In his just released 2014 report, Auditor General Leigh Trotman has raised serious concerns about a number of matters related to various ministries and Government departments, among them the $120 million question of a loan guarantee now hanging over the stalled Four Seasons Development.
Following is a list of general audit concerns to the Auditor General.
Classification of revenue. The main revenue agencies continue to report revenue on the cash rather that the accrual basis as adopted by the Government. This practice results in the revenue not being accurately classified or in compliance with the accounting standards.
Under the accrual basis, revenue should be recorded in the period when it is due, regardless of whether cash was received. However, under the cash basis, funds are only recorded as when cash is received. It has been seven years since Government changed to the accrual basis of accounting and ministries and departments should classify revenue correctly.
Fixed assets. Ministries and departments are required to keep fixed assets registers that contain information on their assets. These registers serve a number of purposes, which include ensuring that the assets are all accounted for, and book values are current. These values should form the basis for the assets which are reported in the Government Financial Statements.
These registers however, are not properly maintained and information such as the value of the assets and the depreciation cost were missing. This resulted in the Audit Office not being able to verify the accuracy of $1.5 billion in capital assets reported in the Financial Statements of the Government.
Bank/ledger reconciliations. In order for the auditors to attest to the accuracy of the financial records, an examination is made of the subsidiary ledgers which contain detailed listings of transactions. The total of these ledgers should be equal to the relevant totals provided in the financial statements.
In many instances the sub-ledger totals and those reported in the financial statements differed, and there were no reconciliation statements provided. This resulted in the auditors not being able to verify the accuracy of these records provided.
Inadequate quotations for goods and services. Ministries and departments are required to obtain a number of quotations from suppliers of goods and services. In many instances, the service or good was purchased after the receipt of only one quotation. These quotations should be obtained, since they ensure that the price is competitive and that there is a level of transparency in the process.
No authorization provided for daily home to office travel. Payments in excess of $800,000 were made to assistant commissioners, senior superintendents, superintendents, assistant superintendents and inspectors for claims in respect of daily travel from home to office and return during 2013-2014. No written authorization has been provided to support these monthly payments which range from $760 to $1,780.
This practice should be discontinued as there is no justifiable reason why officers should be routinely paid for travelling to and from work without authorization from the Ministry of the Civil Service.
It is recommended that management could consider proposing commuted allowances for officers holding the ranks involved.
Register of fixed assets not prepared. An up-to-date register of fixed assets was not in place at the time of the audit inquiry. A list of fixed assets should be prepared, and the net book value reconciled with the total of $6 million shown as the value of the department’s fixed assets in the Financial Statements.
It is recommended that management should ensure that all Government property for which it is responsible is properly recorded and can be easily identified.
Overdrawn salaries. Overdrawn salaries at March 31, 2014, totalled $442,679, which was $33,027 more than the corresponding balance of $409,652 at March 31, 2013. Some of the individual balances were substantial and had accumulated over a considerable period. According to information received, the contributing factors include delays caused by the issuing of letters authorizing salary adjustments, as well as tardiness by the Human Resources Section of the force in submitting the relevant information to the Accounts Section. This matter needs urgent remedial action.
Firearms licences not renewed. There were 755 firearm licences at March 31, 2014, which were not renewed by the due date. Some of these have been outstanding for as many as nine years, and the status of the firearms for which these licences were issued was unknown at the time of the audit.
It is recommended that the unpaid fees for firearm licences issued should be recorded in a receivable account as required under Government’s accrual system of accounting. The unknown status of such a large number of firearms is a cause for concern which needs to be investigated urgently.
MINISTRY OF AGRICULTURE, FOOD, FISHERIES AND WATER RESOURCE MANAGEMENT
Revenue Management. The management of receivables in the marketing facilities was poorly managed in terms of record keeping and revenue collections as follows:
(a) 0175 –– Marketing facilities. The arrears for rent at markets was recorded as $197,098.47 as at March 31, 2014. However during a review by the auditors it was noted that this figure did not include the balances brought forward as at April 1, 2013, for Bridgetown, Cheapside and Six Roads Markets. As a result the amount receivable was understated.
(b) Collection of rent receivable –– High Street Mall. A check of the records at the High Street Mall revealed that the rent receivable included an amount of $37,800 owed by a tenant. The last payment by that tenant was on November 23, 2013, relating to the month of May, 2009. An agreement had been entered into in respect of repayments, but this was not adhered to.
This situation is due to the failure of the management of the markets to take early remedial action against this tenant.
It is recommended that the ministry should ensure that the outstanding balances of the accounts receivable are accurately brought forward. This would ensure that the correct figure is recorded and transmitted to the Treasury for inclusion in the Financial Statement and that all receivables are accounted for.
Action should be taken to prevent lengthy build-up of arrears by individual tenants.
Rental revenue. The Audit Office requested documentation to enable a recalculation of
rental revenue for the year ended March 31, 2014, but this information was not provided. In the absence of documentation such as the number of tenants and rental rates, the rental revenue could not be verified.
It is recommended that the ministry needs to provide the Audit Office with the documentation required to facilitate the verification of revenue recorded. The absence of this information has affected the ability of the auditors in verifying the rental revenue, and in determining whether all revenue has been accounted for.
Fixed asset register. The fixed asset register was not updated for the period ended March 31, 2014, with the assets purchased and disposed of during the period under review. This made it difficult to verify the accuracy of the information presented.
It is recommended that the ministry ensure that all assets purchased and disposed of are recorded and categorized correctly in the Asset Register.
Insurance coverage and revaluations. No evidence was provided to substantiate that assets of the ministry other than vehicles were insured for the period April 1, 2013, to March 31, 2014. This is a breach of the Financial Management And Audit Rules 78 (5).
The ministry holds several high valued pieces of equipment, and the absence of insurance coverage has exposed the ministry to the risk of not being able to recover compensation for assets lost or damaged during the period.
It is recommended that the ministry ensure that all its assets are insured and safeguarded.
The internal controls relating to the administration of contracts revealed a number of deficiencies as follows:
(a) Contracts with suppliers for a number of goods and services were not made available for audit inspection.
(b) Written quotations for the supply of goods and services between $50,000 and $200,000 were not obtained as required by the Financial Rules.
It is recommended that the ministry ensure that all contracts for goods and services are available for inspection, and that it receives the necessary quotations prior to initiating purchases. This should ensure that it receives the best available price under the circumstances as is required by Financial Rule 221(2) (a).
Preparation of financial reports. The ministry failed to submit to the Auditor General’s Office the statement of performance, a schedule of capital assets at the balance date, a statement of commitments and other liabilities, and such other statements as necessary to fairly reflect the financial operations of the ministry in accordance with the Financial Management And Audit Act, Section 22 (3b).
It is recommended that the ministry should ensure that all reports are submitted as required by the Financial Management And Audit Act.
Stock of drugs not properly accounted for. There were several deficiencies in respect of the annual stock count of drugs carried out in March, 2014, by the Drug Service. Numerous differences between the balances in the stock records and the corresponding stock were observed. These were some substantial differences for which no satisfactory explanation has been provided. It is noted that similar occurrences have been reported over the past ten years.
There was no documented evidence of occasional surprise checks being carried out. Such checks would indicate in timely manner whether accurate records are being maintained and the stock properly accounted for.
It is recommended that management reassess the performance of its computerized stock management system (PHARMS) which has been in use for many years, and determine if it could be upgraded or if an alternative system
is required to meet the needs of the department. There should be training provided for those persons who operate the system.
Management should institute appropriate investigations when significant differences between stock records and stock on hand occur.
Overpayments. Three former officers of the Geriatric Hospital retired from the Public Service and according to the hospital’s records were indebted to the Crown for a total of $178,619.94. It is quite alarming that the hospital would allow a build-up of such large amounts by the officers.
It is recommended that the hospital inform the Accountant General of this situation so that measures could be put in place to recover the overpayments from their retiring benefits. The controls in the accounts section should be strengthened to avoid any repetition.
Preparation of financial reports. The Licensing Authority failed to submit to the Auditor General’s Office the requisite financial report as requested by the Financial Management And Audit Act Section 22 (3) b. These reports include a schedule of capital assets at the balance date, a statement of commitments and other liabilities, and such other statements as necessary to fairly reflect the financial operations of the Licensing Authority. These reports are required to verify the amounts reported in the Government’s Financial Statement on behalf of the Licensing Authority.
Insurance coverage. No evidence was provided to substantiate that assets of the Licensing Authority, other than vehicles, were insured for the period April 1, 2013, to March 31, 2014. The Licensing Authority has in its possession, high valued equipment and therefore this matter should be promptly addressed. This lack of insurance coverage has exposed the Licensing Authority to the risk of not being adequately compensated for assets lost or damaged during the period.
It is recommended that the Licensing Authority ensure that all assets of the Crown are insured and safeguarded.
Utilities –– telephone charges
In a prior year’s audit, it was revealed that billings were received for telephone numbers which did not reconcile with the telephone numbers recorded within the Licensing Authority’s ledgers. This situation resulted in the Licensing Authority paying $7,028.85 for services which it did not receive. This matter is still outstanding.
It is recommended that the Licensing Authority carry out an audit of all its telephone numbers to ensure that it is only paying for service it receives.
Accrual accounting. During the financial year 2013-2014 the Licensing Authority collected revenue totalling $66 million. [It] reported this revenue on a cash basis, that is, only when cash was received; but this is contrary to the accrual system of accounting.
The Government of Barbados adopted the accrual basis of accounting from financial year 2007-2008. This means that all revenue earned must be accounted for whenever a transaction occurs and not when money is received. Reporting on the cash basis inferred that the Licensing Authority did not report the accurate amount of revenue for the period under review.
It is recommended that the Licensing Authority account for its revenue using the accrual basis.
Documents requested; not presented. Section 39 of the Financial Management And Audit Act, 2007-11 stipulates the Auditor General should at all times have access to all books, records and data held or stored electronically for examination purposes. Information required for the execution of the audit was requested. However it was not provided. The absence of such information impeded the performance of an effective audit.
As a result, the auditor was unable to verify whether all monies due were adequately accounted for. The failure to provide the Auditor General with requested information is a breach of Section 39 of the Financial Management And Audit Act, 2007-11 and should not be tolerated by management of the Licensing Authority.
It is recommended that the Licensing Authority adhere to Section 39 of the Financial Management And Audit Act, 2007-11. All documents should be safely secured and presented for audit inspection.
NATIONAL LIBRARY SERVICE
Uninsured assets. There was no insurance policy in place for furniture and fittings at the following branch libraries: Eagle Hall, Gall Hill, Holetown, Oistins, Six Cross Roads, Tamarind Hall and The Valley. The absence of insurance coverage leaves the department at risk of having to pay the full cost of replacing equipment in the event of fire or theft.
It is recommended that the department ensure all assets are adequately insured.
MINISTRY OF EDUCATION, SCIENCE, TECHNOLOGY AND INNOVATION
Overdrawn salaries. Outstanding balances totalling $498,031.52 were reflected in the ministry’s schedule of overdrawn salaries as at March 31, 2014. This total comprised approximately 196 accounts, some of which were substantial, including one for $80,715. There were approximately 80 new persons added to the list between September, 2013, and March, 2014, an indication that this issue has become more widespread.
Some of the balances had accumulated over long periods without detection, and in many instances no repayments have been made. Enquiries have revealed that authorizations for the accounting personnel to make salary adjustments are often delayed at the personnel administration department and the ministry’s personnel section for various reasons.
It is recommended that management needs to carry out a thorough investigation to determine why relevant authorizations are not communicated to the accounts section in a timely manner, and why some outstanding balances are not being repaid and take the necessary action to rectify the situation.
Indebtedness to the University of the West Indies. Correspondence from the University of the West Indies indicates that a balance of $131,974,893 was due by the Government of Barbados at July 31, 2014, in respect of contributions, tuition fees and other obligations to that institution. The balance outstanding as at March 31, 2014, was not provided to the Audit Office by personnel from the Ministry of Education as requested.
It should be noted that the liability to the university was not reported in Government’s Financial Statements. This ministry needs to put systems in place to verify amounts billed and due to the university. This outstanding balance should be forwarded to the Treasury for inclusion in the accounts of the Government. As a result of the omission, Government liabilities are substantially understated in the Financial Statements.
It is recommended that the ministry needs to ensure that it receives all relevant details which are needed for verification of the amounts owing to the University of the West Indies. This information should be provided for audit verification and submitted to the Treasury for inclusion in the Government’s accounts.
Ministry of Education, Science, Technology and Innovation response:
Overdrawn salaries. “In cases where persons are owed arrears of salaries any overdrawn salary is deducted from the amount due to the employee in accordance with the Financial Management And Audit (Financial) Rules, 2011 Section 180(2). The ministry will implement a system which accelerates the provision of information concerning teachers’ absences or leave to the accounts section. A written reminder will be sent to principals to report the absence of teachers in a timely manner.”
Continued here: More concerns for the Auditor General.