5.26. Procurement Compliance Audit of Selected Ministries
5.26.1. Ministry of Health and Sanitation
The following were observed from the review of three contracts:
Documentary evidences were not provided for the approval of the award of diet contract in FY2009 from the Ministry of Finance and Economic Development.
A tender notice was not submitted for the supply of diet for gazette action.
Receipt books or registers for sale of bidding documents were not provided to the audit team for review.
The bid opening date did not correspond to the date stipulated in the bid documents and the newspaper advertisement, such that the bidding documents were opened earlier than the date on the advertisement.
The contracts were signed on the date the contracts were awarded, in contravention of what was stipulated in the Public Procurement Act, that 14 days should elapse before contracts were signed.
The issue on award of contracts raised by National Public Procurement Authority was not resolved as no evidence was provided to the audit team to confirm whether the issue was resolved.
The Evaluation Committee‟s recommendations were not always implemented by the Procurement Committee.
Fees collected for bidding to the tune of Le 55,800,000.00 were collected. However, adequate explanation was not proffered on how these monies were utilized.
5.26.2. Ministry of Education, Youth and Sports
A Procurement plan submitted by the Ministry revealed that their planned procurement activities included supply of diet, supply of text book and the supply of school materials. The only form of documentary evidence provided by Ministry officials in relation to the planned activities was an Evaluation Report on the bidding process issued by the technical committee and the Bid Register which was not comprehensive.
No other form of documentary evidence was submitted to the audit team for review and as such auditors were unable to ascertain whether the due process for the allocation of contracts to bidders was adhered to.
5.26.3. Ministry of Agriculture, Forestry and Food Security
Supporting documents of contracts reviewed amounting to 1,972,000, were not made available for audit inspection.
Contracts for the supply of fertilizer, done through International Competitive Bidding (ICB), was not included in the 2009 procurement plan.
The Ministry did not maintain an advertising and notification file which was required by the NPPA act 2004 as the starting point in the procurement process. The stated dates for advertised bids for the Procurement of Mobile Workshop Van Truck Mounted and Workshop equipment did not agree with the minutes of the Public Bid opening Committee as bids were opened on the 31st March, 2009 which resulted in only two competitive bidders in attendance. Further investigations revealed that receipts were not issued for bidding documents sold to the tune of Le 30,064,000.
6. Audits of Public Enterprises and Commissions
What we examined
These are audits of the annual financial statements of the public enterprises and commissions. The audit includes a formalised risk-based audit planning process; a review of internal control systems and procedures; physical examination of assets; substantive verification of samples of transactions to supporting documentation and such other tests as may be necessary in the circumstances.
The focus is upon conducting an in-depth examination of the financial statements and to determine whether they present a true and fair view of the financial position and operations for the accounting period under review. In determining what is true and fair the criteria used are the set of accountancy principles and financial disclosure requirements used to create the financial statements.
These are set down in the professional requirements and guidance of recognised accounting standards bodies and to some extent in the law.
Generally public enterprises and commission each have distinct enabling legislation with which they must comply. Our audit examination includes a review for compliance with such legislation.
Audit teams examined the underlying accounting records, „the books‟, from which the financial statements are prepared as well as the system of internal control in place to ensure the accuracy and overall integrity of how business is conducted. The examination is done in accordance with well-codified and accepted professional auditing standards and ethical requirements recognised by the public and private sector auditing profession around the world.
At the end of the examination the auditors issue a short-form report called an Opinion to shareholders in this case generally the Board of Directors set up by Government and also issue a Management Letter focusing on matters of importance in need of being addressed by management.
Why it’s important
There is a public financial management principle embodied in the phrase „whole-of-government‟ which strongly supports that for financial reporting purposes, as well as transparency and accountability, the government accounting entity should include all bodies coming within its ambit of control.
Public Enterprises and Commissions are within the GoSL‟s ambit of control. They are created for varying legitimate reasons by governments everywhere. Their functions tend to be discrete activities of a commercial, semi-commercial or social policy nature or a combination of all of these. By their legal nature they are more arms-length from government than MDAs and as such are more remote from the scrutiny of Parliament. It is this remoteness, combined with the fact that to varying degrees they both earn and expend public funds, which makes scrutiny by an independent external auditor on an annual basis all the more important.
In Sierra Leone, Public Enterprises and Commissions carry out a broad range of functions. They are in the critical areas of water and power supply, road construction, tertiary level education, narcotics control, banking, ferries and shipping, telecommunications and mineral resources to name but a few. As such they represent a significant amount of economic activity in Sierra Leone‟s and have a major impact on infrastructure development as well.
For all of these reasons the audits of Public Enterprises and Commissions are of considerable importance.
What we found
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;
Failures to deduct withholding tax from supplier remittances; and
Delays in remitting NASSIT deductions
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 are expanded upon in greater detail in the paragraphs to follow. Overall they suggest a need for greatly improved financial management with a clear focus on basic principles of internal control, e.g. appropriation segregation of duties and sound procedures for authorizing, recording and reporting transactions.
Detailed Findings and Recommendations
6.1. Non-Submission of Accounts
As at 31 March 2011, the following Public Enterprises and Commissions had not submitted their Accounts for the 2010 Financial Year.
6.2.1. Management of NASSIT Scheme
Based on the performance of the scheme over the past few years, it was obvious that investment management and general operating expenses were continuously above investment income and, at the same time, growing at a faster rate. The table below shows the trend over the years:
Description 2009 Le ‘000 2008 Le ‘000 2007 Le ‘000 Investment income 17,622,052 24,089,045 20,847,427 General and Administrative expenses 33,000,862 26,671,832 22,168,977
Excess of expenditure over Investment income (15,378,810) (2,582,787) 1,321,556
Management should seek more opportunities to increase investment income through well planned and secured investment decisions, whilst maintaining the operating expenses at a considerable low level.
6.2.2. Investment in Ferries Transport
A review of the cost incurred on the projects to date revealed that the Trust did not carry out an independent verification of amounts being spent on the project since disbursements to the company were based on the analysis prepared by the Sierra Ferries‟ Management on how the money initially made available was spent without, in most cases, third party supporting documents.
Management should ensure that every disbursement is justified with appropriate third party supporting documents. There should also be an agreement between the Trust‟s and Sierra Ferries Limited which will clearly define the Trust rights and obligations with respect to the project expenditure.
6.2.3. Accounting for contributions received
It was observed that in the Trust‟s financial records, contributions received were accounted for on a cash rather than accrual basis.
Although we are not unaware of NASSIT‟s Act which gives the grace of 15 days after the end of the month for contributors to make good their contributions for any particular month, the Trust is expected to account for the contributions yet to be received at the end of each reporting period as part of receivable contribution.
Contributions for the month of December, 2009 were excluded from the audited financial statements. The Trust should ensure that contributions received were recorded in the time due rather than the time cash was actually collected. In particular, contributions for the month of December received by the Trust in January the following year should be included in any year-end financial statement.
6.2.4. Accounting for staff end of service benefits
The Trust employees are entitled to end of service benefit “define benefit scheme” in the event of voluntary retirement or death in the course of service. Accordingly, these liabilities were provided for in the Trust books.
We however noted that actuarial assumptions were not used to value the resulting obligation and expense arising under the “define benefit scheme”. We were also unable to quantify the impact this would have on the audited financial statements.
6.2.5. Fixed Assets Register
The Trust maintained a Fixed Assets Register for all its fixed assets but the register was not comprehensive enough as it appeared that the fixed assets were not timely updated with additions and disposals or reviewed by management.
As a result Le1.3 billion was written off the books as that amount was included in the general ledger but not in the Fixed Assets Register.
6.2.6. Agreement and classification of USD 2 million Kimbima Hotel’s Limited Loan
A two (2) million United Dollar Loan was approved on behalf of Kimbima Hotel Limited, a subsidiary of the Trust, on 29th July 2009 by the Trust‟s Board of Trustees. The loan, according to the agreement between the two parties i.e. NASSIT (the lender) and Kimbima Hotel Limited (the borrower), was meant for the refurbishment and rehabilitation of Kimbima Hotel buildings and infrastructure.
As at the year end, an amount totalling Le3.8 billion (equivalent of USD1 million) had been drawn down by Kimbima‟s Management from this loan.
Certain salient aspects of the terms and conditions of the loan agreement were not clearly spelt out in the agreement including the repayment commencement date and amount to be repaid on each tranche.
Since repayment terms had not been agreed upon, it was unclear whether the loan receivable was in United Dollars or Sierra Leone Leones and, thus, no retranslation of foreign currency denominated assets was performed at year end. In addition, the loan was classified as advance in the book and, as such, no interest income was recognised on the loan.
6.2.7. Uncredited contributions
A review of bank reconciliation statements revealed that there were a considerable number of contributions deposited in the Trust‟s bank accounts which had not been credited to the respective contributors‟ accounts in the Trust‟s records.
The deposits/contributions were made directly to the banks by various contributing organisations and individuals.
Based on their discussion with management, these items were yet to be credited to members‟ accounts due to management‟s inability to match these bank deposits with the relevant contributors‟ identification (ID) numbers.
6.2.8. Investment in Seidya-NASSIT (SN) Alliance
The Trust currently had investment worth Le3billion in SN Alliance, a joint venture company between NASSIT and Seidya group. Based on SN Alliance‟s performance from inception to date, there were strong indications that the Trust may not be able to fully recoup its capital investment.
Thus, there was need for management to carry out an impairment assessment on this investment. The Trust had therefore not utilised this fund optimally.
6.2.9. Investment in Sierra Blocks Concrete Product limited (Le8.3 billions)
The Trust made two separate loans to Sierra Block Concrete Products Limited, its subsidiary in 2005.
On 4th July, 2006, the loans were rescheduled and consolidated into one. This revised loan was expected to be repaid over 16 quarters commencing 30th September, 2006 with an interest rate of inflation rate plus a margin of five hundred basis parts. The loan was expected to have been fully repaid by 30th June 2010.
No repayment had been made so far.
Specific demands should be made from Sierra Block Concrete Product Limited for repayment of the loan in accordance with the terms of the loan agreement between both companies.
6.2.10. Monitoring of Loans and Advances to Employees
The Trust did not monitor the loans to ensure that the loans balance per employee at any period in time did not exceed the balance of end of service benefit payable to the respective employee.
There were instances where outstanding loan balances for some employees exceeded their respective end of service benefits.
6.2.11. Construction of Pontoon at Government Wharf
The Trust contracted the Sierra Leone Ports Authority (SLPA) to construct a pontoon –Targrin Pontoon at Government wharf for the use of the Trust‟s vessels. As a result, an advance payment amounting to Le310,135,350 was made available to SLPA.
The pontoon was not constructed to the Trust‟s specifications. Consequently, the Trust had asked SPLA to fix the problem identified or refund the money already advanced to it. SPLA responded by demanding additional payment of Le28,808,300 on the basis that the construction had been completed.
6.2.12. Bank Reconciliation
The Trust keeps current accounts and domiciliary accounts with some commercial banks in the country. The bank accounts were not properly monitored as there were instances of long outstanding reconciling items in the bank reconciliation statements that were prepared at the end of the year with some reconciling items dating as far back as May 2006. In certain instances, there were items with the same description, without descriptions and references.
6.2.13. Monitoring of contribution receivables
A review of contribution receivable compliance report as at 15th January, 2010 revealed that there was an estimated sum of Le18.6 billion which represented total indebtedness including contribution receivable, interest, penalty and outstanding validation of past services and pension contributions.
Further analysis of this amount revealed that 64.5% was due from government institutions and parastatals, while the remaining balance was due from private sector establishments.
While we may be aware of various challenges the Trust may face in an attempt to recover this money, it was advisable that the Trust intensified its efforts, channelled at aggressive collections of the outstanding receivables.
6.2.14. Classification of receipts and payments of pensions and gratuity on behalf of Government of Sierra Leone
Due to the experience and expertise of the Trust‟s management team, the GoSL entered into an agreement with the Trust, for the latter to receive pension and gratuity funds from GoSL and subsequently pay or distribute these monies to the existing government pensioners and beneficiaries. These transactions were however treated as income and expenditure in the Trust financial records. Since the Trust merely acted as agent to GoSL in the payment to beneficiaries, the Trust only accounts for the commission received or receivables in the financial records whilst a memorandum account is maintained for the receipts and payments of the funds.
6.2.15. Information Security Policies and Procedures
User awareness had been lacking in the Information Security Policies and Procedures. End-users had not been provided with updates on policy and security issues at regular intervals either via trainings, seminars, mails or via the intranet
6.2.16. Physical Access
A fire extinguisher was not in existence in the server room. Furthermore, an Access Register / Log had not been deployed and thus was not available for review. Activities within the server room were thus not logged and monitored. Consequently, unauthorised access gained to perform any unauthorised activities within the server room probably went un-noticed.
6.2.17. Configuration of Access rules
We noted that the creation of users on business applications and network operating system was via memos sent by the HR unit to the Systems and Technology Department indicating names of staff to be created /deleted on the business applications and the network.
The memo however did not indicate the user‟s access right /privileges on the specific application, the department/user group to which he/she belonged, and the provision for approval by the Unit head of the User and Systems and Technology Head.
6.2.18. Identification & Authentication
22.214.171.124. Password Security Settings
Password security parameters such as minimum password length, password life and alpha numeric settings had not been included in the procedure/security standards though they had been partly enforced in practice. Additionally, the settings had not been set on the business applications (NAPOS, NASPER and SUN).
126.96.36.199 Generic User ID’s
A review of user ID‟s on the business application revealed the existence of Generic user ID‟s i.e. ID‟s not directly identifiable with users.
188.8.131.52. Monitoring and Risk Assessment Activities
Very limited IT related issues were reported in the monthly reports; attributed to insufficient requisite skill and knowledge.
184.108.40.206. Problem and Incident Management
NASSIT had not developed problem management policies and procedures that would encompass amongst others:
Communication of operational issues;
Resolution of issues by Systems and Technology personnel;
Logging of issues; and
The practice required that problems encountered by end users of the network and the main Trust applications should be communicated verbally or via phone calls to the Systems and Technology department. These problems were however not logged.
220.127.116.11. Disaster Recovery and Business Continuity
Other aspects of Disaster Recovery Plan (DRP) including Recovery Strategies, Disaster recovery Team as well as their contact details, Training and Awareness, Testing and Implementation Plans, amongst others had not been included in the DRP as required by best practice. It was also observed that the plan was yet to be tested to ascertain its effective operation as and when implemented.
6.3. National Power Authority (2008 and 2009)
6.3.1. Review of journal vouchers
The accounting system was not configured with a facility to ensure that journal vouchers, when prepared, were appropriately reviewed by a more senior officer before entries were passed. In addition, there was no after posting review of journal entries to ensure that they were rightly booked by the account officers.
6.3.2. Technical and commercial losses
The Authority was able to generate or purchase an average of 18-19 megawatts of electricity daily. However, an average of 7-8 megawatts was only available for sale due to old transmission and distribution materials being used by the Authority and the activities of saboteurs.
6.3.3. Billing system
It was observed that the Authority used utility 2000 billing system for generating bills for its prepaid customers on a monthly basis. The bills generated were based on the pre-defined parameters/graduating billing rates inbuilt in the system and information supplied from the meter-reading exercise carried out by the Authority‟s staff which were manually fed into the system. Our manual re-computation of the amounts generated by this billing system revealed significant variances between the expected charge and actual charge in the customers‟ bills. It therefore appeared that the system only could not be relied on to generate accurate bills. This issue was also corroborated by the significant adjustments noted on the debtor schedule.
6.3.4. Fixed Assets Register
The fixed assets were not timely updated or reviewed by management. Some items were without description, several similar items had the same description or name in the Asset Register, and items with ambiguous descriptions. In addition, the Fixed Assets Register did not reconcile with the General Ledger as manual adjustment were made in order to reconcile fixed assets ledger balance to the Assets Register.
Although management had made conscious effort to segregate and write off some plant and machinery including related inventory considered obsolete (these write offs amounting to Le 8.8 billion and Le5.5 billion respectively) the Authority should carry out a comprehensive physical verification of its fixed assets in order to determine the existence or otherwise of assets in the book and update the details in the Fixed Assets Register, accordingly.
6.3.5. Accounting for Gratuity and Pensions
Actuarial assumptions were not used to value the resulting obligation and expense arising under the “define benefit scheme”.
6.3.6. Monitoring of Inventories
Some engineering spares relating to the power generating equipment which had been long abandoned by the Authority were included in the inventory valuation sheet. The total value of these inventories as at year end prior to the write-off amounted to Le6.16 billion. It was observed that the Authority did not intend to put the power generating equipment into use in the foreseeable future. Although management had written off Le5.5 billion worth of these stocks from the books, management should carry out an additional exercise aimed at identifying all inventories, to make sure they were properly safeguarded and monitored, to prevent huge write offs of inventories in the future.
6.3.7. Booking Keeping and Accounting Practices
A review of the Authority‟s accounting records revealed the following:
Prepaid revenue was recognized upfront by the Authority at the time of recharge by the customers without reference to customers‟ usage pattern of the units loaded.
Cut-off procedures were not appropriately observed for billing customers as the last bill recorded as revenue in the year was read in the month of January, 2009, resulting in over- recognition of revenue for the year.
The accounting system used for book keeping and accounting purposes did not seem to be configured in such a way as to allow the authority to accurately reflect in its book revenue and trade receivables.
6.3.8. Monitoring of Trade Receivables
As at year end, the Authority had a trade receivable balance of Le55.3 billion. A review of schedule provided by management as support for this trade receivable balance revealed the following:
The revenue included in the debtor schedule could not be reconciled to the revenue account in the general ledger.
The total trade receivable balance in the schedule could not be reconciled to the general ledger.
There were significant adjustments/corrections to the debtor figure mainly due to erroneous computation of customer billing, amounting to Le818 million
Total cash receipts in the year as reported in the schedule was far below the total sales in the year. Only 62% of total sales in the year was received in the form of cash during the year.
6.3.9. Rent Receivable from Authority’s Tenants
The Authority accommodated some tenants in its electricity house along Siaka Stevens Street for which, based on discussion with management, the Authority was expected to collect rent income from these tenants as consideration for the use of the building. There was no evidence of collection of this rent in the Authority‟s Books.
6.3.10. Reconciliation of Bank Accounts
The Authority kept current, deposit and domiciliary accounts with some commercial banks in the country. The bank accounts were not properly monitored as there were instances of long outstanding reconciling items in the bank reconciliation statements that were prepared at year end with some reconciling items dating as far back as March 2006. In certain instances, there were unidentified debts in the bank accounts, without evidence of appropriate follow-up by management.
6.3.11. Documents Filing System
Agreements or memorandum of understanding for the following grants and loans were not submitted for inspection.
South Africa Grant
Grant European Union
Equity IDA Loan
Management should obtain copies of these agreements for reference sake. These agreements could assist the management to monitor its level of compliance with the loans or grants terms and conditions from time to time.
It was also observed that the Authority was unable to provide us with the analysis of the following accounts:
Rechargeable jobs – Le300,174,111 credit balance
Bo/Kenema Power Station (BKPS) – Le18,529,420 credit balance
Rice Debtors – Le55,103,250 credit balance
Management should investigate and review these balances and raise necessary adjustments to clear any unexplained balances.
6.3.12. Timely update or Review of Insurance Agreements
Periodic reconciliation or reviews were not carried out between the Authority and the Insurance Companies to ensure that assets which may have been sold off or scrapped by the Authority were not included in the list of insured assets by the insurance companies.
6.3.13. Customer Complaints Register
There was no evidence that the customers‟ complaints were fully or partially addressed or not addressed. Management should ensure that an accurate and up to date customers‟ complaints log was maintained at all time.
6.3.14. Information Security Policies and Procedures
The National Power Authority was yet to develop and implement comprehensive information security policies and procedures to ensure that access to its network and sensitive financial information was granted to authorized personnel only.
6.3.15. Physical Access
The authority was yet to develop formalised guidelines governing physical access to its IT resources. An access register / log had not been deployed and thus was not available for our review. Activities within the server room were thus not logged and monitored. Consequently, unauthorised access gained to perform subversive activities within the server room would go un-noticed.
6.3.16. Configuration of Access rules
There were no formalized policies or procedures governing the profiling of user profiles on the Microsoft Great Plains and Utility 2000 Applications and the Network. The process of granting users access to the application was also not via user request /authorization forms.
6.3.17. Access administration
The authority was yet to develop and implement formal policies and procedures guiding the creation, modification and management of user profiles on Great Plains and Utility 2000 Applications and the Network. No policy or practice existed regarding the management of user profiles of disengaged users, users who changed departments and users on vacation. Users on vacation were left active on the network and business applications.
6.3.18. Identification & Authentication
The authority had not instituted formalised processes, practices and standard naming conventions to be used regarding the creation and use of unique user ID‟s and passwords for access to Utility 2000 Application , Great Plains Application and the network. Additionally, guidelines on password settings did not exist.
A review of user ID‟s on the Utility 2000 and Great Plains Applications revealed that user ID‟s were not unique and standard user ID naming convention was not in practice. There was also the existence of a generic user IDs on Great Plains Application.
6.3.19. Super User profile
No formalised policy existed to provide guidelines on creating and managing super user profiles or users with administrative privileges on the network and business applications. It was also observed that a review of super user activities was not carried out on a periodic basis to ensure that these privileges were not used to circumvent the laid down controls for anomalous use to the detriment of the Authority.
6.3.20. IT Organisation Structure
The IT department was not adequately staffed. As at the time of this report, the IT manager had just been brought on board. Additionally, we noted that training courses were not planned and organized by management for IT personnel, to keep them abreast with developments in the industry and better still, enhance their capabilities in supporting end users especially the users of Utility 2000, Great Plains and the network.
6.3.21. IT Strategy
It was observed that corporate strategies had not been documented in an IT Strategy document that would indicate the future plans the IT department had developed to aid the Authority as a whole in achieving its corporate objectives. Considering the emerging technologies in the energy industry, management should develop an IT strategy indicating how they intend to make use of IT to foster achievement of the Authority‟s corporate goals.
6.3.22. IT Steering Committee
An IT Steering Committee or its equivalent was yet to be constituted.
6.3.23. Monitoring and Risk Assessment Activities
Review and monitoring of IT operations were lacking as was evidenced from our review of the „memos‟ generated by Internal Audit. No IT related issue in the „memos‟.
The Authority used Utility 2000 for post paid metering billing, Microsoft Great Plains as the financial application for generating financial reports and Apator/Guoji for prepaid metering.
It was however noted that the applications capability in supporting the Authority‟s financial reporting objectives was in doubt.
6.3.24. Back up and Disaster Recovery Plan /Business Continuity Plan
The authority had no documented guidelines on backup and recovery procedures. Additionally, the authority was yet to develop and implement a formalised Disaster Recovery / Business Continuity Plan to ensure continuity of business operations in the event of a major disruption or disaster.
6.3.25. Virus Management
The authority was yet to develop an antivirus policy and procedure document as a guide to the management of viruses and other malicious codes.
6.3.26. Incident / Problem management procedures
It was observed that the Authority had not yet developed a problem management policy and procedures guidelines that would detail amongst others;
Communication of operational issues;
Resolution of issues by IT personnel;
Logging of issues; and
Also, problems encountered by users on the applications (Utility 2000 and Microsoft Great Plains) were not logged by the Application Administrators. The authority did not have a help desk application deployed to effectively track, analyze and resolve operational problems relating to these applications and other IT related systems.
6.4. Bo Kenema Power Supply (2005)
6.4.1. Internal Audit Unit
Several lapses were observed in the operations of the Internal Audit Unit. There was no Charter or formal document stating the scope, responsibilities, purpose and rights of the Department. The Department had no annual work plan for the period under review. Working paper files (both Current and Permanent) were not maintained by the Department for the audited period.
There was no Audit Committee to supervise and monitor the implementation of Internal Audit recommendations. It was therefore recommended that the Agency in collaboration with the Director of Internal Audit at the Ministry of Finance and Economic Development and the National Power Authority, should immediately design a Charter stating the scope, responsibilities, purpose and rights of the Department.
In addition, the Internal Audit Department should prepare a work plan for each fiscal year and should ensure that regular audit work was carried out and reported on.
Furthermore, Working Paper files (both Current and Permanent), should be maintained for work done by the Department and the Agency should establish an Audit Committee charged with the responsibility of approving the Department‟s work plans, reviewing reports and monitoring the implementation of all audit recommendations.
The Chief Executive Officer (CEO) noted the audit recommendations and promised to put them into effect immediately.
The issues relating to Internal Audit are yet to be addressed.
6.4.2. Withholding Taxes Not Deducted and Paid to NRA
It was observed that 5% Withholding Taxes, totalling Le 18,523,728 in respect of goods and services procured, were not deducted and paid over to the NRA. It was recommended that the Chief Executive Officer should ensure that the Withholding taxes of Le 18,523,728 not deducted should be recovered immediately and paid over to the NRA. Evidence of payments should also be forwarded to the ASSL for verification.
In his response the CEO stated that BKPS had been deducting withholding tax from the procurement of goods and services from the time they were knowledgeable about the regulation. He further said that he was making effort to recover the taxes but most of the suppliers were now out of business, dead, or could not be found.
Letters of recoveries sent to the affected suppliers were provided for audit verification. However, more needs to be done to ensure that the amount in question is fully recovered.
6.4.3. Unsupported Payments
PVs, with amounts totalling Le 262,300,960 were not supported by the relevant documentary evidence such as receipts, delivery notes, certification, etc.
The CEO was advised to ensure that all transactions, from inception to completion, should be supported by the relevant documentations and they should be numbered and cross referenced so that in cases of missing documents, such documents could be easily traced. The supporting documents in relation to the above expenditure should be forwarded to ASSL for verification; otherwise the said sum of Le262, 300,960 must be refunded immediately.
The CEO explained that supporting documents were obtained for all transactions done, but due to internal office movement and handling of files by various stakeholders, some were detached and therefore not available at the time of audit inspection. He promised that they would however be recovered and ready for perusal.
Although the Finance Department was able to produce some of the supporting documents in question, receipts to justify the authenticity of the above expenditures could still not be found for verification.
6.5. Sierra Leone Roads Authority (SLRA) (2009)
6.5.1. Filing/Record Management of Procurement Documents
Upon discussion held with senior management in the Procurement Unit, it was revealed that partial and incomplete records were held by several different departments and individuals. The Procurement Unit must ensure that complete documentation is maintained in respect of all procurement activities and for contracts and agreements entered into.
The Director General stated that he accepted our recommendation and all procurements of contracts, goods and services would now be carried out by the Procurement Unit.
6.5.2. Procurement of Goods, Works and Services
The following was observed:
Some contracts were awarded to contractors who do not possess certification from the Ministry of Works, Housing and Technical Maintenance. It was recommended that works contracts should only be awarded to contractors upon the presentation of an up- to- date registration certificate from the Ministry of Works, Housing and Technical Maintenance (MoWHTM).
The initial advance payment and in some cases subsequent payments made to contractors were not duly entered in the Contract Register. The Contract Register should be regularly updated to reflect all payments made to contractors by the Authority.
There were evidences of uncompleted works for which the validity period had expired for the insurance guarantees and performance bonds issued in favour to determine the contractor‟s validity for the 30% advance payments received.
Insurance guarantees and performance bonds should be provided by contractors upon the signing of works contracts.
The Authority should compel contractors to complete their works within the validity period stated in the insurance guarantees and performance bonds.
Contractors should be compelled to renew all expired guarantees and bonds.
There were instances where huge sums were spent on repairs and maintenance on vehicles that had exceeded their useful lives. Some of the instances are given below:
It was also observed that the Suppliers Register was not strictly followed as the under-mentioned services were procured from non-registered service providers:
It was therefore recommended that the Procurement Unit should ensure the regular update of Suppliers Register and that only authorised suppliers should be used to procure services. Authorisation checks on invoices should ensure that only services that had been rendered were paid for and that the agreed prices were being paid. The Authority should ensure that there was control over the cost of repairs and maintenance of vehicles.
In his response, the Director General stated that:
Management accepted the recommendations and that appropriate action would be taken. On the issue of Insurance Guarantee and Performance Bond, he stated that, those cases investigated and necessary management action taken.
Management noted the high expenditure on vehicle repairs and had put in place measures to minimize the cost of repairs. Also, management was considering the disposal of aged vehicles with high running costs.
6.5.3. Failure to advertise annually for new suppliers/ contractors
Discussions held with senior management of the Procurement Unit revealed that no open advertisement was done annually to invite applications from new suppliers or consultants to join the register.
An open advertisement should be published annually in at least three (3) locally read newspapers to invite applications from new suppliers or consultants who may want to be included in the list of registered suppliers.
The Director General stated that action had already been taken and invitations were published in the local newspapers inviting applications from suppliers, contractors and consultants in January 2010.
6.5.4. Monitoring and Evaluation Reports
No evidence of regular monthly progress, monitoring and evaluation reports was provided to the auditors by the SLRA Engineers for the various works projects undertaken by contractors on behalf of the Authority. Regular visits should be made by the various Engineers of the Authority to works sites to assess the status of the work being undertaken; issues raised should be properly documented in the form of a report.
The Director General stated that management noted our recommendations and promised that prompt action would be taken.
6.5.5. Directors’ Meetings
In reviewing the minutes of Directors meetings, the following resolutions were reached, but they had not been resolved:
It was recommended that all resolutions reached at these meetings should be properly addressed by the Units/Department to which they were related, and the necessary support given to them by management.
In his response, the Director General stated that management had taken note and would ensure that all resolutions reached at Board meetings were fully implemented.
6.5.6. Donor Funded Projects
In reviewing the projects report of the various donor projects the following lapses were observed:
The Director General in his response stated that:
Songo to Moyamba project was in the process of termination
Compensation payments on Songo to Moyamba Road were indeed outstanding but would definitely be paid.
For the Hill Side Road, some refund had been made and a meeting was held with the Minister relating to the issue raised in which a dead line had given and that the Attorney General was handling the whole issue.
The Hill Side Road contract was awarded to CSE, and work had commenced.
There was a budget gap which caused the contract to be divided into two phases
6.5.7. Internal Audit Unit
The following issues raised by the Internal Auditors were not resolved by management during the year under review:
Retention of Money
Retention money of 5% was not deducted where applicable on some of the contracts. Old balances held from previous years had not been paid to the contractors.
The frequency of vehicle maintenance and repairs carried out and their costs were of concern.
The Authority prepared a pre-inspection report before taking any vehicle to the garage. However garage owners always ignored the inspection report. They produced invoices that were completely different from the pre inspection report, meaning that the cost of repairs was solely determined by the garage owners.
There was no legal contract between SLRA as the Client and the garage owners as Contractors Contract Register.
Regional offices had not maintained a contract register and one could not have details of contracts awarded within the period.
Contracts were awarded by OMD and Feeder Road in the regions but the regional Engineers were not actively involved either in the implementation or supervision of some contracts. Some even claimed that works were carried out in their region without their knowledge.
In Bo, we observed that the storage facility not conducive.
Kenema does was without a storekeeper.
The Director General stated that management had noted the points raised. He promised that those points would be fully addressed and steps taken to avoid or minimise the occurrences of such issues in future.
6.5.8. Cash Advance
In reviewing the cash advance as at year end, it was observed that there was the total of Le14,400,000 that was not retired by staff. It was also observed that a staff member did not acquit his first cash advance given to him on the 10th March, 2009, and yet another cash advance was given to him on the 14th August 2009. Management should ensure that the policies with regards to cash advance are fully adhered to.
In his response, the Director General stated that the staff left without acquitting the Cash Advance but the amount has been recovered from his terminal benefit.
6.5.9. Registration and License Fees
During our review of the returns from SLRTA, we observed that there was delay in the transfer of Registration and Licenses Fees to the Authority as evident below.
Monthly transfer of funds from SLRTA must be within the first week of the following monthly.
The Director General stated that the situation remained the same. The Authority had sought the intervention of NCP on this matter before now adding that they intended to get the intervention of the Ministry of Works / Minister as the direct supervisor.
6.5.10. Reinstatement of Trenches/ Bill Board Erection
In reviewing the sundry income, we observed that some reinstatements of trenches and Billboards erection were recognized as income, but there were no evidence of client accepting the invoice, nor the client undertaking the said work. Evidences are as follows:
The Director General stated that a mechanism had been put in place to prevent such problems from reoccurring.
6.5.11. Revenue Recognition
Income from disposal of motor vehicle in 2008 of Le6,000,000 was only recognized in the 2009 Financial Statement. The accrual concept must be strictly followed in the preparation of financial statements.
The Director General in his response stated that that was an oversight.
6.5.12. Vehicle License
Some vehicles previously used by projects but now transferred to the Authority were not licensed under its name:
The Director General stated that the transfers were not complete, however he would ensure that action was taken to correct the situation.
6.5.13. Control over Inventory Issue
During our review of stock requisition and stock issue notes, we noted that few requisitions were not approved by the heads of the department requesting the items.
All inventory requisition notes must be approved by the appropriate personnel before they are issued to department or sites.
In his response, the Director General stated that the Authority followed stores procedures in its operations. The issues raised may have resulted from over sight.
6.5.14. Staff Social Security Numbers
It was observed that there was large number of employees in the payroll of the Authority without social security numbers and social identity cards. The Authority must ensure that staff must have security numbers and identity cards for him/her to be eligible to the scheme of social security.
In his response, the Director General explained that most of the affected staff members were either those that NASSIT could not cover because of the year when NASSIT was established, or newly recruited staff. He added that the Authority would however ensure that all staff issues relating to NASSIT were resolved.
6.5.15. Summary of matters previously raised.
The under-mentioned issues raised in my previous Audit Reports had still not been addressed by the Authority:
6.5.16. Issues on Non-Disclosure of Non-Current Assets (Financial Year 2009)
In carrying out a physical verification on non-current assets, we observed that a generator (250KVA) physically verified was not included in the assets register
The Asset was acquired by the World Bank and the supporting documents have not been made available to the Authority. As a result, we could therefore not include the KVA generator in the Assets Register.
6.5.17. Management of trade receivables (Financial Year 2007 & 2008)
The following lapses were observed with the management of trade receivables:
The Authority did not maintain an aged debtor‟s analysis;
The Authority did not maintain a database of companies/organisations which they leased their right of way for the erection of bill boards;
At the end of the year the Authority was unable to guarantee the amount owed by each of their debtors;
There was evidence of long outstanding debts.
The DG affirmed that a data base was currently being maintained for effective monitoring of utility debtors and collection of all receivables.
An aged debtor analysis was currently being maintained in each debtor enquiry report of receivables management.
6.6. Sierra Leone Roads Authority (2010)
6.6.1. Unresolved issues for Board meetings
Certain resolutions agreed in Board meetings had still not been resolved effectively. It was recommended that resolutions reached at Board meetings must be effected or resolved within the given time frame.
The Director General responded, stating that action had been taken to resolve those issues.
6.6.2. Contractors and suppliers not included in the Procurement Register
The Authority awarded contracts to construction Enterprises and suppliers in the period under review (2010); these contractors and suppliers were not indicated in the procurement register. It was recommended that all contracts must strictly follow the procurement procedures and the Contractors‟ and Suppliers‟ register must be updated regularly.
The Director General in his response stated that he did accept that among the seventeen sampled contractors/suppliers; only six (6) went through the registration process. He however ensured that only registered business enterprises would be considered for the award of contracts in future.
6.6.3. Social Security Numbers
Five employees of the institution did not have NASSIT numbers. It was therefore recommended that the Personnel Departmentmust ensure that all permanent staff were registered with NASSIT and must have Social Security numbers.
The Director General in his response stated that all permanent staff were provided with NASSIT Registration Forms which were completed and returned to NASSIT. He added that more than 95% of staff had NASSIT numbers and management would engage NASSIT to ensure that all staff were provided with NASSIT numbers.
6.6.4. Long outstanding receivables
It was observed that certain debtors with long outstanding debts were still included in the financial statement. There was also a difference of Le 16,300,576.00 between the amount as per listing and amount as per system. It was therefore recommended that management should notify those debtors long outstanding obligations with the Authority to make a settlement in order to help the treatment of debtors in the financial statement and balances in the individual ledgers should always be reconciled before preparing the schedule for the financial statement.
The Director General in his response pointed out that it was true that some long outstanding balances were included in the receivables amount. However, he said that many letters had been written to the debtors but to no avail. As an act of last resort, he said management would seek the approval of the Board of Directors to write off the balances.
6.6.5. Rents received
The following transactions were rents received with no receipts as supporting documents:
It was recommended that pre-numbered official receipts were to be provided for all transactions of the Authority.
For the renewal of land lease of Le 138,000,000 the director stated that it was only posted to Rent Received in error and it should have been posted into Sundry Income Account. He however said that no payment had been received and therefore no receipt could be issued.
On the issue of rent for land lease of Le 394,491,082, the director stated that that was money received in respect of bill boards erected in their Right of Way and should have gone into sundry income account. The payment he said was effected by direct transfer into the Authority‟s bank accounts for which no receipt was issued on the bank‟s credit advice.
There was no defining basis of evaluation done for compensation payment made for some projects especially in the Western Area.
Listed below are samples of compensation that did not have Conveyances attached and the floor area not indicated:
It was therefore recommended that the Authority should comply with the standard criteria that had already been set up.
The following were the responses of the Director General:
Evaluation of affected properties for compensation payments made for some projects countrywide, and in Western Area in particular, was always based on the methods used by Consultants‟ who carried out the Property Acquisition Surveys for the various projects. These reports which stated clearly the methodologies used in evaluating the affected properties, were available in the Development Department for reference.
All affected properties that were evaluated were of significant value and the property owners submitted conveyances and other title deeds. Where documentary evidence was not available the concerned local authorities such as village headmen or chairmen of trade unions were called upon to indemnify. These documents were not usually attached to the payment voucher and were instead kept in a separate file in the Development Department.
The floor area of any affected property was the main determining factor for the valuation of the said property. It was therefore not true that some properties were valued without determining their floor area. There were comprehensive lists of affected properties that indicated these factors such as the floor area, unit cost per area, type of property, etc. for every payment request made. The list for payment that was usually attached to the payment voucher did not indicate these factors because of space.
Management had always followed and would continue to follow those criteria that had been set up for the valuation of properties on the projects.
The Development Department would always make sure that the standard criteria were strictly followed.
Below are samples of contracts that were awarded which were divided into segments in order to use Request for Quotation (RFQ):
It was recommended that the Authority must adhere to the National Public Procurement Act of 2004.
The Director General in his response explained that the contracts for the construction of side drains on Bai Bureh Road and Regent Road, and the spot improvements on the Songo/Moyamba Road were awarded to multiple contractors for the following reasons:
To facilitate a timely completion of the project
To put some contractors on trial.
He further said that it was the policy of the Authority to develop the local construction industry which could only be achieved through the award of trial contracts in the early stages of the contractors‟ development before finally exposing them to full competition. These projects he added, had laid bare the contractors‟ performance for future projects.
6.7. Mechanical Services Unit (MSU) (2009)
6.7.1. Limitation of the work of the internal audit
The Internal Audit work was limited to the head office, as there was no evidence of work being done at the regional offices, nor independent verification of the frequent reported break down of plants and their locations. Provision should be made for the internal audit to do periodic and on the spot checks throughout the year, so as to enhance control on plants.
In his response, the DG stated that management had acknowledged this fact and that the Internal Audit will pay frequent visits to the regions and provide reports accordingly.
6.7.2. Budgeted income on the hiring of plants
It was observed that over the past years that the Unit has not been able to meet the budgeted income on the hiring of plants.
New plant and equipment is to be procured so that the Unit can fairly compete with other organisations in the plant and equipment hiring business, which will result in more income being realised by the Unit. The budgeted income for the following years be reviewed or increased in line with the effectiveness of the commercial department.
In his response, the DG stated that the insufficient funds from SLRA due to the decrease in fuel levy, the global economic trend and the age of the equipment characterized by frequent breakdowns have contributed to the Unit not meeting its budgeted amounts.
6.7.3. Operations of the Unit
The Accounting Manual (SLRA Manual) in use does not detail the operations of the Unit. The services of an accounting professional/ firm should be sought to develop a detailed accounting manual that fits in with the general operations of the Unit.
In his response, the DG stated that management was considering putting in place an Accounting Manual that would suit the operating activities of the Unit.
6.7.4. Operating and Administrative Expenses
The MSU suffered liquidity problems and staff salaries, statutory commitments (Tax and NASSIT) and payables were not paid on time; as income generated from plants hired was not sufficient to meet operating and administrative expenses.
A comprehensive business plan should be developed which takes into account the Unit operations and the hiring of plants so as to improve the financial performance of the Unit.
In his response, the DG stated that the insufficient funds from SLRA due to the decrease in fuel levy, the global economic trend and the age of the equipment characterized by frequent breakdowns have contributed to the Unit not meeting its budgeted amounts.
6.7.5. Long Outstanding Debts
The following are debts that have been outstanding for more than two accounting periods:
An aged debtor analysis was not prepared by the Accounting Department of the Unit.
Management should develop an appropriate debt management policy to be duly followed. A comprehensive age analysis should be produced for all debts.
In his response, the DG stated that management had ensured the preparation of the debtor analysis by the Accounting Unit.
6.7.6. Payments received from SLRA
It was observed that payment received in respect of invoices for plants hired by SLRA were usually made in bulk with no clear indication of the invoices honoured.
Management should ensure that SLRA payment vouchers give clear indication of invoices for which payments are made.
The DG stated that he had noted our observations and this had already been in communication to SLRA.
6.7.7. Control over the use of Computers
The computers of the Unit were infested with virus. Furthermore, some computers containing financial information were not protected by the use of passwords in the absence of a backup system.
Management should ensure that each computer has an updated antivirus. Management should institute a backup system to store vital and confidential information. All the computers should be protected with passwords.
The DG stated that he had noted our observations and that corrective measure had been taken.
6.7.8. Staff Trainings
It was observed that the Unit had not been engaged in staff training over the past years. Staff trainings (either in-house or overseas) should be organised to ensure productivity and efficiency of the Unit.
The DG stated that management had lengthily deliberated on that issue and had agreed that, it was a must for training to be provided for staff members, to enhance the efficiency and productivity of the Unit.
6.7.9. Goods Received Notes & Inspection Reports
The Goods Received Notes were prepared and distributed to various departments concerned before Inspection Reports were prepared. Some of the instances are highlighted below:
The Unit must ensure that goods are thoroughly inspected before goods received notes are prepared.
The DG in his response maintained that control lapses raised on items were noted and corrective measures had already been taken.
6.7.10. Valuation of Stock
There was no proper valuation of stock during the audited period with regards to IAS 2. Stocks should be valued using the appropriate method. Obsolete and slow-moving stocks should be disposed of using the right procedure.
The DG stated that our observations concerning stock keeping records were noted and corrective measures had already been taken. In addition, he went on, management was still awaiting response from SLRA to dispose of the obsolete and slow moving stock.
6.7.11. Formal Policy for Maintenance of Fixed Assets
The Unit did not have a formal policy for the maintenance of its plants, vehicles and equipment. The operation department did not maintain a comprehensive register of plants and equipment. A maintenance policy should be developed and strictly adhered to. A comprehensive register should be maintained with adequate control over plant and equipment.
The DG stated that the Unit strictly adhered to the manufacturer‟s manual as a policy in terms of maintenance and repairs of plant and vehicles.
6.8. Mechanical Services Unit (MSU) (2010)
6.8.1. Management Meetings
It was observed that Management Meetings were held once for the period under review. Management must ensure that Management Meetings are held periodically. Also, members should have the opportunity to add items on the agenda of those meetings.
The DG maintained that the concerns raised on that issue had been seriously noted by Management and corrective measures already been taken.
6.8.2. Ineffectiveness of the Internal Audit
The Internal Audit section lacked the required technical knowledge to adequately enforce controls with regards to technical issues. A technical auditor should be recruited by the Unit.
In his response, the DG stated that the former Internal Auditor had left in September 2010 and there was no Internal Auditor. Corrective measures had already been taken as the Unit now had an Internal Auditor.
Debts owed by the Unit were not paid on time as some payables were long outstanding. Management should make sure that the debts of the Unit are paid and on time.
Management had agreed not to hire equipment on credit especially to external hirers to eliminate the debt risk of the Unit.
6.8.4. Control Environment
Source documents used by the Unit were not in sequential and chronological order. It was also observed that the Commercial Department did not have track of Invoices Books issued to and used by the regional offices.
Management noted our recommendations and mentioned that corrective measures had already been taken.
6.8.5. Monthly Reports
Though monthly reports were prepared and submitted, it was observed that no evaluation was done on the reports by Management.
The DG stated that measures were now in place for the evaluation of the monthly reports.
6.8.6. The Accounting and Financial Records
The accounting and financial records of the unit were partly manually maintained with the accounts preparation being done on Microsoft excel. A computerised accounting system should be instituted.
It was stated by the DG that management as a matter of urgency had taken steps to address that issue. Already a feasibility study with regards to the Accounting Package was ongoing, and quotations had been obtained from reputable organizations for the installation of the programme.
6.8.7. Payment Fees on Long Outstanding Debts
It was observed that late payment fees were not charged on long outstanding debts. The Unit must ensure that commercial policies be strictly followed.
It was stated by the DG that management had already put corrective measures in place with regards the 3% charge per month for all late payments.
6.8.8. Staff Attendance List
Review was not done on the Staff Attendance List. Staff constantly signed in at 7:30am with no variances on the time. It was also clear that some staff members did not sign in, nor sign out. It is the duty of the personnel department to review the staff attendance list on a daily or weekly basis.
In his response, the DG stated that to ascertain the actual hours worked by staff, a mechanism for the review of staff attendance had been put in place.
6.8.9. Life Assurance
Life Assurance Provision was not made by the Unit for its entire staff. Management should provide insurance coverage for its staff as a means of motivation and in line with best practice.
The DG stated that the issue raised on the above was noted and that the Unit had a Group Insurance Policy which covered all workers.
6.8.10. Filing System
The MSU filing system was poor. The documents were not filed sequentially or chronologically. Management should make sure that the documents of the Unit were properly filed.
The DG stated that the issues raised on the above were noted and promised that corrective measures would be taken.
6.9. Sierra Leone Road Transport Authority (2005 – 2009)
6.9.1. Tangible Fixed Assets
Some of the tangible fixed assets of the corporation were re-valued several years ago in contravention with IAS 16 and the report the revaluation was not available for our inspection. It was recommended that the assets should be revalued by an independent professional valuer and the necessary adjustments be made in the accounts of the corporation.
The Director in his response stated that the revaluation of other Tangible Fixed Assets was in the mind of management and would be done when funds were available.
6.9.2. Register of Tangible Fixed Assets
It was observed that the corporation did not maintain a Fixed Assets Register. It was therefore recommended that immediate steps should be taken to write up a Fixed Assets Register preferably in an electronic form as it would be much easier to update the register.
In addition, a full scale verification exercise should be carried out in order to identify assets that are in good condition. Furthermore, cost and accumulated depreciation charges should be allocated to the assets from information in the finance department and those that cannot be allocated with cost and depreciation should be valued by an independent valuer and a detailed register prepared.
The register should also disclose all of the asset information.
Alternatively, the corporation should ensure that a fixed assets module is part of a computerized accounting package, if computerization of the accounting function is being considered by the corporation.
The Director in his reply stated that during the rebel war, the old Administrative Building was totally burnt down where documents including the fixed Assets Register were kept. He however mentioned that Management would put mechanism in place so that one would be developed by the Internal Audit Department.
6.9.3. Capitalization Level and Memorandum Register
The Corporation did not have a formal policy with regard to the capitalization of its tangible fixed assets. It was recommended that capitalization levels should be introduced and very low amounts written off in the accounting period in which they were incurred.
In his reply the Director mentioned that the point had been noted, and that a threshold for capitalization would be set up by management.
6.9.4. Identification Tag
A significant amount of the corporation‟s tangible fixed assets were without identification tags to facilitate easy verification and proper monitoring of these assets. It was recommended that all property , plants and equipment belonging to the corporation should carry an identification tags which must be in agreement with the information indicated the register of tangible fixed assets.
The Director stated the he would ensure that such exercises were done by the Internal Audit Department.
6.9.5. Physical Verification of Tangible Fixed Assets
We observed that the tangible fixed assets of the corporation are not physically verified on a regular basis to enable the corporation determine their existence and condition.
It was recommended that the corporation‟s tangible fixed assets should be verified at least on a yearly basis in order to check their existence and condition.
In his reply the Director stated that management would ensure that such exercises were done with sufficient regularity by the Internal Audit Department.
6.9.6. Conveyances and other Documentation to support Freehold and Leasehold Properties
The corporation did not have the possession of conveyances and other documentations to substantiate its title to freehold and leasehold properties indicated in the financial statements. It was recommended that those Conveyances and other documents supporting the corporation‟s title to free and leasehold properties indicated should be made available for verification.
The Director promised that he would ensure that the service of the Surveyor was sought when funds were available.
6.9.7. Fixed Assets without proper Documentation
Some fixed assets were without proper documentation. It was therefore recommended that required documentations to support these transactions should be made available for verification.
6.9.8. No information to support spares part purchase
Purchase of spare parts (accessories, diesel oil, engine oil, lubricants, tyres and tubes) were not well documented. The auditors were unable to verify the accuracy of the inventories because of the way in which the stores transactions were recorded in respect of spares and accessories. The cost units of the inventories were not available. In addition there were no procedures in place to enable management of the corporation identify obsolete inventory.
A significant number of obsolete Benz 309D were still part of the corporation‟s stock.
It was recommended that the financial management system of the Corporation should be reviewed and restructured and full provision of stock obsolescence should be made in the books of the corporation. Moreover, those items should be disposed of or put into alternative use and proper structural financial procedures should be put in place to identify obsolete stock items.
The Director noted the audit recommendations and agreed to take corrective measures.
6.9.9. Missing Stores Records
The under-mentioned store records were not available for our inspection:
Store issue vouchers for bus tickets
Tickets weigh bills
Bus ticket register
Valuation sheet for bus tickets
It was recommended that the above-mentioned documentations should be made available for verification. Alternatively, officers in charge of these activities / documentations should account fully for those documents.
6.9.10. Loans to Directors
Even though the Road Transport Corporation Act, 1964 provides that the corporation should pay to the members such remuneration, fees and allowances for expenses as may be determined by the Minister of Communication after consultation with and prior approval of the Minister of Finance, it was noted that loans amounting to Le 2500,000 were granted to two directors and were unpaid as at 31st December, 2009. It was recommended that the officers should repay the above mentioned amount with interest.
The Director in his response stated that the loans were given by the past management some years ago. He however mentioned that management would contact the respective individuals so that the loans would be fully recovered.
6.9.11. Credit Policy
There were no formal policies governing bus hire services. Therefore the recoverability of the below mentioned debts maintained below was doubtful because management controls pertaining to bus hire services was weak.
It was therefore recommended that the corporation should take immediate steps to formulate policies governing bus hire services and monthly bus hire debtors should be prepared and circulated to management for their review. Furthermore, the above mentioned debts should be pursued.
The Director stated that reminder letters would be sent to the respective debtors once again.
6.9.12. Cash Counts
Cash counts were not carried out at the end of the financial periods under review to check the accuracy of cash balances indicated in the books and financial statements of the corporation. It was recommended that cash counts should be carried out at every location at the end of the financial year and the exercise should be witnessed by senior and independent officers of the corporation who should verify the accuracy of the amount indicated in the cash count sheets.
In his reply, the Director stated that management would cause a cash count to be done at various locations all over the country at the end of the year by the Internal Audit department.
6.9.13. Going Concern of the Corporation
The financial statements of the corporation for the years ended 31st December, 2005 to 2009 were prepared on the basis that the corporation will continue it‟s operation for the foreseeable future, the validity of which depended upon future funding being available to the corporation either from it‟s members or from it‟s operating activities. It was observed that the net assets of the corporation were above four billion, nine hundred million Leones (Le 4.9b) in the negative.
It was therefore advised that the corporation should be recapitalized or privatised.
The Director noted the findings and mentioned that the issue would be discussed at Management and Board level.
6.9.14. Corporation Tax
It was noted Le 442,183,000 and Le 337,853,000 were provided for corporation tax for the accounting period ending 31 December, 2007 and 2008 respectively, but the computation as to how these amounts were arrived at was not available for inspection. In addition, corporation tax totalling Le 813,000,000 has been outstanding for several years. It was therefore recommended that the corporation should make arrangements with authorities of the National Revenue Authority, with a view of settling the amounts due.
The Director in his reply stated that corporation taxes would now be computed on profit yearly and all calculations shown.
6.9.15. Procurement Policy
There was no formal procurement policy and system in place to capture liabilities of the corporation as and when they incurred. It was therefore recommended that a formal procurement policy and accounting system would be put in place which should be capable of capturing liabilities of the corporation as and when they incurred. It was also recommended that all relevant documentation supporting credit transactions should be made available for verification.
The Director stated that there was now a procurement department managed by a Procurement Manager.
6.9.16. Creditors Account without Documentations
Information/documentations of the under mentioned general ledger accounts were not made available during the course of our audit examination:
Accrued Staff Wages
Accrued Terminal Benefits
Staff Provident Fund
Accrued Rate & Utilities
Sierra Leone Port Authority Loan
Sierra Leone Commercial Bank Loan
Other Accrued Charges
Loan – 10 DBO Buses
Loan – 25 TATA Buses
Loan – 5 DAF Buses
Loan – 17 Iran buses
It was recommended that the accounts should be investigated by management.
The Director in his reply said that most of the creditors mentioned were originated by past managements and almost all have been fully paid.
Capital & Financial Management Systems
6.9.17. Loan Stock & Other Reserves
Information/documentations of the under mentioned general ledger accounts were not made available during the course of our audit examination:
Government of Sierra Leone Grant
It was recommended that the accounts should be investigated by management.
The Director replied that reserves had been in the books of Sierra Leone Road Transport Corporation for several years and documentation cannot be traced.
6.9.18. Rental Agreement with Tenants
Most of the tenancy agreements for individuals and institutions occupying properties belonging to the Corporation were not available for verification. It was recommended that agreements between the Corporation, tenants, sales agents and advertising companies should be formalized.
6.9.19. Income – Bus Tickets & Luggage
A review of the operations of bus ticketing and luggage service revealed that cash payments were made out of the daily takings to meet operational expenses. In addition, information indicated in way bills were not checked against any other document to prove their accuracy.
Furthermore, there was no formal control system in place to ensure that all takings were paid over to the Corporation. It was recommended that management control relating to bus and luggage revenue should be reviewed and enhanced and payments out of daily takings should be avoided as much as possible.
The Director stated in his reply that the current practice was that no payment was made out of daily takings, and that information in the way bill was checked against the receipt and bank statements.
6.9.20. Training School & Technical Department
There were no structural financial policies and procedures to govern the administration and activities of the Corporation‟s Training School and Technical Department. It was recommended that management controls relating to the Training School and Technical Department activities should be reviewed and enhanced.
The Director in his response mentioned that the Training School and Technical Department formed part of the overall Financial Management system of the Corporation, whereby all income received from those departments was properly accounted for.
6.9.21. Revenue Accounts without Documentation
Information/documentations of the under mentioned general ledger accounts were not made available during the course of our audit examination:
Interest & Dividend
Staff Welfare Cards
It was recommended that those accounts should be investigated by management and all documentations made available for verification.
Transactions to the tune of Le 1,023,006,738 were without supporting documents. It was therefore recommended that the transactions should be thoroughly investigated.
6.10. Sierra Leone Ports Authority (2009)
6.10.1. Lack of Fixed Assets Register
A Fixed Asset Register was not maintained, however, there was a fixed asset listing which did not include relevant details such as date of acquisition, location of the asset, identification codes, depreciation rate and accumulated depreciation. A comprehensive Fixed Assets Register should be maintained to contain all relevant information such as cost, date of acquisition, and unique identification codes among others.
The General Manager stated that management had contracted PCL International to upgrade its Microsoft Dynamics GP Financial Management System. This upgrade included a Fixed Asset Register which had been installed to take into consideration all relevant information such as cost, date of acquisition, location, etc.
It was however noted that this issues were yet to be resolved by the Authority.
6.10.2. Adequate insurance coverage
The Authority did not maintain insurance coverage for its properties, plant and equipment (including office furniture, fittings, computer equipment, and office buildings) during the period under review. Only motor vehicles were insured. The net book value of property, plant and equipment at 31 December 2009 was Le 216 billion while the sum insured was Le 25 billion. Management must ensure that the Authority‟s properties, plants and equipment are adequately insured to mitigate any eventual risk of financial losses occurring.
The General Manager stated that management noted the observation on the inadequate insurance coverage on property, plant and equipment and promised to ensure that adequate cover was made during the financial year ending 31 December 2011.
It was however noted that the issues were yet to be resolved by the Authority.
6.10.3. Review of debtors’ lists
Management was not reviewing the Authority‟s debtors profile regularly. This exercise would enable management identify debtors that were not meeting the repayment terms on a timely basis and take corrective informed decisions on such debts.
The GM stated that monthly debtor‟s lists were prepared regularly. Revision of this list had now been the responsibility of the Chief Accountant/Financial Controller to ensure that appropriate action was taken on defaulters.
It was however noted that the issue was yet to be resolved by the Authority.
6.10.4. Petty Cash Disbursement
Cash disbursed to the employees for business purpose were not subsequently retired as no liability was created in the recipient account. All the petty cash vouchers reviewed did not have supporting documents such as receipts and or invoices attached to them. In addition, there were no limits on petty cash disbursements as some transactions that should have been settled by cheque payments were made by cash, thus increasing the risk of fraud.
The GM stated that since January 2010 management had limited petty cash transactions to its bearest minimum, that is (Le2.4m) two million, four hundred thousand Leones per month for transaction such as transport fares, top-up cards, soup money etc. All other transactions went through the cheque payment system.
It was however noted that these issues were yet to be resolved by the Authority.
6.10.5. Review and approval of payroll
There was no evidence that the payroll was reviewed and approved by a senior officer before payments were made to staff. Management should ensure that appropriate review and approval of payroll was done on a monthly basis in order to prevent unauthorized payments of salaries to staff.
The GM stated that structures were now in place where by payroll were regularly reviewed and approved before payment was effected. This duty had been delegated to the Personnel Department with effect from 1 July 2010.
It was however noted that the issue was yet to be resolved by the Authority.
6.10.6. Internal audit work plan
In the review of internal audit reports, the following were observed:
There was no approved internal audit work plan by the board of directors.
The line of reporting was not independent of management as the unit reported directly to the General Manager.
Management did not act on internal audit findings and recommendations.
There was no evidence of follow up on the internal audit findings and recommendations
It was therefore recommended that a review of the role and functions of the internal audit for the unit should effectively carry out its function as a management control tool.
The GM stated that management would ensure that 2011 internal audit work plan was approved by the Board of Directors and that modalities were now in place whereby the Head Internal Audit reported directly to the Board and copied the General Manager. In addition, he mentioned that structures were now in place to ensure that follow-up actions were taken.
It was however noted that the issues were yet to be resolved by the Authority.
6.10.7. Non-compliance with International Accounting Standards (IAS 19)
The Authority did not use actuarial assumptions in determining the end of service benefit provision as required by International Financial Reporting Standards (IAS 19). Accordingly, the auditors were unable to verify the completeness and accuracy of the employee benefit liability at 31 December 2009. Management should ensure that provision for end of service benefits were in compliance with the accounting standards.
The GM stated that management was awaiting quotation from two actuarial valuers for management to be able to comply.
It was however noted that the issues were yet to be resolved by the Authority.
6.11. Sierra Leone Ports Authority (2010)
6.11.1. Differences in depreciation computation
Differences were noted between our computation and the Bank‟s depreciation computation. These differences could lead to understatement of depreciation, thus, the net book value of fixed assets could have been misstated. Effort should however be made to ensure that accounting estimates and computations were prepared and reviewed by different personnel for early detection of errors for correction.
We also noted the following:
Addition made to fixed asset not part of the capital expenditure budget
The construction of a canopy/canteen at Kissy Ferry Terminal amounting to Le 20,000,000 was not included in the approved capital expenditure budget for the year.
Management should ensure that all projects should be undertaken during the year must be included in the approved capital budget.
6.11.2. Bank Reconciliation Statements
Monthly bank reconciliation statements were not reviewed and approved by the management in respect of five bank accounts during the period.
It was also observed that the leave allowance of Le 1, 1275,826 and end of service benefit of Le430,356, in favour of a staff member, in the Sierra Leone Commercial Bank‟s September 2010 reconciliation statement, still remained a reconciling item as at date of our review (July 2011). Thus, it appeared that the monthly bank reconciliation was not properly prepared, reviewed and approved by management. There was no proper segregation of duties within the cash management system. The cashiers responsible for the receipt of cash were also involved on a monthly basis in the preparation of the bank reconciliation statements.
6.11.3. Lack of updated tenancy list on rent
Details of the Authority‟s leased properties showing the tenants, the rental periods and lease amount had not been updated since the 5th of August 2009. Management should ensure that the list of the Authority‟s leased properties were reviewed and updated with the correct rental periods and amounts.
6.11.4. Spare Parts for Obsolete Items
The Authority made a 5% general provision for obsolescence on stock, which appeared to be reasonable based on our review. However, we noticed unmoved/slow moving items amounting to Le284.8 million. A significant portion of stores listing was without unit cost and value and were included in the inventory balance as at 31 December 2010. It was recommended that Management should carry out regular reviews of the stock items to identify obsolete and unmoved items and ensure that adequate provision were made for such items at year end.
6.11.5. Loan agreement and interest accrued
We were not provided with the loan agreement on loan by International Development Association (IDA) to the Government of Sierra Leone under Credit Number 2895 SL for the replacement of Shipway Cradle and Port Rehabilitation. Thus, we were unable to review the Authority‟s compliance with the terms and conditions stated in the loan agreement. Additionally we could not ascertain the accuracy of the loan amounting to Le 28.4 billion and management had over the years not been accruing for the loan. Furthermore, we didn‟t receive confirmation reply from IDA.
6.11.6. Non- deduction of advances given to dock worker cooperation
Management had not been made deductions for advances given to Dock Workers Cooperation contrary to the loan agreement. Management should be monitoring the advances given to the dock workers cooperation so as to avoid the advances becoming bad debts. Generally, the control and monitoring of advances at the Authority needs to be enhanced and defaulters followed up for repayment.
6.11.7. Contingent liabilities – Legal Letter
We circularized the Authority‟s legal solicitor to ascertain the litigations for and against the Authority amounting to Le 88 million and as at date of finalizing the financial statements we did not receive the confirmation reply from the legal solicitor. Going forward, management should ensure that their legal solicitor responds/confirms the Authority‟s contingent liabilities so as to enable us ascertain their contingent liabilities as at year end.
During the review we noted receivables of Le 11.6 billion. We then circularized the Authority‟s debtors amounting to Le 70 billion as at year end. We had not received confirmation from third parties for debtors, thus, we could not conclude on the existence and accuracy of those receivables going forward.
Management should ensure that their debtors respond/confirm the Authority‟s debtors so as to enable us ascertain their debtors balance as at year end.
6.11.9. Bank confirmations and creditors balance
During our review we circularized the Authority‟s banks and creditors amounting to Le 12.3 billion and Le 649.2 million respectively as at year end. We had not received confirmation from the banks and creditors. Thus, we could not conclude on the existence and accuracy of those balances. Going forward management should ensure that their banks and creditors respond/confirm the Authority‟s balances so as to enable us ascertain their balances as at year end.
6.11.10. Payroll Records
In the course of reviewing staff salaries amounting to Le 17.5 billion, we were not provided with accurate payroll records.
Management should ensure that accurate records and appropriate review and approval of payroll are done on a monthly basis in order to prevent unauthorized payments of salaries to staff.
6.11.11. Compliance with procurement procedures
During the review of contracts awarded during the year we were not provided with the contract documents used to award contracts to some suppliers and as such we could not ascertain whether the contracts awarded were in compliance with the Public Procurement Act 2004 - Part IV which states that public procurement shall be undertaken by means of advertised open bid proceedings, to which equal access shall be provided to all eligible and qualified bidders without discrimination.
Additionally the Act also states that where an entity uses a method of procurement other than advertised open bidding, it should note in the record of the procurement proceedings the grounds for the choice of the procurement method. Going forward management must ensure that all contracts above Le 65,000,000 must follow the required process of complying with the Public Procurement Act 2004 - Part IV and should also go through the Evaluation Committee and Procurement Committee.
6.11.12. Access to Programs and Data
Information Security Policies and Procedures document did not include the following:
Systems Development and Maintenance
Business Continuity Management
Out sourcing Policy
Software restriction policy
6.11.13. Security awareness and education
We were also not able to determine whether other end users (apart from IT) received appropriate training and regular updates on the importance of security.
6.11.14. Configuration of Access rules
There were no documentary evidence authorising the System Administrator to disable or delete user profiles of staff that were on vacation and those who had disengaged their services from the company.
6.11.15. Access administration / identification & authentication
It was observed that logical access security measures had been put in place by SLPA to ensure that access to its resources were granted only to authorised personnel. However other password security parameters such as minimum password length, password life and alpha numeric settings had not been included in the procedure/security standards. Additionally these settings had not been predefined on the network system and company applications.
6.11.16. Monitoring and Risk Assessment Activities
It was observed that the monthly reports were addressed/forwarded to the General Manager (GM) instead of the Audit Committee instituted by the Board thus compromising the integrity of the whole process. Furthermore, it was observed that a risk assessment framework had not been put in place by management. Consequently no IT risk assessment was performed during the period.
6.11.17. Computer Operations - Business Continuity (Recovery)
It was observed that SLPA was yet to develop a Business Continuity plan which should detail disaster recovery policy and strategy plans for minimising disruption to the business including tasks and responsibilities, Disaster Recovery Committee (DRC), interim processing guidelines for key business systems, contact numbers of members of the DRC, amongst others.
6.11.18. Backup of Data and system files
Adequate backup of application data was not performed by the IT Department. Consequently, the audit team found it difficult to obtain electronic copies of transactions during the period under review. Discussions with the Head of IT revealed that backup was performed on compact disks (CDs) which were kept onsite though in a secured safe. However, a register was not maintained by the IT department detailing the backup processes and status of backup media i.e. when the backup was done, who did it, the status of the process (successful or not) and the location of the media (onsite or offsite). As a result, we were unable to ascertain the adequacy and completeness of the backup process.
6.11.19. Problem management procedures
SLPA was yet to develop a problem management policy and procedures. However, problems encountered by users on the companying applications were logged by the IT personnel representing the helpdesk in a manual log book. It was also observed that the company did not have a help desk application deployed to effectively track, analyse and resolve operational problems relating to Company Manager and other IT related systems.
6.12. Sierra Leone Airport Authority (2009)
6.12.1. Review of the 2009 Management Letter
18.104.22.168. Review of Recurrent Budgets
An analytical review on the profit and actual results budgeted for 2010 revealed the following variances:
It was recommended that in future the budgeting process will take such factors into consideration to ensure final estimates are close to target. Detailed investigation should be also undertaken on the adverse variances and evidence of action taken should be documented and filed and such a process should be undertaken regularly in future.
The General Manager explained that the adverse revenue variance was due to delay in the implementation of the new charges that were introduced in 2010. The charges he further stated were budgeted to have been introduced in March 2010, but delayed until May 2010.
In the area of expenses he said that generally the adverse expense variances were due partly to the huge change in foreign exchange rate that led to increase in the price of goods and services. He further mentioned that introduction of the Goods and Services Tax also led to actual expenses exceeding the budgeted as that was not anticipated at the time of preparing the budget. In addition to this, he said the following specific explanations could be part of the cause for the under mentioned adverse variances.
In his reply to Administrative Expenses, he stated that
the adverse variance of 3% could also be due to the huge new employment in July
2010 that was not budgeted for.
He explained that for Commercial Expenses, the Authority was called upon by the government to join the re-branding process of the country and was therefore engaged in expensive international commercial advertisement in 2010 which led to more spending than was budgeted.
The adverse variance of 8% in Engineering and Maintenance expenses could also be attributed to the increase number of developmental projects undertaking by the Authority towards the end of the year in response to the call to join the re-branding process of Sierra Leone, the Airport Manager mentioned.
In the area of Project Expenses he mentioned that the Authority was expecting the transfer of ground handling operations to a concessionaire to have been done before the end of 2009; hence he said, the ground handling project expenses were not budgeted for and this scenario accounted for the 100% adverse variance on project expenses
In conclusion, the General Manager said that the Profit/Loss before tax had an adverse variance due to all of the factors narrated above.
Le 3,234,000 was noted between the amounts on the Payment Vouchers and those on the supporting documents. In addition, a difference of Le 3,336,000 was also noted between the Payment Vouchers and the General Ledger. It was however recommended that management should ensure that control procedures were complied with to avoid lapses.
The General Manager explained that these were payments to casual workers that constituted different departments wherein each department‟s time sheet was maintained separately but merged together in preparing payments in the name of the cashier who after collecting the payment sent each department payment to its supervising foreman together with the listing. He mentioned that when payment was completed, the foreman returned the listing to the cashier who in turn attached such listings to the respective payment voucher.
He added that it was during this process that some of the listings in question were wrongly attached and promised that steps will be taken to ensure that such a does not occur again.
For the issue relating to the Le 3,336,000 he mentioned that it was an input error. He further said that the review process would be made much more robust to ensure that any case of input error in future will be noted and corrected.
He however noted that appropriate journal will be prepared for the amount under reference.
Retirements were not made for cash floats given to staff to spend on behalf of the Authority.
For example, a difference of Le 161,574,204 was also observed between the cash count certificate and general ledger for Lungi cash in hand.
It was recommended that management ensured that all retirements for cash float should be done once transactions were complete in order to reduce the risk of irregularities. Furthermore investigation on the difference between cash count certificate and general ledger should be expedited.
The General Manager stated in his reply that it was the policy of the Authority for all cash floats to be retired as soon as the work for which it was meant was completed, but sometimes there were slight delays in the retirement process. This, he said was normally cause by staff that went on vacation leave or travel overseas before completion of the work or immediately after its completion. He further noted that this was precisely the situation for the cash floats and the retirements will be done as soon as the staff in question resumes duty. On the issue of the difference between the Cash Count Certificate and the General Ledger, he mentioned that the board was waiting for the final report of the investigation committee and the police report to enable them take appropriate action on this issue.
There was no movement over the years in the receivables account listed below:
Advances made to some suppliers for goods that had been received, still appeared as receivables in the Financial Statements. Goods Received Notes were not raised to reduce receivables. The following are examples:
It was recommended that the balances noted should be reviewed and the Authority should ensure that once goods were received, a goods received note should be raised to cancel the receivables.
The General Manager explained that exceptional circumstances, especially in life threatening situations warranted loans to be given to staff with existing loans. He however mentioned that he will ensure the spirit of the terms and conditions of service was safe guarded such that the additional loan granted did not create undue stress on its recipient. Recoverability he said, was well assured. He also maintained that all loans given to staff in excess of their terminal benefit were always guaranteed by a staff whose terminal benefit always exceeded such loan.
On the issue of the receivable schedule, he mentioned that the exception of SALWACO, all the other customers in the schedule had ceased operation and had previously approached NCP to have these debts written off but their request was rejected. With respect to SALWACO he stated that the Authority shall enter into a cross-debt arrangement with them to have this debt set-off against water rate bills of the Authority.
On the area of Goods Received Notes, he noted that these were urgent procurement of materials needed for the maintenance of Presidential Lounge at the Airport and because of the exigency of the work, materials purchased were sent direct to the maintenance site. He maintained that the normal procedure of having them through stores department was inadvertently skipped but the Management was now working to have the entire process regularized.