4. Financial Audit of the Public Accounts
What we examined
The audit examination of the Public Accounts is a risk-based audit. We select on a test basis a selection of transactions selected from the Integrated Financial Information Management System (IFMIS) and examine the underlying supporting documentation. We also verify the accuracy of the compilation process used to create the financial statements and review the system of internal control in place including segregation of duties, authorization, recording keeping and selected controls over the computer system.
Why it’s important
The Public Accounts comprise a Statement of the Financial Assets and Liabilities of the Consolidated Fund, a Statement of Financial Performance, a Cash Flow Statement and other Notes of Explanations and Elaboration to the Public Accounts. These financial statements are an expression of the Government‟s accountability to Parliament and civil society on how well it has exercised its responsibilities as custodian of the public purse. They are a report on the extent to which the Government has complied with the intent of Parliament as no revenue or expenditure may be collected or spent except as authorised by a parliamentary vote.
What we found
We found extensive internal control problems especially around revenue matters and the relationship between NRA and MOFED on responsibility for the CRF. This was at the root of our choosing to issue a qualified opinion on the Public Accounts and had the problems encountered been pervasive would have given rise to a disclaimer of opinion, i.e. the situation where we are unable to obtain sufficient appropriate audit evidence on which to base the opinion. There is a need to clarify the relationship between MOFED and NRA with regards responsibility for the CRF.
We found significant numbers of receipt books were not accounted for or available for examination. There were unidentified cash balances held in transit accounts and not transferred to the CRF at year end in a timely manner. We also noted a significant discrepancy between NRA reported revenue and that disclosed in the Public Accounts.
No breakdown on donor revenue was made available for audit and we encountered a lack of supporting documentation in a worrisome number of instances. Also, for 99% of bank balances we were unable to obtain direct confirmation of balances held in commercial banks.
The Internal Audit Department, a key component of the system of internal control, although improving we noted there was no internal audit manual, previously agreed audit work plans were not adhered to and we were not granted access to working paper files. Quite apart from being a breach of the access rights of the this office as a result we were unable to determine if we could rely in part on the work of Internal Audit for purposes of our audit examination.
Many of our recommendations from previous years have not been implemented and this continues to be of considerable concern.
4.1. Auditor General’s Opinion on the Public Accounts
I have audited the accompanying Public Accounts of the Government of Sierra Leone for the year ended 31st December 2010. The Public Accounts comprise a Statement of the Financial Assets and Liabilities of the Consolidated Fund, a Statement of Financial Performance, a Cash Flow Statement and other Notes of Explanations and Elaboration to the Public Accounts as set out on pages 8 to 15.
Responsibility of the Ministry of Finance and Economic Development for the Public Accounts
Overall responsibility for maintenance, preparation and submission of the Public Accounts lies with the Minister of Finance and Economic Development. Section 3(2)(h) of the Government Budgeting and Accountability Act (GBAA) 2005 states that “(it shall be the responsibility of the Minister to) maintain, subject to subsection (3) of section 119 of the Constitution and any other enactment, the annual accounts of Sierra Leone and submit them to the Auditor-General for audit and cause copies to be published for general public interest.”
The responsibility of the Accountant General for the Public Accounts is stated in section 12(1)(a) of the GBAA 2005 which states that “(The Accountant-General shall be responsible for) the compilation of the public accounts”.
Other responsibilities of the Ministry of Finance and Economic Development include:
designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of Public Accounts that are free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies in consultation with the Auditor-General; and
making accounting estimates that are reasonable in the circumstances.
Responsibility of the Auditor General
The Public Accounts of the Government of Sierra Leone are subject to audit by the Auditor General in accordance with Section 119(2) of the Constitution of the Republic of Sierra Leone 1991 and Sections 62 to 66 of the GBAA 2005.
My responsibility is to express an opinion on the Public Accounts based on my audit.
The audit was conducted in accordance with the International Standards of Supreme Audit Institutions. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the Public Accounts are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Public Accounts. The procedures selected depend on the auditor‟s judgement, including the assessment of the risks of material misstatement of the Public Accounts, whether due to fraud or error. In making those risk assessments, the Auditor considers internal controls relevant to the entity‟s preparation and fair presentation of the Public Accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Government internal controls.
An audit also includes evaluating the:
appropriateness of accounting policies used;
reasonableness of accounting estimates made by management;
overall presentation of the Public Accounts; and
adequacy of design and the effective implementation of internal controls.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.
Basis for Qualified Opinion
Uncertainty over domestic revenue disclosed
I have been unable to ascertain that domestic revenue collected as disclosed in the Public Accounts is free from material misstatement. This is due to the following reasons:
A significant number of receipt books, held by the National Revenue Authority, were not made available for audit inspection. As a result, I do not have sufficient assurance that revenue in relation to these books was fully collected and correctly disclosed in the Public Accounts.
Treasury Transit Accounts are used by The National Revenue Authority to collect money on behalf of Government. Money from these Accounts should have been transferred to Government Bank Accounts at close of business on 31st December 2010. However, this was not done. Consequently, Government domestic revenue for the year ended 31st December 2010, as presented in the Public Accounts, does not include all money collected and is, therefore, understated. I was unable to ascertain the total amount not transferred and cannot, therefore, estimate the amount of this misstatement.
The domestic revenue as presented in the Public Accounts is Le119,870 Million less than the revenue collected as stated in the Annual Revenue Report prepared by the National Revenue Authority. This total comprises apparent understatements of Customs and Excise revenue by Le89,253 Million and Goods and Services Tax revenue by Le30,617 Million.
Expenditure not supported by relevant documentary evidence
Over recent years, I have noted a general improvement in the availability of documentation to support financial transactions represented in the Public Accounts. However, based on sample testing, I estimate that 11% of non-salary, non-interest, recurrent expenditure (Le 68,519 Million) presented in the 2010 Public Accounts cannot be supported by appropriate documentary evidence. As a result, I am unable to ascertain whether this balance, as presented, is free from material misstatement.
Government bank balances held at commercial banks not confirmed
Out of a total of Le127,985 Million presented as Cash and Bank Balance with Commercial Banks in the Public Accounts, only approximately Le93 Million (less than 0.1%) of this total was confirmed by the Commercial Banks concerned. Although providing such external confirmation is not within the direct control of Government, the unavailability of this audit evidence does constitute a significant limitation on the scope of my audit. Consequently, I am unable to ascertain whether the Cash and Bank Balance with Commercial Banks, disclosed in the Public Accounts, is free from material misstatement.
Revenue Arrears not disclosed in the Public Accounts Section 57 of the Government Budgeting and Accountability Act 2005 specifies what disclosures should be included in the annual statement of Public Accounts. Section 57(5)(g) states that the Public Accounts should include “a summary statement of revenue arrears to be collected by each budgetary agency”. The Public Accounts do not include such a disclosure.
In my opinion, except for the effects of the matters described in the basis for qualified opinion paragraphs above, the Public Accounts of the Government of Sierra Leone give a true and fair view, in all material respects, of its financial position as at 31st December 2010 and its financial performance for the year then ended and have been prepared in accordance with section 57 of the Government Budgeting and Accountability Act 2005 and other applicable laws and regulations.