4.2. Some Comments on the Public Accounts

I have issued my Auditor‟s Report, also called my Opinion, on the Public Accounts of the Government of Sierra Leone in accordance with Section 119(2) of the Constitution of the Republic of Sierra Leone 1991 and Sections 62 to 66 of the Government Budget and Accountability Act 2005. A copy of my Opinion precedes the Financial Statements of the Government of Sierra Leone which are reproduced above.

The Public Accounts comprise a Statement of the Financial Assets and Liabilities of the Consolidated Revenue Fund, a Statement of Financial Performance, a Cash Flow Statement together with Notes of Explanations and Elaboration to the Public Accounts which are an integral part of the financial statements.

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. It is a basic tenet of our system of government that no revenue or expenditure may be collected or spent except as authorised by a parliamentary vote. Therefore the Public Accounts are a report on the extent to which the Government has complied with the intent of Parliament.

The Public Accounts of the Government of Sierra Leone are subject to audit by the Auditor General. As the external auditor of government my responsibility is to conduct an audit examination and based on it to express an opinion on the Public Accounts. I set out to determine if the financial statements give a true and fair view, in all material respects, of the Government’s financial position as at 31st December 2010 and its financial performance. My audit work is conducted in accordance with professional auditing and ethical standards promulgated by INTOSAI and a range of related guidance. 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.

The Audit Opinion is an expression of professional judgement and its wording– sometimes referred to as the short-form opinion – is dictated by international good practice. I may issue an unqualified, qualified, disclaimer or an adverse opinion. Without going into too much technical detail, an unqualified opinion arises where the financial statements provide a true and fair view of financial position and performance and a disclaimer arises where the auditor is unable to form an opinion one way or the other. An adverse opinion arises where issues in the financial statements are so pervasive as to not present a true and fair view. Either a disclaimer or an adverse opinion is a very serious matter.

This year I have expressed a qualified opinion on the Public Accounts. The issues raised in the opinion to support an audit qualification were:

 Material uncertainty over domestic revenue due to:
- significant receipt books not available/accounted for;
- unidentified cash balances held in transit accounts not transferred to the CRF at year end; and
- a significant discrepancy between NRA reported revenue and that disclosed in the Public Accounts.

 Material uncertainty over other charges expenditure due to lack of supporting documentation made available.

 Material uncertainty over cash balances held in commercial banks due to 99% of accounts not being confirmed by the commercial banks.

 Material error in non-disclosure of domestic revenue arrears as required by GBAA 2005.

Unfortunately qualified opinions on the Public Accounts have been the norm in Sierra Leone for a number of years now. This year, however, I gave very serious consideration to issuing a disclaimer and would have done so had the matters encountered and commented upon in this report been more pervasive. A disclaimer arises where the auditor is unable to obtain sufficient appropriate audit evidence on which to base an opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive but not to amount to meet the true and fair test overall.

The matters encountered were serious and related mostly, though not exclusively, to revenue accounts. The revenue issues are a matter of grave concern to me and the citizens of Sierra Leone and internal control issues throughout MDAs also need to be addressed. Unless improvements on many fronts become apparent then the question of disclaimer of opinion or worse will arise again in future years.

The following paragraphs set out in greater detail our findings while conducting the audit and the matters giving rise to qualified opinion.

4.3. Review of Internal Audit Operations

There has been a significant improvement in the level of activities undertaken by the Internal Audit Unit. However there are a number of areas where further work is required:

 The Internal Audit Unit did not have Manual in place. It is critical that a Manual is put in place to ensure that work performed is carried out in line with international auditing standards. A working Manual will also help to ensure that there is consistency in the approach of the Internal Audit Unit even when the Unit is subject to Personnel changes.

 Although Monthly, Quarterly and Annual Reports are prepared by the Internal Audit Unit these reports do not present actual work performed as against work plan.

 Internal Audit Assignments performed did not always fall in line with the 2010 annual work plan. As a result, out of the ten key activities planned for the year, five were not undertaken. It is understood that the failure to deliver against work plan had various contributory factors, including staffing and resourcing problems and request from the Financial Secretary to carry out special audits. Nevertheless the Internal Audit Unit should endeavour to ensure that key activities identified in the annual work plan are delivered. Some allowance for staffing and financial constraints should be factored into the plan so that activities planned are realistic.

 Working Paper files were not made available to substantiate the outstanding issues indicated in the Internal Audit Annual Report. As a result, no reliance could be placed on the work of Internal Audit Unit. In future years, access we will require access to Internal Audit working paper files. If we can review these files, and be able to place reliance on this work, this will allow us to complete the Public Accounts audit in a much more efficient manner and allow ASSL staff to focus on other areas not addressed by the Internal Audit Unit.

4.4. Cash and Bank Balances

Out of a total of Le 127,985 Million presented as Cash and Bank Balance with Commercial Banks in the 2010 Public Accounts, only approximately Le 93 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 constituted a significant limitation on the scope of my audit of the Public Accounts. Consequently, I was unable to ascertain whether the Cash and Bank Balance with Commercial Banks, disclosed in the 2010 Public Accounts, was free from material misstatement.

The primary source of information for the Accountant General in identifying the value of these bank balances to be included in the Public Accounts is a schedule provided by the Bank of Sierra Leone. However, for the purposes of obtaining sufficient audit evidence further confirmation is required.

Prior to the audit of the 2011 Public Accounts the Accountant General should take the following action:

 Liaise with the Commercial Banks concern to sensitise them on the importance of providing such confirmation directly to ASSL; and

 Ensure that in advance of producing the Public Accounts, bank statements are reviewed by the Accountant General relating to the bank accounts included in this account heading.

4.5. Loans and Advances

In recent years, there has been an improvement in the way staff loans and advances have been recorded, managed and recovered by the Accountant General. However, some minor issues were identified during the audit of the 2010 Public Accounts. Of particular importance are controls around loans given to MPs. Although the amount of these loans and advances are not significant in relation to the Public Accounts, they are of particular public interest given the positions held by the recipient.

Audit findings in this area were:

 An examination of Advances Register revealed that two application summaries for the month of October 2010 (totalling Le 103,000,000) for MPs were not signed by the persons who prepared, authorized and approved them. As such, there is no evidence that the loans were properly reviewed and authorised by the appropriate officers.

 There was no evidence of approval for salary advances to twenty-five (25) MPs for the month of July 2010, amounting to Le100,000,000 Salary advances should not have been paid without proper approval and appropriate evidence retained.

 The Accountant General should take steps to ensure that proper control over staff loans and advances. Particular care should be taken in relation to Loans and Advances to MPs.

4.6. Donor Disbursements and Public Funds
Donor funds form part of public funds. It is still a practice of donor funds not being captured as part of public funds. These should be fully disclosed in the Financial Statements to ensure completeness.

4.7. Government Record Keeping (Other Charges)

The availability of Payment Vouchers (PVs) to support expenditure made has improved to such an extent that almost all PVs were provided during the audit of the 2010 Public Accounts. Out of a total of 386 PVs for Other Charges requested only 7(representing 2% of the total PVs requested) could not be made available for audit inspection.

However, for 42 PVs that were produced for audit inspection, totalling Le 30,254,565,688 the supporting documentation attached was not sufficient to support the substance of the transaction to which the PVs related. Supporting documentation such as invoices, delivery notes, certificates of completion or other relevant documents should be reviewed by the Accountant General Department prior to payment being made in accordance with section 81(1) of the Financial Management Regulations which states that:

“the Accountant-General or authorized officer shall, before making any payment against a voucher, check that- (a) the voucher is properly supported by the prescribed documents; (b) the documents are attached to the voucher and are correct and complete in every particular”.

The documents should then be filed appropriately to maintain an adequate audit trail.

In addition, 30PVs examined during the audit were prepared and authorised by the same Officer. Adequate segregation of duties is crucial in ensuring that payments are made for the purposes for which they are intended and that fraudulent transactions are not processed.

4.8. Management Information Systems

A Disaster Recovery Plan or Continuity Plan for the whole MIS of the Government is still outstanding. There is yet to be a proper policy for this within the Accountant General‟s Department.

4.9. Domestic Suppliers Arrears

Domestic Suppliers‟ Arrears continue to be a major cause for concern within the Financial Management Systems of the Government of Sierra Leone. It was noted that apart from the one by the review done by the ASSL during the year, there was no evidence of internal reviews done to ascertain the genuineness of other arrears.

In general, there needs to be an adequate system of review on the operations of NASSIT by the Accountant General‟s Department. The Audit Service Sierra Leone should be given copies of all contracts entered into by the Government of Sierra Leone in accordance with section 30(3) of the Government Budgeting and Accountability Act 2004 which states that:
“A copy of every contract under this section shall be submitted to the Auditor-General and to the Accountant-General as soon as it is made”.

In such cases, the age and position of loans entered into by the GoSL could be easily and readily verified. At the moment, we are unable to ascertain the age of the Le753M Bumbuna Loans as there were unavailable documentation.

4.10. Control Over Revenue Collection, Banking, Recording and Reporting

The National Revenue Agency (NRA) through its Commissioner has a delegated responsibility from the Minister of Finance for many aspects but not all of government revenue assessment and collection.

4.10.1. Review of Internal Audit Department at NRA

I was unable to place reliance on the work of the Internal Audit Department as the Deputy Director was on leave and I could not have access to any of the Reports, Audit Manual and Working Papers. The Charter was yet to be endorsed while the Work Plan and strategic plan provided were still in their draft stages.

4.10.2. Review of the operations and management of the Transit Accounts

Our review of the National Revenue Audit Department‟s transactions with the Accountant General‟s Department disclosed that there is inadequate evidence to show that these Departments are interrelated. It should be noted that the NRA has the key management function for income generation within the Government Finances. The Accountant General‟s Department is there to ensure that such funds are judiciously utilised within the Government system. It is the responsibility of the Accountant General to have control of all accounts being opened in the name of funds for the Government of Sierra Leone.

Transit Accounts are not been managed properly. Bank Accounts noted in 2009 could not be traced in 2010 and there is no evidence to prove that such accounts have been closed. A comprehensive list of all transit accounts being held in various banks could not be provided. There were accounts being operated in Commercial Banks for which Bank Statements were not available. Bank Reconciliation on transit accounts was not prepared. A total of Le3.5Bn was held in transit accounts at 31st December 2010 which were not immediately transferred to the Bank of Sierra Leone at the beginning of 2011.

4.10.3. Review of the operations of the sub divisions of NRA

A review of the operations of the sub divisions of the NRA revealed various lapses in the control system within these sub divisions.

4.10.4. Customs and Excise

One hundred and three (103) Receipt Books in use by the Customs and Excise could not be traced to the securitised documents from NRA head office and were unavailable for our inspection.

Receipt Books valued at Le233.8Millon could not be traced to the securitised documents received from head office. Receipts and corresponding paying slips, totalling Le37.3Million could not be traced to the Bank Statements and revenue collection of Le30.9 billion were not banked on the next working day in the Customs and Excise sub division.

On review of the ASYCUDA System, it was observed that a breakdown of the daily collections could not be made available, the revenue account over the period exceeded the Revenue update by Le9.5Billion and there were differences between the total receipt entered in the ASYCUDA system and that in the Revenue Cash Book.

4.10.5. Large Tax Payers’ Division

Cash operations at the NRA continue to be an area of grave concern. In the Large Tax Payers‟ Division, amounts totalling Le 2.165 billion were held in Transit Accounts for over 24 hours before being paid into the CRF. In addition, Le 3.18 billion cash was held and not bank within 24 hours. This has a major effect on the cash flow of the Government of Sierra Leone.

4.10.6. Non Tax Revenue Department

At the Non Tax Revenue Department, the total amounts in each MDA in the Annual Performance Revenue Report exceeded that recorded in paying slips by Le4.935 billion. Various types of documentation such as Receipt Books and Bank Reconciliation statements in these Divisions were not made available for inspection.

4.10.7. GST operations

On review of the GST operations revealed amongst other issues that amounts recorded in the Customs Cash Book, totalling Le4.492billion could not be traced to the CRF.

Amounts, totalling Le 246.36 billion as recorded in the Financial Statements differed from the total of Le215.7billion recorded in the books of NRA, and amounts paid into the Transit Accounts amounting to Le53.914billion were not banked within 24 hours as per the relevant regulations.

4.11. Outstanding Issues from previous Audits

A number of issues identified as during the 2009 audit have not been adequately addressed despite commitments by the Accountant General to effect the changes and improvements recommended. A summary of the issues identified during the audit of the 2009 Public Accounts is shown in the table below along with the response from the Accountant General to these original findings. The issues were reviewed as part of the 2010 Public Accounts audit and the current status of each issue is also given in the table as is the response from the Accountant General to this follow up work.

In order to ensure that these issues do not continue during 2011 and beyond, the Accountant General should take a more proactive stance in ensuring that all parties work together to ensure that corrective action is taken. To this end, the Accountant General should produce Action Plans, setting out implementation dates and responsible Officers. This plan should be monitored on a regular basis to ensure that changes are being implemented as planned.

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