…as it bags adverse audit opinion
Mohloai Mpesi
THE Lesotho Nursing Council (LNC) has received an adverse audit opinion after the Auditor-General, Mathabo Makenete, found serious financial reporting weaknesses, unsupported expenditure and unexplained discrepancies in its books.
The findings, contained in Ms Makenete’s report on the council’s annual financial statements for the year ended 31 March 2023, were released last week and raise questions about the reliability of the institution’s financial records.
An adverse audit opinion is among the most serious verdicts an auditor can issue. It means the financial statements contain material misstatements and cannot be relied upon to present a true and fair view of an institution’s financial position.
Ms Makenete attributed the adverse opinion to poor bookkeeping, unexplained differences in the council’s accounting records and inconsistencies between expenditure figures presented in the financial statements and those disclosed in accompanying notes.
“The Council relied on month-end reports instead of maintaining a comprehensive, double-entry accounting system supported by a general ledger. This approach is not compliant with IAS 1 — Presentation of Financial Statements,” Ms Makenete said.
She said significant discrepancies between expenditure figures in the financial statements and those disclosed in the notes prevented her from verifying whether the amounts were complete, accurate and properly classified.
“Unexplained differences were noted between income and expenditure figures reported in the financial statements and the underlying accounting records. As a result, I was unable to obtain sufficient appropriate audit evidence to confirm the completeness and accuracy of both revenue and expenditure,” the report reads.
The Auditor-General also flagged expenditure amounting to M65,933.82 for which the council had failed to provide supporting documentation.
She further questioned subscriptions amounting to M1,791,049, saying she could not obtain sufficient evidence to verify the accuracy and proper presentation of the amount.
“The financial statements reported M1,791,049 relating to subscriptions. I was unable to obtain sufficient appropriate audit evidence to confirm the accuracy and proper presentation of this amount, as the recognition of subscriptions includes penalties, advance payments and recoverable debts from prior years. This recognition deviates from IFRS 15 — Revenue from Contracts with Customers,” she said.
The findings also raised concerns about the council’s ability to recover money owed to it.
According to the report, the council recorded receivables of M464,845, including long-outstanding debts, without assessing whether the amounts were recoverable. It had also failed to make provision for doubtful debts.
“The receivables balance of M464,845 in the financial statements includes long-outstanding receivables for which no assessment of recoverability has been performed. No provision for doubtful debts has been recognised, therefore receivables might be materially overstated,” the report reads.
Ms Makenete also questioned the accuracy of cash balances reported by the council, saying she could not verify the existence of funds held with Stanlib and ABSA because the necessary bank confirmations were unavailable and the council had not maintained a cashbook.
“I was unable to substantiate the existence and accuracy of the reported cash balances of M151,292 for Stanlib and M294,713 for ABSA due to absence of bank confirmations and non-maintenance of a cashbook,” she said.
The Auditor-General further identified an unreconciled discrepancy of M1,094,274 between cash and cash equivalents reported in two financial statements.
The council reported M4,485,569 in cash and cash equivalents in its Statement of Cash Flows, while its Statement of Financial Position reflected M3,391,295.
Ms Makenete said the absence of supporting reconciliations meant she could not confirm the existence and accuracy of either balance.
“I could not confirm the existence and accuracy of the reported cash and cash equivalent balances of M4,485,569 and M3,391,295 disclosed in the Statement of Cash Flows and Statement of Financial Position, respectively, due to an unreconciled variance of M1,094,274 between the two statements and the absence of supporting reconciliations,” she said.
The report also raised questions about the council’s inventory records.
Inventory valued at M73,510 was not supported by the disclosure notes required under IAS 2 — Inventories. The council also failed to provide documents to substantiate the reported balance, leaving the Auditor-General unable to verify the inventory’s existence, completeness and valuation.
The adverse opinion points to weaknesses across several areas of the council’s financial management, including revenue recognition, expenditure documentation, debt recovery, cash management and inventory accounting.
The LNC is the statutory body responsible for regulating nursing and midwifery education and practice in Lesotho. Its mandate includes setting standards for training and professional practice and protecting the public from unsafe conduct by nurses, midwives and nursing assistants.
The audit findings therefore raise concerns about the financial accountability of an institution entrusted with overseeing the country’s nursing and midwifery professions.