An independent auditors’ report has revealed an appalling finance and accounting mess at the state-owned Transport Board from as far back as seven years ago.
And there has been an absence of audited financial statements at the cash-strapped, state-owned, bus company since then, according to the financial probe.
The audit, which inspected financial statements for the year ended March 31, 2011 and conducted by accounting firm Ernst & Young last year could not confirm the source of $48.9 million the Transport Board received.
When Barbados TODAY reached out to the Chairman of the Transport Board Gregory Nicholls tonight, he confirmed that the auditors had an issue with the source of the $48.9 million which was received by the bus company.
“I can confirm that the $48.9 million of which you speak, the issue the auditor had was that there was no substantiated information to confirm the revenue. But it was money the Transport Board received from transfers to Crown Government for subsidies for paying for pensions, school children et cetera. But that money has already been spent, so it is not an issue. It is that there was no ability of the auditors to confirm that the money came into Transport Board. So they had issues with that,” Nicholls, an attorney at law, said.
He noted that when the auditors checked with the Government, which is the usual source of funding, they did not get a satisfactory response.
The auditors seemed to face problems of one kind or another in being able to dig deeper to ascertain the basis for a series of financial transactions, according to the report dated December 6, 2017.
The Ernst & Young investigators issued a “disclaimer opinion”, citing five key areas in which they found difficulty in accessing critical information from Transport Board management, preventing them from carrying out their responsibility to express an opinion on the financial statements in accordance with international financial reporting standards.
Auditors give a disclaimer when they are unable to give a definite opinion. A lack of properly maintained financial records or the absence or insufficient support from management usually prompts this opinion, one of four possible opinions in audits.
A disclaimer opinion may be issued if an auditor has not had the opportunity to fulfill crucial tasks, such as observing or reviewing certain procedures or operations.
Under the sub-heading of Basis for Disclaimer of Opinion the auditors said they were unable to access the inventory application and therefore could not perform their audit procedures on the inventory balance of $4,410,902 (2010:$3,704,495).
“We were also not able to audit the associated income statement accounts,” said the report.
The chartered accountants also revealed that they could not verify clearance of a significant portion of the balances in the Board’s accounting records for cash, which are supposed to match the corresponding information on the bank statement.
This, the investigators reported, related to the bank’s information which is supposed to support an overdraft balance of $9,922,328 (2010: $4,659,916).
“Consequently, we were unable to obtain sufficient appropriate audit evidence for the overdraft balance as of 31 March, 2011 and revenue amounting to $48,973,325 (2010: $46,716,228) for the year ended 31 March, 2011,” the auditors disclosed.
The Ernst & Young officials outlined other cases in which they experienced stumbling blocks in doing the job they were hired by the Board to do.
“We were unable to obtain sufficient appropriate audit evidence for additions to leasehold buildings and buses amounting to $77,437 (2010: $244,966 and $3,652,221) respectively,” the report stated.
The auditors recorded repeated hurdles at the state-run bus company in trying to do a thorough inspection of its books.
“We were unable to confirm Government contributions included in equity capital amounting to $37,242,870 (2010: $18,393,480) and consequently we could not opine on the fairness of equity capital of $452,416 384 (2010: $415,173 514),” the probe added.
The independent auditors said, too, they were unable to examine the associated comprehensive income statement accounts.
“We were unable to obtain sufficient and appropriate audit evidence for accounts payable and accrued liabilities amounting to $937,969. As a result of these matters, we were unable to determine whether any additional adjustment to the financial statements might have been required,” the report noted.
The Ernst & Young chartered accountants also drew attention to Note 2 in the financial statements, which recorded a net loss for the Board of $59,745,448 for the year then ended March 31, 2011 (2010: $64,682,167).
And as at that date, the report pointed out, the bus company’s deficit amounted to $108,750,951 (2010: $86,248,373).
“These conditions indicate the existence of material uncertainty that may cast significant doubt about the Board’s ability to continue as a going concern without the support of the Government of Barbados,” the auditors concluded.
It was the management’s responsibility for the preparation and fair presentation of the financial statements in accordance with international financial reporting standards, the auditors stressed.
“And for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error,” the independent audit report said.
Nicholls told Barbados TODAY the board had indicated to auditors Ernst & Young dissatisfaction with the absence of audited financial statements going back to 2011.
“They have told us what is the problem in terms of the production of each financial statement and we have put the necessary arrangements in place to complete the audit to bring us into compliance with the requirements of the law,” the board chairman said.
He said the Board was working “assiduously” to complete reports for the years 2012 to 2015. He said the auditors have agreed what they would put into those reports according to their professional assessment of the situation.
“They have also told us that they are in a position, because of the review of the financials in ‘15,’16,’17 to do those. We are putting that in place so that the Transport Board could be brought up to compliance,” the attorney added.