financial management of the Councils needed to be improved with a clear focus on basic principles of internal control and proper records management. Significant matters identified in the audit examinations across all Local Councils fall into the following categories:
Breach of Procurement Act/Regulations;
No guidelines for the payment of Councillor sitting fees and allowances;
Expenditure not supported by relevant documentary evidence;
Inadequate control over the collection, recording and reporting of Financial Transactions;
Failures to deduct withholding tax from supplier remittances; and
Internal Audit Unit not effective.
These observations are expanded upon in more detail below and in even greater detail in the individual Councils’ Reports submitted to Parliament.
The 2011 financial statements for eighteen Councils were submitted for audit before, or shortly after, the legislative deadline of 31st March 2012. However, to date, the 2011 financial statements for Freetown City Council have not submitted for audit as required by law.
Tertiary Level Institutions and Schools
Based on our review of schools and vocational institutions we continue to believe that administrative and financial management of the school system is out of control. Responsibility and accountability rests squarely on the Ministry of Education and it is from there that corrective action needs to be initiated as a matter of the gravest urgency.
Losses from schools and other educational institutions attract not only cash losses in respect of fees collected but there are also significant arrears in school fee payments. Basic procedures that are not being observed as follows:
Monies collected are not banked before disbursement;
There are extensive disbursements without adequate supporting documents;
Procurement rules not followed;
In some instances school fees are being collected without the issuance of receipts.
In this year’s report we notice a deliberate flouting of “revenue banked before usage” spreading across virtually all schools.