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Flawed financial reporting paints false picture of govt finances — AG

Bereng Mpaki

THE government’s financial statements for the 2018/18 financial year were not prepared according to international accounting standards and therefore paint an inaccurate picture of Lesotho’s state of finances, acting Auditor General (AG) Monica Besetsa has said.

Ms Besetsa says this in her adverse report on the government’s consolidated financial statements for the 2018/19 financial year. The report was tabled in parliament on Wednesday by Finance Minister Thabo Sophonea.

In the report, Ms Besetsa raises several financial irregularities that have influenced her adverse opinion on the government’s books.

“In my opinion, the accompanying consolidated financial statements do not present fairly the financial position of the government as at 31 March 2019, its financial performance and its cash flow for the year then ended in accordance with international public sector accounting standards (IPSAS),” Ms Besetsa said.

Due to the flawed financial reporting, she said the financial statements reflected a cash decrease of M1, 462 billion from the 2017/18 financial year whereas the bank balances showed a cash increase of M7781 million.

She said the statements also do not comply with the IPSAS under cash basis accounting.

“The financial statements do not consolidate all government-controlled entities. State owned enterprises, autonomous institutions and other extra budgetary funds are not fully consolidated.

“Centrally managed bank accounts balances were not fully reconciled as at 31 March 2019. The financial statements disclose a small number of accrual items, which had not been cleared at the reporting date e.g. accounts payable, advances, provisions, third party trusts and deposits.”

She said the statements were compiled in a manner that contravenes the Constitution and Public Financial Management and Accountability (PFMA) Act.

“Advance warrants from the Contingencies Fund totalling M123, 8 million were directly allocated to some voted heads of expenditure. That contravened Section 112 (2) of the Constitution, which requires allocations to heads of expenditure to be made only on the basis of Appropriation Act.

“This issue recurred on an annual basis since 2009/10 and a total amount of M1, 369 billion for 10 years ended 31 March 2019 is yet to be regularised through the Supplementary Appropriation Acts.

“In my 2016/17 audit report, I reported that the Minister’s (former Minister of Finance Tlohang Sekhamane’s) directive to transfer an amount of M450 million from the Trust Monies Account into the Consolidated Fund, for onward transfer to Recurrent Expenditure Account was contrary to the requirements of Section 112(2) of the Constitution and Section 24(4)(b) of the Public Finance Management Act 2011.

“The amount of M450 million was from the Loan Bursary Fund administered by the National Manpower Development Secretariat (NMDS). The transfer from the Consolidated Fund to Recurrent Expenditure has not yet been regularised by Parliament.”

The transaction was done during the last Pakalitha Mosisili coalition which lasted from 2015 to 2017.

AG Lucy Liphafa’s report captured how the Mosisili coalition abused M450 million meant to fund the activities of the NMDS. The NMDS is responsible for funding national bursaries for students. Yet its money was redirected to fund a number of unbudgeted for expenses in a manner that violated the constitution of Lesotho and the Public Financial Management and Accountability Act of 2011. The Act was established to ensure that public office bearers manage taxpayers’ money and other public funds prudently.

The unbudgeted activities that the M450m million was misdirected to fund included bizarrely the use of M28, 4 million of that money to fund the procurement of cyber security equipment. The money was also used to fund the termination of the controversial Bidvest fleet services tender which was mired in corruption as well as the June 3 2017 elections.

Ms Liphafa described the way in which the M450 million was diverted from the government’s Trust Monies Account into the Consolidated Fund as “unconstitutional” and “irregular”.

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