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BRA chided for accounting practices

by Emmanuel Joseph
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Auditor General Leigh Trotman

The Auditor General has said the Government’s revenue collection agency did not follow the law regarding the nature of the financial information it submitted for the fiscal year ending March 31, 2019.

“The submission of financial information for revenue collection was not in accordance with Section 22 (3) (c) of the Financial Management and Audit Act 2007-11, and did not follow generally accepted accounting principles, Leigh Trotman said about the Barbados Revenue Authority (BRA) in his annual report for 2019.

“The authority should take the requisite action to ensure that the information produced in the financial statements is accurate, properly classified, follows generally accepted accounting principles and is useful to the stakeholders,” Trotman recommended.

In his examination of the statement of revenue collected, he said there was nothing to justify that the BRA had actually collected the $2.04 billion it had reported.

“The auditors were unable to verify the amounts submitted in the statement as a result of a number of errors and omissions,” he explained.

In outlining the main issues arising from the audit of revenue collection of BRA, the Auditor General found that Valued Added Tax (VAT) had been overstated by $31 million.

“Valued Added Tax revenue was reported as $644.4 million. This was inclusive of $31 million which related to amounts already included as revenue in previous financial years. Hence, VAT revenue was overstated by $31 million in this regard,” he stated.

He said that in addition, cash payments made in respect of outstanding VAT amounts dating back to 1999, were recorded as revenue in the current financial year.

However, Trotman said cash collections for sums owing for previous years are not to be classified as revenue since amounts were included in earnings for prior years.

“This resulted in an overstatement of VAT revenue by $27.4 million. The authority needs to provide the necessary monitoring of transactions and possible training of staff, so that officers are aware of the various accounting treatments for transactions.  This would ensure taxes are accurately recorded and classified,” the Auditor General added.

He also reported his findings on taxes on income and profits and complained of being prevented by BRA from completing his investigation.

“The amounts for taxes on income and profits included $190.6 million recorded in the E-Tax computerized system.  However, access to this system was not granted to the auditors, thus prohibiting the verification of taxes on income and profits. Similar restrictions also occurred in previous years and were reported to management, but no action has been taken to rectify this situation,” the Government’s chief auditor revealed.

Just as in the case of VAT, he said corporation tax revenue which was reported as $539.7 million, was also overstated, but by $244 million.

He explained that the overstated amount related to the previous financial year.

Trotman also  pointed to the $1.5 billion which BRA reported for net tax receivables.

“This amount did not include amounts owed prior to tax year 2013 for income tax and corporation tax. The reported amounts therefore did not represent total taxes outstanding,” the Auditor General disclosed.

In his examination of the highway revenue receivables, he found that no schedule was provided to support the $300,000 reported as amounts outstanding. “The auditors were therefore unable to verify this figure,” he pointed out.

The Auditor General also revealed that transactions of $20.8 million were not captured in the ledger accounts submitted by BRA.

He explained that payments from taxpayers in respect of VAT and taxes on incomes and profits are collected by cashiers and then posted to the ledger account via a journal voucher.

Trotman said the balances in this ledger are reconciled with totals on the bank statement at the end of the financial year.

“The audit revealed that amounts totalling $20.8 million of these transactions were not posted to this ledger account. This failure to post these amounts has adversely affected the reconciliation process and the accuracy of the accounts,” he submitted.

Trotman also called for urgent action to be taken to clear the differences from the Bank Reconciliation Statement of BRA. He noted that the authority’s bank account recorded about $17 million as “other reconciling differences” at March 31, 2019.

“This “reconciling difference” has been brought forward each month from May 2018 to March 2019,” he stated.

The Auditor General also brought to light other omissions he discovered in the ledger account.

“For the months of June and December 2018 and March 2019, payments made directly to the authority’s bank account totalling $48.6 million were not posted to the ledger account, resulting in misrepresentation balances in the ledger,” he declared.

“It was observed that for the month of July 2018 credit card payments totalling $1.7 million were not recorded in the ledger account, thus resulting in misrepresented balances in this ledger,” Trotman said.

He noted that daily credit card payments received by BRA’s cashiers are reflected on the bank statement and should also be recorded in the ledger account.

“These omissions indicate that not enough attention is being paid to the recording of bank information in the ledger. This will have negative implications for accurate record keeping of information and for the reconciliation of the bank accounts,” the Government’s chief auditor warned.

Trotman also pointed out some concerns regarding financial reporting.

He said that while reference is made in the Statement of Financial Position to a $26.2 million General Fund, it remained a mystery what it is all about.

“There is uncertainty of what this balance represents and how it was derived. There is also reference to ‘other receivables’ of $460 million which do not relate to any assets but purportedly represents refunds by the Treasury,” he declared.

Regarding issues related to the TAMIS system and taxpayers’ balances, Trotman noted: “Taxpayers’ balances from the previous tax systems have not been integrated into the new TAMIS system,” he stated.

“The authority needs to put measures in place to ensure that the balances from the old systems are verified and integrated into the TAMIS system as soon as possible, so that taxpayers’ information is located on one system, and that it provides accounting information that is complete and up-to-date as this is currently not the case.” 
emmanueljoseph@barbadostoday.bb

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