REPORT OF THE AUDITOR GENERAL

Transcription

1 KINGDOM OF LESOTHO REPORT OF THE AUDITOR GENERAL On the Public Accounts of Lesotho FOR THE YEAR ENDED 31 ST MARCH 2007 PRICE : M50.00

2 VISION We aspire to be a leading Supreme Audit Institution that promotes public accountability and transparency. MISSION To promote sustainable public accountability and transparency, by providing professional auditing services to all stakeholders whilst creating a respectful workplace where our diverse workforce can strive for excellence and realize their full career potential. VALUES We focus on the following values when conducting the work and ourselves; Independence and objectivity Serving the public interest Commitment to excellence Respectful workplace Trust and Integrity Disciplined Workforce

3 A/C/REP/ JULY 2009 Honourable Dr. T. Thahane Minister of Finance and Development Planning Ministry of Finance and Development Planning P O Box 395 MASERU 100 Honourable Minister, A REPORT ON THE PUBLIC ACCOUNTS OF LESOTHO FOR THE YEAR ENDED 31 ST MARCH, 2007 As required by Section 117 (4) of the Constitution of Lesotho and Section 6(1) of the Audit Act 1973, I submit my report on the Public Accounts of Lesotho for the year ended 31 st March, Please arrange to lay the report before the National Assembly in terms of the same Section of the Constitution and Section 6(1) of the same Act. Yours faithfully LUCY L. LIPHAFA (MRS) AUDITOR GENERAL

4 TABLE OF CONTENTS Paragraphs Pages AUDIT CERTIFICATE 1 SUMMARY REPORT 2-9 PART 1 Public Accounts 2006/ PART 2 2. INTRODUCTION Audit Report Audit Mandate Submission of Accounts Scope of the Audit Financial Legislation Statements of Responsibilities Parliamentary Control Public Accounts Committee 38 PART 3 3. ASSETS AND LIABILITIES ASSETS LIABILITIES PART 4 4. ABSTRACT ACCOUNTS Resources of the Government of Lesotho Recurrent Account Capital Account PART 5 5. PRE-AUDIT OF TERMINAL BENEFITS PART 6 6. MINISTERIAL PARAGRAPHS Ministry of Agriculture and Food Security Ministry of Health and Social Welfare Ministry of Education and Training Ministry of Finance and Development Planning

5 6.5 Ministry of Trade, Industry, Cooperatives 113 and Marketing 6.6 Ministry of Justice, Human Rights and Rehabilitationary Affairs 6.7 Ministry of Home Affairs and Public Safety Prime Minister s Office Ministry of Communication, Science and Technology 6.10 Ministry of Law and Constitutional Affairs Ministry of Foreign Affairs and International Relations 6.12 Ministry of Public Works and Transport Ministry of Forestry and Land Reclamation Ministry of Natural Resources Ministry of Labour and Employment Ministry of Tourism, Environment and Culture 6.17 His Majesty s Office Ministry of Defence and National Security Ministry of Local Government Ministry of Gender and Youth, Sports and 149 Recreation 6.21 Ministry of Public Service 150 PART 7 7. GENERAL MATTERS

6 AUDIT CERTIFICATE ON THE PUBLIC ACCOUNTS OF LESOTHO FOR THE FINANCIAL YEAR 2006/07 I have examined the Statement of Assets and Liabilities and related statements on the Public Accounts of Lesotho for the financial years ended 31 March The Accountant General is responsible for the preparation of the accounts in accordance with Section 27 of Finance Order It is my responsibility to express an opinion on these statements based on my audit in accordance with Section 117 of the Constitution and Audit Act I have conducted my audit in accordance with Generally Accepted Auditing Standards. Those standards require that I plan and perform the audit to obtain reasonable assurance on whether the financial statements are free from material misstatement. My audit included Examining on a test basis, evidence supporting the amounts and disclosures in the financial statements Assessing the accounting principles used and significant estimates made by management, as well as Evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. Disclaimer of Opinion: Due to material uncertainties within the accounts and limitation of scope regarding the regularity of expenditure, I am unable to express an opinion as to whether the financial statements set out on pages 10 to 34 present fairly the state of affairs of the Government of Lesotho, and in particular the financial position as at 31 March The three key reasons for this disclaimer of opinion are set out in paragraphs 8 to 28 of my Summary Audit Report. L.L. LIPHAFA (MRS) 6 JULY 2009 AUDITOR GENERAL 1

7 Auditor General s Summary Report on the Public Accounts for the Financial Year 2006/07 Introduction 1. The Government of Lesotho accounted for recurrent expenditure of M4.42 billion and capital expenditure of M580 million for the financial year 2006/ The accounts are prepared on a cash basis in accordance with Section 27 of Finance Order The accounts are not yet fully compliant with International Public Sector Accounting Standards (IPSAS) for cash-based accounts as Parastatals accounts are not consolidated into the accounts. It is the intention of the Accountant General to move towards full IPSAS compliance in future. 3. The issue of negative opinion on the Public Accounts of Lesotho still prevails in 2006/07 and it has become a public concern which suggests that it should be seriously addressed by all parties concerned. The Minister of Finance and Development Planning has also expressed his concern, in the previous budget speeches, that public accounts have been produced late, in batches of three years and with heavy qualifications by the Auditor General. He indicated that the Government had already embarked on a Public Financial Management Reform Programme which, among other things, encompasses the clearance of a backlog of accounts for 1996/97 to 2000/01 through the preparation of a Financial Statement of Affairs. 4. The Accountant General in his explanatory notes to the accounts had also indicated that despite the efforts that are being carried out to reconcile these accounts, the issue of a 5 year backlog of accounts will remain an overarching problem as to the reliability of the balances as reflected by the GOLFIS system. His comment already calls for qualification of the accounts. 5. In this summary report I provide an analysis of the underlying causes for the disclaimer to the accounts. 2

8 Statement of Responsibilities 6. It is my responsibility to examine the Statement of Assets and Liabilities and the related statements of the Public Accounts of Lesotho for the year ended 31 March The Accountant General is responsible for the preparation of the accounts in accordance with Section 27 of Finance Order It is my responsibility to express an opinion on these statements based on my audit, in accordance with Section 117 of the Constitution and Audit Act Audit Opinion qualified opinion (disclaimer) due to material uncertainties within the accounts and limitation of scope regarding the regularity of expenditure 7. I have already indicated in paragraph 3 that I am giving a negative opinion on the 2006/07 on the state of affairs of the Government of Lesotho, and in particular the financial position as at 31 March The reasons for qualification are not different from the ones stated in my previous reports. The main reasons I am unable to express an opinion are set out at (a) to (c) below, and the limitation of scope regarding regularity is set out at (d) below. (a) Non-compliance with accounting principles and the Government Accounting Manual 8. The Public Accounts are not presented in accordance with any defined standards such as International Public Sector Accounting Standards (IPSAS) for accounts presented on cash basis. As a result there is lack of clarity in the presentation of the accounts, and in particular the definition and status of items contained within the Statement of Assets and Liabilities are unclear. Some of the supporting notes to the Statement of Assets and Liabilities are made up of a mix of debit and credit balances without explanation as to why this is the case. 3

9 i) Non-reconciliation of Treasury GOLFIS ledger with Ministries records 9. A further related matter is the failure to reconcile outputs from the Government of Lesotho Financial Information System (GOLFIS) to the Ministries records. This is a fundamental reconciliation requirement without which reliance cannot be placed on the figures reported by GOLFIS. 10. The underlying reasons for this lack of compliance are: The pervasive level of error in the accounts that has been brought forward from the past years. The Treasury Department staff preparing the accounts not familiar with the GOLFIS ledger system and the accounting manual, and this causes a large number of errors when postings are made to the ledger. Supervision of the accounting function in the Treasury Department is not strong enough to prevent errors arising and to correct those that happen. Training of accounting staff at the Treasury Department and provision of support materials (such as the Accounting Manual) is not adequate. Staff from the Ministries has not provided adequate information to the Treasury Department to enable reconciliation of GOLFIS to Ministries records. 11. As a result of the above factors, I have not been able to obtain satisfactory explanations for the presentation of assets and liabilities in the accounts and the supporting notes. This casts doubt on the original entries made to the GOLFIS ledger system to the extent that I cannot rely on the output from that system. (b) Disclosure and reconciliation of bank accounts 12. Lesotho Government has a number of bank accounts opened with commercial banks. I was not able to verify the balances with these banks against balances reflected in the Public Accounts, as the bank statements were not made available for my verification. The only statements I was able to verify were those provided by the Central Bank of Lesotho. 4

10 13. The Accountant General has indicated in the explanatory notes that if cash accounts are properly maintained and reconciled, they should reflect a zero balance at the end of the financial year. He further states that due to non-reconciliation of the bank accounts, especially for CBL accounts the GOLFIS ledger reflects unrealistic balances. 14. In support of his statement, I have noted with great concern a difference of M3.96 billion between the public accounts and bank statements. The public accounts show an overdrawn balance of M1.81 billion whereas the Central Bank statements reflect a favourable balance of M2.15 billion. That was basically caused by the non-reconciliation of Treasury and bank records and it should be noted that reconciliation is the fundamental requirement in any accounting environment hence the financial regulations require that monthly bank reconciliation be made. 15. I have already stated that I was not provided with the bank statements from commercial banks. The Accountant General wrote a letter to all banks requesting them to provide my office with confirmation of bank balances as at 31 March 2007 for all Lesotho Government accounts. Unfortunately the commercial banks never responded and as such I could not confirm the accuracy and completeness of figures appearing in the public accounts. This noncompliance causes a serious concern that accounts are not being managed correctly and that there may be other Government bank accounts that have been omitted from the accounts and this could cause material omissions in the reported cash balances of the Government. 16. The commercial banks failed to fulfil the requirements of Finance Order 1988 in respect of Government bank accounts as they failed to provide details of all Government bank accounts maintained by their institutions. This is despite the Accountant General s communication with the banks about the requirements of Finance Order

11 17. The most fundamental concern regarding the management of bank accounts is that most accounts have not been reconciled for the past years. There are a number of reasons why the Treasury Department has been unable to reconcile the bank accounts: Lengthy backlog of un-reconciled accounts and in many cases there is no documentation to facilitate these reconciliations to be completed, and to go back and reconcile this period would be intensive and unlikely to be successful due to lack of supporting documentation. Even without such a significant backlog, there are insufficient numbers of appropriately qualified/ trained staff to complete all the reconciliations on a monthly basis. The oversight of the Accountant General s office is not adequate, and does not ensure that Ministries and Districts submit reconciliations and supporting information on a monthly basis, and failure to submit reconciled accounts carries no sanctions or risks to continued funding. (c) Unsupported balances in GOLFIS: Clearing Accounts, Special Funds, Deposits, Advances and Imprests 18. There are a number of line items in the accounts some of these are below the line accounts i.e. (non-budgeted items) that represent either assets or liabilities of the Government. Advances-Clearing Accounts M4.43 billion 19. These advance accounts represent loans to the corporate bodies. The balance of the advances-clearing accounts on the statement of assets and liabilities was M4.43 billion for financial year 2006/07. A large portion of this balance represents one clearing account called Opening Balances with an amount of M4.47 billion. I have not been provided with the supporting information for this account and it would appear it does not represent genuine asset of the Government. 6

12 Special Funds M377 million 20. Administrators of Special Funds are required to provide financial statements to my office for audit on an annual basis, but in most cases statements have not been provided and if provided they reflected different figures from those presented in the Public Accounts. Some Administrators of Funds have never submitted statements, and some of them are dormant. Due to lack of supporting information for these funds, I cannot form a view on the amount of M 377 million presented in the 2006/07 accounts. Deposit Accounts M1.27 billion 21. The main use of the deposit accounts is to record receipts which are held temporarily to be refunded to the payer or third party. The depositors are required to maintain independent records and to reconcile their records with Treasury records. However the balance of M1.27 billion has not been confirmed by the responsible ministries and departments on the basis of their records and as such the correctness of the figure remains doubtful. 22. In this balance of M1.27 billion, there is an amount of M0.94 billion representing Accountant Sundries. Accountant Sundries serve to hold funds temporarily which cannot be immediately given their correct classification code or funds received for onward transmission to some other destination. In my audit report for the financial year 2001/2002, I had stated that amounts totalling M0.86 billion from Lesotho Highlands Revenue Fund have been transferred to this deposit account instead of the Consolidated Revenue Fund as required by Lesotho Fund for Community Development regulations. No action seems to have been taken to regularise the position hence the huge balance. Advances and Imprests (M 116 million) 23. Advances and Imprests are given for a number of reasons petty cash for districts, ministries and overseas missions, official travel and expenses, or advances to individual Government Officers due to shortfalls that have arisen in the performance of their duties, for which the individual is responsible for making good the loss to the Government. If the Advances or Imprests accounts are properly 7

13 maintained, they should show either a debit or nil balance at the end of the financial year. 24. For the 2006/07, the advances and imprests were showing a credit balance of M116 million which implies that the repayments were more than the actual advances. Due to lack of supporting information for this balance, I cannot form a view on the amounts presented in the accounts. (d) Regularity of expenditure 25. Once again the issue of charging expenditure to different heads without Parliamentary approval has emerged. During the financial year 2006/07, the first supplementary estimates amounting to M75,928,320 and second supplementary estimates totalling M187,839,135 were prepared and not approved by Parliament as there were no Supplementary Appropriation Acts for the year under review. Therefore I consider expenditure incurred based on these estimates illegal. Clearing advances amounting to M91,953,067 from the Contingencies Fund without the relevant Act is also against finance laws. 26. The majority of Government Departments expenditure exceeded their estimates as voted by Parliament on expenditure items. Specific mention should be made on the item Fuel and Lubricants whereby out of 27 voted heads, 19 heads exceeded their budget by M 24 million on this item. Excess expenditure totalling M200 million were incurred on 739 expenditure items during the financial year 2006/07. Viring from one item to another should have been considered as finance laws permit the Principal Secretary for Finance to approve a virement from one subhead with a surplus balance in aid to another subhead with a deficient balance. My opinion on this expenditure is qualified as I consider it to be irregular, having not been approved. 8

14 Other Matters 27. Other matters that I consider should be brought to the attention of Parliament are significant issues arising from Inspection Audits. 28. In accordance with the audit strategy my staff has undertaken several audits of Ministries and Departments. There were a number of findings that were repeated across a number of Ministries and Departments which cause concern regarding non-compliance to government rules, regulations and procedures and the potential for fraud and loss to the Government that arises. Individual cases are rarely material in value, but are indicative of a lack of knowledge or commitment to following the Government s prescribed procedures: Irregular payments of salary due to unauthorised leave being taken or contracts not having been approved. Failure to maintain reliable records for the control of public assets Improper maintenance of accounting records especially vote control books which in most cases cause excess expenditure Failure to properly record and take responsibility for losses that have occurred regarding cash and property of the Government Failure to comply with accounting requirement and financial regulations on the reconciliation of records i.e. ministries, Treasury and bank records 29. Detailed recommendations have been made on these points to the relevant bodies, and follow-up on the progress made in implementing recommendations is done as part of normal audit procedures. 9

15 PART 1 GOVERNMENT OF LESOTHO ANNUAL PUBLIC ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH

16 EXPLANATORY NOTES TO THE BELOW THE LINE (BTL) ACCOUNTS CASH AT BANKS (401) This category of BTL accounts represents actual bank accounts maintained by the Government at the Central Bank of Lesotho (CBL) and at Standard Lesotho Bank for the Sub-Accountancies. If properly maintained and reconciled, there accounts should reflect a zero balance at the end of the financial year. However, due to non reconciliation of the bank accounts, especially for CBL accounts the GOLFIS reflects unrealistic balances. CASH FOREIGN MISSIONS (402) These are actual bank accounts maintained by the Government missions abroad. These accounts should also reflect balances or at least a minimal balance as a result of the impact of exchange rates. The ever increasing balances in these accounts indicate non reconciliation of the remitted funds to the Missions with the posting of the actual expenditure incurred by the Missions. CASH IN TRANSIT (404) This category represents the movement of money/funds from one office to another. These accounts should also reflect zero balances at the end of the financial year since the transactions clear each other e.g when money is transferred from Treasury to Sub-Accountancy the remittance vote is debited and when the Sub-Accountancy receives the money they issue an acknowledgement receipt which is going to be credited to the same vote. CASH WITH PROJECTS (405) These are projects that effect their payments outside GOLFIS and bring returns to the Treasury to be captured. IMPRESTS (411) These are advances made to Ministries/Departments and to individual public officers for specific purposes as covered by chapter 14 of the Financial Regulations. The main problem with these accounts is that imprests are not retired as stipulated by FR as a result huge balances are left over the years. 11

17 ADVANCES (423) These are advances raised mainly for cash shortages whereby an advance voucher will be raised as and when an officer has a shortage of cash and will be cleared by way of a repayment of the advance so raised. The problem here is lack of follow up and reconciliation of advances raised. ADVANCES PUBLIC OFFICERS (424) These accounts are mainly used for making recoveries from public officers of the loans advanced to them by the commercial banks since the Government is no longer offering any advances from the Government purse. The recoveries are subsequently remitted to the commercial banks. CLEARING ACCOUNTS (428) These are repayable loans made to different agencies by the Government with the exception of one vote with a huge balance which is used to transfer all BTL accounts balances to the following year. SUSPENSE CLEARING ACCOUNTS (431) These accounts are used for payment of goods and services supplied by the Exel and Imperial Fleet Services companies. The problem here is the lack of reconciliation of the initial lump sum paid to these companies and the subsequent charging of the relevant ministries and departments votes. This is covered by Section 19 of the Finance Order TRADING ACCOUNTS (432) These accounts are used for trading purposes by the departments that operate them. They supply goods or services to other Government Ministries at a minimal profit. The problem here is the proper maintenance of the books of accounts to reflect the actual financial position of the trading accounts. Reconciliation is also not being carried out as necessary. DEPOSITS (503) These are accounts that are covered by section 21 of the Finance Order The majority of these accounts are used for making third party deductions e.g. Insurance companies and Micro lenders. There are about one hundred and ninety (190) deposit accounts in this year alone and due to the magnitude of these accounts it becomes difficult to reconcile them. Even the ministries that are operating the deposit accounts are not reconciling them with Treasury records. 12

18 DEPOSIT-GENERAL (504) These accounts are mainly used by the districts to deposit monies that belong to third parties, in other words the money is held in trust. The problem here is also lack of reconciliation and proper maintenance of records to reflect the status of funds held in trust. SPECIAL FUNDS (511) Section 18 of the Finance Order 1988 stipulates that only the Principal Secretary has the authority to establish and close a special fund by notice in the gazette. Special funds have rules and regulations that are governing their operation, but in most cases these rules are not being observed, hence why we are having unrealistic balances in these accounts. Reconciliation of the accounts with Treasury records is also not done by the ministries that are operating these accounts. CONCLUSION Despite the efforts that are being carried out to reconcile these accounts, the issue of a 5 year backlog of accounts will remain an overarching problem as to the reliability of the balances as reflected by the GOLFIS system. 13

19 Notes to the Financial Statements Accounting Policies Basis of Preparation The Statement of Revenue and Expenditure has been prepared in accordance with the cash basis of accounting. Transactions and other events are recognized only when cash is received or paid. This policy has been applied consistently throughout the reporting period. The Statement of Assets and Liabilities has been prepared to include balances of financial assets, public debt, deposits and special funds as at 31 st March The Statement does not include non financial assts, accounts receivable, accounts payable, or the Government s liability in respect of civil service pensions. Reporting Entity The financial statements are for the Government of Lesotho and have been prepared in accordance with the Finance Order The financial statements cover the Consolidated Fund and other funds, and special accounts established under Section 18 of the Finance Order The financial statements do not include Government business enterprise under the control of the Government of Lesotho. Reporting Period The reporting period is the twelve months ended 31 March The Government of Lesotho Financial Regulation 1973 define the financial year as the twelve months ending on the 31 st day of March in any year, while the Finance Order 1988 requires public accounts to be prepared in respect of each financial year. Reporting Currency The reporting currency is Maloti. For loans denominated in foreign currency, the amount of principal and interest repayments is converted to Maloti at the exchange rate for the day of the transaction. The amount of the loan outstanding as at 31 st March is converted to Maloti at the exchange rate for 31 st March.

20 Government of Lesotho Consolidated Fund Statement of Revenue and Expenditure For the Year Ended 31 March 2007 REVENUE Notes M 000 M 000 Recurrent Revenue 1 6,298,773 4,359,778 Capital Revenue 2 224, ,731 TOTAL REVENUE 6,523,626 4,495,509 EXPENDITURE Recurrent Expenditure 3 4,228,198 3,585,667 Capital Expenditure 4 580, ,988 Principal Repayments 5 195, ,537 TOTAL EXPENDITURE 5,004,999 4,548,192 Surplus/(Deficit) at the beginning of the year (52,683) 33,135 Surplus/(Deficit) for the year 1,518,627 (52,683) Surplus/(Deficit) at the year end of the year 1,465,944 (19,548) 15

21 GOVERNMENT OF LESOTHO CONSOLIDATED FUND STATEMENT OF ASSETS AND LIABILITIES FOR THE YEAR ENDED 31 MARCH 2007 FINANCIAL ASSETS Notes M 000 M 000 Main Accounts (401) 6 (1,752,365) (3,110,229) Mission Accounts (402) 7 (58,970) (42,136) Cash with Projects (405) 10 (355,663) (372,859) Cash Investments (403 & 426) 8,15 305, ,431 Cash in Transit (404) 9 725, ,518 Clearing Accounts (428 & 431) 17,18 4,429,488 4,750,143 Advances and Loans (411, 423,424, & 425) 11,12, 13,14 (116,776) (216,139) Trading Accounts (432) 19 (4,648) 1,645 Dep-Unspent Grants/Loans (501) 20 (75,150) (75,150) Dep-Other (504) TOTAL FINANCIAL ASSETS 3,097,567 1,303,224 LIABILITIES Surplus/ (Deficit) for the year 1,518,627 (52,683) Dep-Other (504) 2,430 2,068 Deposits (503) 1,198,750 1,144,223 Cash with Special Funds (511) 377, ,616 TOTAL LIABILITIES 3,097,567 1,303,224 16

22 GOVERNMENT OF LESOTHO TRIAL BALANCE AS AT 31 st MARCH 2007 RECURRENT EXPENDITURE 4,424,070 DEBIT CREDIT M 000 M 000 RECURRENT REVENUE 6,298,773 CAPITAL EXPENDITURE 580,929 CAPITAL REVENUE 224,853 CASH AT BANK (401) 1,752,365 CASH FOREIGN MISSIONS (402) 58,970 CASH ON DEPOSITS 9,146 CASH IN TRANSIT (404) 725,750 CASH WITH PROJECTS (405) 355,663 IMPREST (411) 11,005 TRADING ACCOUNTS (432) 4,648 SPECIAL ACCOUNTS (511) 377,760 ADVANCES ( ) 105,771 INVESTMENTS ( ) 315,047 CLEARING ACCOUNTS ( ) 4,429,488 DEPOSITS ( ) 1,276,330 10,475,284 10,475,284 17

23 NOTES SUPPORTING STATEMENT OF RECEIPTS & PAYMENTS NOTE 1 RECURRENT REVENUE M 000 Ministry/Department 101 Agriculture and Food Security 4, Health and Social Welfare 12, Education and Training 4, Finance & Development Planning 6,080, Trade & Industry Cooperatives & Marketing 2, Justice, Human Rights & Rehabilitation 17, Home Affairs & Public Safety 18, Communications, Science & Technology 4, Law & Constitutional Affairs Public Works & Transport 7, Forestry & Land Reclamation Natural Resources 128, Employment & Labour 2, Tourism, Environment & Culture 1, Auditor General s Office Defence & National Security 2, IEC Local Government 11, Gender, Youth & Sports & Recreation Public Service 1,256 TOTAL 6,298,773 NOTE 2 CAPITAL REVENUE M 000 Ministry/Department 801 Agriculture and Food Security 19, Health and Social Welfare 24, Education and Training 53, Finance and Development Planning 19, Public Works & Transport 97, Natural Resources 10, ,853 18

24 NOTE 3 RECURRENT EXPENDITURE M 000 Ministry/Department 001 Agriculture and Food Security 107, Health and Social Welfare 335, Education and Training 902, Finance & Development Planning 526, Trade & Industry Cooperatives & Marketing 35, Justice, Human Rights & Rehabilitation 117, Home Affairs & Public Safety 202, Prime Minister s Office Communications, Science & Technology 42, Law & Constitutional Affairs 37, Foreign Affairs 152, Public Works & Transport 131, Forestry & Land Reclamation 31, Natural Resources 45, Employment & Labour 22, Tourism, Environment & Culture 39, Auditor General s Office 10, His Majesty s Office 6, Public Service Commission 3, Interest Charges 321, Pensions and Gratuities 297, Statutory Salaries & Allowances 11, Subscriptions To International Org. 29, Refunds Of Erroneous Rece Defence & National Security 268, National Assembly 31, Senate 8, Ombudsman 3, IEC 134, Local Government 231, Gender, Youth & Sports & Recreation 29, Public Service 12,482 TOTAL 4,228,198 19

25 NOTE 4 CAPITAL EXPENDITURE M 000 Ministry/Department 701 Agriculture and Food Security 9, Health and Social Welfare 50, Education and Training 110, Finance & Development Planning 53, Trade & Industry Cooperatives & Marketing 12, Justice, Human Rights & Rehabilitation 5, Home Affairs & Public Safety Prime Minister s Office 24, Communications, Science & Technology 14, Public Works & 89, Forestry & Land Reclamation 8, Natural Resources 60, Tourism, Environment & Culture 29, His Majesty s Office Lesotho Highlands Development Authority 68, Local Government 37, Gender, Youth & Sports & Recreation 6,151 TOTAL 580,929 NOTE 5 PRINCIPAL PAYMENTS M Principal Payments 195,872 TOTAL 195,872 20

26 NOTES SUPPORTING STATEMENT OF ASSETS AND LIABILITIES NOTE 6 CASH AT BANKS VOTE DISCRIPTION GOLFIS BALANCE AS AT ACTUAL BANK BAL AS AT M 000 M H/Q-NO1 A/C -934, H/Q-NO2 A/C 38, H/Q-NO3 A/C 16, H/Q-NO4 A/C 10, H/Q-NO5 A/C -27, H/Q-NO6 A/C - 462, H/Q REV A/C 18,408, NO 11 A/C MANUAL CHQ -210, C/B A/C BUTHA-BUTHE -20, C/B A/C BUTHA-BUTHE 6,686 3, C/B A/C LERIBE -17, C/B A/C LERIBE 13,154 3, C/B A/C BEREA -13, C/B A/C BEREA 9,873 4, C/B A/C MAFETENG 76 1, C/B A/C M/HOEK -25, C/B A/C M/HOEK 8,162 3, C/B A/C QUTHING 15, C/B A/C QUTHING 5,503 3, C/B A/C Q NEK -11, C/B A/C Q NEK 4,810 1, C/B A/C MOKHOTLONG -15, C/B A/C MOKHOTLONG 11,467 2, CROWN-AGENTS-CERRENT A/C 3, C/B A/C THABA-TSEKA -11, C/B A/C THABA-TSEKA 1,787 2, EXTERNAL DEBT A/C -1767, DOMESTIC DEBT A/C -565, CAPITAL EXPENDITURE 94, C/B RAND AGENCY SALES TAX C/B A/C INCOME TAX MAIN A/C CBL -16,286,126 2,111,450 TOTAL -1,752,365 2,139,165 21

27 NOTE 7 CASH FOREIGN MISSIONS VOTE DISCRIPTION GOLFIS BALANCE AS AT ACTUAL BANK BAL AS AT M 000 M NEW YORK (4,886) 1, WASHINGTON (6,266) LONDON (3,921) 1, OTTAWA (1,906) CAIRO-DOLLAR (1,336) CAIRO-EGYPTIAN POUND (881) BONN (5,828) BRUSSELS (10,356) ROME (11,037) TRADE MISSION/PRETORIA PEKING/BEIJING MISSION 3, PEKING/BEJING DOLLAR 4,199 1, LESOTHO-TOKYO (1,030) ADDIS ABBABA 2, JOBURG CONSULATE (795) DURBAN CONSULATE (1,397) GENEVA (4,253) 1, LIBYA-TRIPOLI 1, LIBYA-LYBYAN DINNER (5,559) 117, IRELAND-DUBLIN (2,330) NEW DELHI RUPPE (14,834) NEW DELHI DOLLAR 5, TOTAL (58,970) 11,505 NOTE 8 CASH ON DEPOSIT GOLFIS BALANCE VOTE AS AT M POST OFFICE FUND (9,146) (9,146) 22

28 NOTE 9 CASH IN TRANSIT VOTE DESCRIPTION GOLFIS BALANCE AS AT M REMIT SUB-AC TO ACGEN -7, REMIT REMIT MISSIONS 96, REMIT AG TO SUB-ACC 128, SALARIES MISSION 14, REMITTANCE AG TO PROJECTS 494,420 TOTAL 725,750 NOTE 10 CASH WITH PROJECTS VOTE DESCRIPTION GOLFIS BALANCE AS AT M EDU SECTOR DEV (33,411) EDUCATION SECTOR PROJECT (14,641) PSRIP DOLLAR CREDIT LINE 31, NAD GOL REH PROG (554) DISABLED SUPPORT (427) NAD REHAB PROGRAMME (347) HIV/AIDS CAPACITY (4,294) EARLY C. DEV (2,742) CONSTRUCTION SCH (2,909) EDUCATION DEV (30) EDUCATION DEV (7,847) ESDP II 79, CONSTRUCTION SCH (1,524) SUPPORT TB (608) TB CONTROL GLOBAL (7,979) SADMA IFAD 23, SADPMA LES COUNT (4,852) SADPMA APBCP IDA (1,031) APBCP LG (809) SUS AGR & NAT RES (3,857) SANREP IFAD FUNDS 15,360 BAL C/F 61,993 23

29 NOTE 10 CASH WITH PROJECTS VOTE DESCRIPTION GOLFIS BALANCE AS AT M 000 Bal B/F 61, ROAD SAFETY EDF (366) DISTRICT AIDS IMPROV (1,226) LIKALANENG THABA-TSEKA 20, STRUCTURES PROG (938) TLOKOENG ST. MARTIN (8,091) INTER. TRANS PROJ (6,337) MAPHOLANENG ST. MARTIN (394) REMOKOATSI-MASENG (5,136) FOOT BRIDGES (13,166) LIKALANENG THABA-TSEKA 76, NAPA (415) RURAL WATERSUPPLY (90,975) MASERU PERI URBAN 9, WATER SEC. REF. ID 11, LES NAT SEC IMPR (3,321) LES WATER SEC PROJ (2,087) MALOTI CONSEV & DEV (23,509) I CONSEV & DEV (9,235) DEV. OF MBFW LG (63) HEALTH SEC. REF. P (4,418) HEALTH SECTOR REFO 9, HEALTH SEC. REF. SUP (33,408) HEALTH REP. SEC C (42,462) HEALTH SECTOR REFO (820) EARLY CHILDHOOD DEV. (7,868) LES ENV SUP PRJ (186) E-GOVERNANCE (777) POPUL FAM LIFE EDUC (240) EDUC SEC II IDA 10, EDUC DEV SEC II LG (9,859) FREE PRIMARY EDUC LG (121,873) IRISH AID TO EDUC (61,245) EDUC SEC DEV PR I (403) Balance C/f 247,912 24

30 NOTE 10 CASH WITH PROJECTS VOTE DESCRIPTION GOLFIS BALANCE AS AT M 000 Bal B/F (247,912) EDUC SEC DEV PR I (2,640) MICRO PROJ. ADF (6,599) LES. UTILITY SEC 7, LES. UTILITY SEC (33,033) LESOTHO UTILITIES (9,130) LES MICRO ECON (2,568) POLITICAL EMPOWER (152) ADVOCACY COMPON (270) POLITICAL EMPOWER (109) HIV/AIDS GLOBAL (57,136) GLOBAL FUND HIV/AIDS (3,806) TOTAL (355,663) NOTE 11 IMPRESTS VOTE DESCRIPTION GOLFIS BALANCE AS AT M TREASURY STANDING IMPREST (1,667) TRAVELLING IMPREST (TOUR) (10,215) IMPREST (MISSIONS) 1, STANDING IMPREST M (401) 11,005 NOTE 12 ADVANCES VOTE DESCRIPTION GOLFIS BALANCE AS AT M CASH SHORTAGE H/Q (25) C/S SUB-ACCT C/S OTHER MINISTRIES C/S LERIBE C/S BERA C/S M/HOEK R/D CHQS-H/Q REV.A/C (375) R/D CHQS-SUBACCOUNTANCIES (1) PARASTATALS LOANS (202,031) TOTAL (201,619 25

31 NOTE 13 ADVANCES PUBLIC OFFICERS VOTE DESCRIPTION GOLFIS BALANCE AS AT M CAR ADV. LESOTHO BANK (1999) CAR ADV. NED BANK (786) CAR ADV. NED BANK (170) ADVANCES SALARY/STAFF 3, COMPREHENSIVE INSURANCE ADVANCES PENSION/GRATUITY 1, ADVANCES MINISTRIES (2,075) TOTAL 2,367 NOTE 14 INVESTMENTS SPECIAL FUNDS VOTE DESCRIPTION GOLFIS BALANCE AS AT M COUNTERPART CONTR NETWORKING OF COMP FINANCIAL SUPPORT 4, PABX TELEPHONE CENSUS 47, MCC COUNTERPART HOSTING OF SADC/EU 1, OFFICE SPACE 2, DISPOSAL OF BACKLO H COURT CRIMINAL JUSTICE-JH STEYN NEW RECRUIT 7, PRODUCTION OF PASSPORTS 4, FUNDS FOR SARCCO 1, STRUCTURAL CHANGES 1, CELEBRATION ACTIVITIES 5, SMALL PARTNERSHIP 1, TRIPS OF HONOURABLE HOSTING NATIONAL D CPTM LONDON SMART 1, WATER SUPPLY 2, PURCHASING & UPGRADING PURCHASING & UPGRADING NATIONAL CONVENTION TRAVEL TO THEIR MA SECURITY OPERATIONS 4, MOTOR BIKES FOR S 494 Balance C/f 92,232 26

32 NOTE 14 INVESTMENTS SPECIAL VOTE DESCRIPTION GOLFIS BALANCE AS AT M 000 Balance B/F 92, MEDICAL EXPENSES ZONE VI SADC 1, SADC MINISTERS 48 TOTAL 93,480 NOTE 15 INVESTMENTS (ABROAD) VOTE DESCRIPTION GOLFIS BALANCE AS AT M GROWN AGENTS-CALL 5, C.A. INVESTMENTS (FIXED) 21, C/AGENTS-SURPLUS BAL 87,025 TOTAL 113,590 NOTE 16 INVESTMENTS (SPECIAL FUNDS) VOTE DESCRIPTION GOLFIS BALANCE AS AT M RESERVE FUND 201,457 TOTAL 201,457 27

33 NOTE 17 CLEARING ACCOUNTS VOTE DESCRIPTION GOLFIS BALANCE AS AT M OPENING BALANCES 4,474, DORMANT BTL A/C (230,523) PARASTATALS LOAN (166) ODA 1 LINE (999) KFW NYENYE INFRUCTURE (44) ODA FACTORY SHELL ODA 111 FAC SHELL LNDC 8, RECONSTRUCTION OF LNDC 1, EIB P/PLASTICS EIB M/S PRINTING EIB CARCA F/WEAR EIB JADE F/WEAR 2, EIB U/CLOTHING 4, ODA 2 ND LNE OF CREDIT KFW LOTI BRICK 18, REPLACE SEBABOLELENG EXCHAN REPLACE MSU PENTEX MORJE 5, IDA THETSANE DEV. AREA 11 1, THETSANE DEV. AREA 11 8, LEC PMT TO ESKON 24, LONG TERM W/CAP FLOUR MIL 1, MSU PERI URBAN FROM BADEA 1, LOAN CAPITAL TO IMPERIAL 13, ELECTRICITY SUPPLY PROJECT 41, TIKOE INDUSTRIAL ESTATE 29, LINE OF CREDIT LNDC IDA IDA INDUSTRIAL INFRUSTRUCTURE 13, TELECOM LINE OF MOHALE 6, REPLACE SEBABOLENG EX EXP 2, REPLACE MSU PENTEX MORIJA 1, BEDCO LINE OF CREDIT - TOTAL 4,431,185 28

34 NOTE 18 SUSPENSE CLEARING ACCOUNTS VOTE DESCRIPTION GOLFIS BALANCE AS AT M EXEL IMPERIAL FLEET SERVICES (2,256) TOTAL (1,697) NOTE 19 TRADING ACC DESCRIPTION GOLFIS BALANCE AS AT M PRINTING MATERIAL (964) PRINTING PAPER (325) PRINTING STATIONARY (3,319) DAIRY CATTLE FUND (40) TOTAL (4,648) NOTE 20 DEPOSIT-UNSPENT GRANTS/LOANS VOTE DESCRIPTION GOLFIS BALANCE AS AT M BUDGET SUPPORT (75,150) TOTAL (75,150) 29

35 NOTE 21 DEPOSITS-OTHERS VOTE DESCRIPTION GOLFIS BALANCE AS AT M ACCOUNTANT SUNDRIES (945,358) AGRIC-ACC.SUNDRIES (467) FINANCE-ACC.SUNDRIES (6,082) HEALTH-ACC.SUNDRIES (361) EDUCATION-ACC.SUNDRIES (743) TRADE ACC.SUNDRIES (98) PLANNING-ACC.SUNDRIES JUSTICE-ACC.SUNDRIES (1,183) HOME AFFAIRS ACC.SUNDRIES (18) PM S OFFICE ACC SUNDIRES (18) EXCLE QUIRIES (574) FORESTRY-ACC.SUNDRIES (42) I.B.MIN-ACC.SUNDRIES FOREIGN AFFAIRS ACC.SUNDRIES (5,998) WORKS-ACC.SUNDRIES (3,252) MEGYA-ACC.SUNDRIES (273) NAT RESOURCE ACC.SUNDRIES (662) LERIBE PRISON BRICK (72) TOURISM-ACC.SUNDRIES (408) AUDITOR GENERAL ACC.SUNDRIES (653) LEPPER PRISONS (20) P.S.C.-ACC.SUNDRIES DEFENCE-ACC.SUNDRIES I.E.C.-ACC.SUNDRIES (546) MAFETENG PRISONS (14) LOCAL GOV.-ACC.SUNDRIES (627) URBAN SANIT(VIP TOILETS) (56) PHALAFALA LEGAL CO. (66) AGRIC.-SUMMER PROGRAMME (6,284) C/PENSIONS-BOOKS & RENTAL (273) NEDBANK HOUSING LOAN-LG LESOTHO BANK HOUSING (2) WASA WATER BILLS (2) ACC SUNDRIES GARNISHEE ORDERS-S (7) GARNISHEE ORDERS-S (13) PS AGRIC-LYBYAN (701) PS AGRIC JAPAN (4,681) COURT DEPOSIT-M (2,466) COURT DEPOSIT-B (219) CAR LOAN REPAYS COURT DEPOSIT-L (585) COURT DEPOSIT-B (455) TOTAL C/F (982,721) 30

36 NOTE 21 DEPOSITS-OTHERS VOTE DESCRIPTION GOLFIS BALANCE AS AT M 000 Balance B/f (982,721) COURT DEPOSIT-M (91) COURT DEPOSIT-M (283) COURT DEPOSIT-M (449) COURT DEPOSIT-Q (224) COURT DEPOSIT-Q (368) COURT DEPOSIT-M (636) ENG. MATERIAL (8) PUBLIC SERV. SAVINGS (93) LAT. SUBSCRIPTION INCOME TAX ARREARS (1,399) LOST & UNPRESENTED (862) MAINT. ALLOWANCE (109) PRISONER S PROPERTY (4) PRISONER S PROPERTY (48) PRISONER S PROPERTY PRISONER S PROPERTY PRISONER S PROPERTY (11) PRISONER S PROPERTY PRISONER S PROPERTY PRISONER S PROPERTY PRISONER S PROPERTY RENTION FEES (5,860) METROPOLITAN LIFE L.N.I.C. INSURANCE (9) L.N.I.C. GROUP SCHEME ALLIANCE I.G.I STARLION (108) METRO GROUP SCHEME (33) METROPOLITAN LIFE (22,423) METROPOLITAN S BR (99) METROPOLITAN-J.S 9, METRO FUNERAL 3, L.N.I.C. 1, GROUP FUNERAL-L.N.I.G 1, STARLION ALLIANCE I.G.I (502) INFUND LOAN (80) MORTAGE (92) MORTGAGE (LECOOP) (182) METROPOLITAN LIFE 3, METROPOLITAN BR (21) POLICE INSURANCE - TOTAL C/F (997,269) 31

37 NOTE 21 DEPOSITS-OTHERS VOTE DESCRIPTION GOLFIS BALANCE AS AT M 000 Balance B/f (997,268) METROPOLITAN J.S (2,031) METRO FUNERAL (1,626) L.N.I.C. (431) GROUP FUNERAL-L.N.I.C (84) ALLIANCE I.G.I INFUND LOAN LETSEMA FIN. SERVICES METROPOLITAN LIFE (LESOTHO) (93) LESOTHO FUNERAL (2) LNLAC LOAN (4,236) LNLAC PREMIUM SEOTLONG MULTIPURPOSE GAP FUNERAL SERVICES (8) XMAS DONATIONS Q.E UNDP HOUSING-LERIBE (40) P.A.Y.E. INCOME TAX (148,937) COURT DEPOSIT-T/TSEKA (309) PRISONER S PROPERTY-T/TSEKA CAR LOAN REPAY POLICE INSURANCE 2, UNICEF-DONATIONS FEEDLOT PROJECT (5) EDUCATION LITS (1,103) MAINTAIN HOUSE (14) % DED.AT SOURCE CUSTOM 30, INDIAN CREDIT LINE (3,128) PAR;IAMENT REFORM (308) SALE V.I.P LATRINES (375) MOTOR VEHICLE INSURANCE 5, OPENS LEARNING (C/SERVICE) (1,334) OPEN LEARNING TSD 1, R.L.M.P. BURIAL SCHEME (477) METRO FUNENRAL (LESOTHO) (170) INFUND LOAN MABOTE (1) LAT. SUBSCRIPTION U.N. FUND FOR WOMEN (16) JAPAN-SALE OF TRACTORS (16,363) C.B.L. LOAN-DEFENCE MAMOTH MICRO LENDING BOS POST CENSUS (359) LITTU SUBSCRIPTION POSTAL-LENDING 697 TOTAL C/F (1,136,032) 32

38 NOTE 21 DEPOSITS-OTHERS VOTE DESCRIPTION GOLFIS BALANCE AS AT M 000 Balance B/f (1,136,032) SSU (425) SALES TAX ARREARS (3,011) LESELI MULTI SERVICE (134) POLICE STAFF ASS. (38) POLICE SCHEME (59) LRA-VAT (311) LMPS STF ASSOC (5) PROPERTY INSURANCE (2) FEED THE NATION (1) MEDICAL AID-SECHABA SECHABA PERS LOANS (2,033) SECHABA PERS LOANS 1, PS JUSTICE-LEGAL AID (9) EEZY MGT SERVICES EEZY MGT SERVICES (14) NEW HORIZON FUNERAL (3) LADB-ASSETS RECOV (3,139) FINANCIAL MAID PTY (1) M/HOEK-FTC LAT (LOANS) 1, ROAD FUND (12,669) SADC/ELMS (2,947) SPECIAL VEHICLES (40,346) N.S.S. BURIAL SCHEME (44) VIP TOILETS (68) VIP TOILETS-TEACHERS 1 TOTAL (1,198,749) NOTE 22 VOTE DESCRIPTION GOLFIS BALANCE AS AT M GEN-DEPOSIT-BUTHA-BUTHE GEN-DEPOSIT-LERIBE (501) GEN-DEPOSIT-BEREA GEN-DEPOSIT-MAFETENG (1,705) GEN-DEPOSIT-MOHALE S HOEK (28) GEN-DEPOSIT-QUTHING (6) GEN-DEPOSIT-MOKHOTLONG (61) GEN-DEPOSIT-THABA-TSEKA (269) TOTAL (2,430) 33

39 NOTE 23 SPECIAL FUNDS VOTE DESCRIPTION GOLFIS BALANCE AS AT M PLANT POOL SERVICE 3, GUARDIAN FUND (11,652) MINES RESOVLVING LO. (716) POLICE BAND FUND (47) POLICE REWARDS (148) PRINSONS REWARDS (7) RESERVE FUND (201,457) WOOL & MOHAIR (2,013) LOAN BURSARY (84,758) FOREST FUND (1,087) WORKMEN S COMPENSATION L.C.U. REVOLVING FUND NAT. DRT. DIS. RELIEF FUND (1,447) POST OFFICE FUND (77,911) L.D.T.C. FUND (10) LDF REWARDS & FINES FUND (79) TOTAL (377,760) 34

40 PART 2 2. INTRODUCTION 2.1 Audit Report This report contains my observations arising from the audit of the public accounts for the financial year ended 31 March The financial statements submitted by the Accountant General through the Principal Secretary for Finance included:- i. Statement of Assets and Liabilities ii. Abstract of Receipts and Payments iii. Other Supporting Statements The audit was conducted in accordance with Generally Accepted Auditing Standards and the legislative mandate. 2.2 Audit Mandate In terms of Section 117 of the Constitution and section 5 of the Audit Act, 1973 I am required to audit, in such a manner as I may deem necessary, the accounts relating to the Consolidated Fund, other public funds and stores; and to submit my report thereon to the Minister of Finance for laying it before the National Assembly as stipulated in Section 6 of the Act. In carrying out my statutory duties, I have to establish whether: a. the accounts have been properly kept; b. all public moneys have been fully accounted for and the rules and procedures applied are sufficient to secure an effective check on the assessment, collection and proper allocation of revenue; c. money has been expended for the purpose for which it was appropriated by the National Assembly or by law or regulation relating to other public funds; and d. essential records are maintained and the rules and procedures applied are sufficient to safeguard and control public property. 35

41 2.3 Submission of Accounts The Finance Order 1988 requires the Accountant General to sign and submit to the Principal Secretary for Finance for onward submission to the Auditor General, within six months of the close of every financial year, the public accounts showing fully the financial position of the Consolidated Fund and other funds on the 1 st day of such financial year. The public accounts representing the transactions of Government are prepared for twelve months period ending 31 March. These comprise an Abstract of Receipts and Payments, Statement of Assets and Liabilities and other Statements. 2.4 Scope of the Audit The audit was conducted in accordance with section 117 of the Constitution of Lesotho and section 5 and 6 of the Audit Act The Generally Accepted Auditing Standards were applied in the conduct of the audit. These standards require that I plan and perform the audit to obtain reasonable assurance on whether the financial statements are free from material misstatement. I also examined, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. 2.5 Financial Legislation During the accounting periods covered by this report, the law of the country governing the management of public finances was the Finance Order, The daily financial as well as stores accounting operations were regulated through Financial Regulations 1973, Stores Regulations 1967 and by complementary administrative instructions. 2.6 Statements of Responsibilities: a) Principal Secretary for Finance The Principal Secretary for Finance is responsible for general supervision and management of accounting operations of government and proper custody and use of public funds. 36

42 b) Accountant General The Accountant General is responsible for ensuring that proper system of accounting is established, installation of efficient system of collection, custody and classification of public revenue; supervision of expenditure to guard against extravagancy, excesses and misallocations; control and supervision of accounting officers and standardisation of accounting documentation and records. At the end of each financial year, the Accountant General is required to prepare public accounts for audit as stated under section 27(1) of the Finance Order 1988 which reads as follows: within a period of six months after the close of each financial year the Accountant General shall sign, date and submit to the Principal Secretary for Finance for submission to the Auditor, accounts showing fully the financial position of the Consolidated Fund and other funds on the last day of such financial year c) Chief Accounting Officers The primary responsibility of every Chief Accounting Officer is to ensure that adequate internal control systems are put in place for proper accounting, and that public assets are safeguarded against loss, and that current rules and procedures are effective. d) Auditor General According to the Audit Act 1973, the Auditor General is responsible to audit and report on the Public Accounts of Lesotho and the accounts of all accounting officers at least once in every year. Within 90 days of the receipt of the Public Accounts from the Accountant General, the Auditor General shall send to the Minister a certified copy of the accounts, together with the report upon his examination and audit of the public accounts. 37

43 In exercise of his functions, the Auditor General shall not be subject to the direction or control of any person or authority 2.7 Parliamentary Control The Fundamental Control of the public funds is the Parliamentary Control through Appropriation Act. The Appropriation Act provides for sums of money necessary to meet expenditure under approved budgetary items for specified purposes. It is therefore a breach of law to incur expenditure without approval of Parliament or incur expenditure in excess of the sums provided by Parliament. The Minister of Finance is permitted by Parliament to provide funds under contingency provision to meet expenditure for urgent and unforeseen events whose expenditure cannot be postponed. Such provision has to be laid before Parliament for ratification as supplementary estimates as soon as practicable. 2.8 Public Accounts Committee The Public Accounts Committee (PAC) is another measure of Parliamentary Control over the public funds. The Committee has already examined my 2003/04 Audit Report and it is currently writing its report. The PAC is due to examine my report for the two financial years ended 31 March

44 PART 3 3. ASSETS AND LIABILITIES Statement of Assets and Liabilities The Statement of Assets and Liabilities is prepared from Account General Ledger as at the last day of the financial year. It shows the cash assets and liabilities of the Government and balances of the below the line accounts according to whether they represent the amounts due to the Government or by the Government. It does not include material assets such as buildings, roads, etc which have been paid out of recurrent and capital funds. The figures of assets and liabilities for the six years are given in the following table for trend purposes. Table 1- Six Year Summary of Assets and Liabilities 31 March 02 M March 03 M March 04 M March 05 M March 06 M March 07 M 000 Assets Cash at hand 694, ,781 (1,444,919) (3,097,239) (3,244,300) (1,450,394) Imprests 42,845 16,252 18,547 (18,694) (17,916) (11,005) Investments 40, , , ,047 87, ,047 Advances 23,829 24,565 (179,972) (192,153) (198,223) (105,771) Clearing Accounts 3, ,789,336 4,750,143 4,429,488 Trading Accounts (435 ) 3,098 1,645 (4,648) Remittances 6, Deposits Unspent (75,150) (75,150) (75,150) grants/loans Deposits - Other (1,790) - - Total Assets 777, ,953 (1,300,866) 1,722,455 1,303, 224 3,097,567 Liabilities Recurrent Account 27,212 25,664 (173,253) 557, ,574 1,874,703 Capital Account (156,943) 281, ,093 (170,307) (445,257) (356,076) Deposits 893,702 (1,280,556) (1,335,062) 1,135,238 1,146,291 1,201,180 Special Funds 10,457 (163,175) (168,665) 199, , ,760 Clearing Accounts - 430,630 2,678, Total Liabilities 777,430 (705,953) 1,300,866 1,722,455 1,303,224 3,097,567 39

45 3.1 ASSETS CASH AT BANKS: Non reconciliation of Bank Accounts The Financial Regulation 1203 requires that monthly bank reconciliation statements should be prepared between the bank statements and the cash book so as to verify the bank balances. I have however observed, that this legal requirement has not always been observed. The Lesotho Government has a number of bank accounts opened with commercial banks. I was not able to verify the balances with these banks against balances reflected in the Public Accounts, as the statements were not made available for my verification. The only statements I was able to verify were those provided by the Central Bank of Lesotho. The following irregularities were noted: a) An un-reconciled figure of M3,961,497,000 Description Public Accounts (M 000) Bank Statement (M 000) Difference (M 000) Main Account (16,286,126) 2,111,450 (18,397,576) Sub accountancies (70,310) 27,715 (98,025) No. 1A/c (934,435) - (934,435) N0.2 A/C 38,994-38,994 No.3 A/C 16,466-16,469 No. 4 A/C 10,603-10,603 No.5 A/C (27,667) - (27,667) No.6 A/C (462,222) (462,222) Revenue A/C 18,408,626-18,408,626 No.11 Manual Chq (210,855) - (210,855) Crown Agents Current A/C 3,293-3,293 External Debt A/C (1,767,806) - (1,767,806) Domestic Debt A/C (565,534) - (565,534) Capital Expenditure 94,608-94,608 Missions (58,970) 10,997 (69,967) TOTAL 1,811,335 2,150,162 3,961,497 40

46 b) Revenue Account and Main Account The revenue and main accounts are major Government bank accounts operated at the Central bank of Lesotho (CBL) and are to be periodically reconciled with the Treasury records. According to the records maintained by the Treasury and CBL, the position of the accounts at the end of 2006/07 was as follows: Vote Description Revenue Account Public Accounts (M 000) Central Bank Confirmation (M 000) Difference (M 000) 18,408,626-18,408, Main account (16,286,126) 2,111,450 (18,397,576) Net Difference 11,050 i) Revenue Account ( ) The Central bank clears all transactions (funds) from the revenue account ( ) to Main account ( ) daily, so that at the end of the day it has a nil balance as reflected on the bank statement. The expectation is that the same information should be reflected in the Treasury accounts, if proper reconciliation was being carried out. ii) Main Account ( ) The balance on this account reflects a negative balance of M16,286,126,000 in the public accounts, while the bank statement shows a favourable balance of M2,111,450,000 resulting into an unusual difference of M18,397,576,000. c) Understatement of Investments - M57,573, i) Crown Agents Current Account (M3,293,000.00) This account should have been classified under Investments Abroad, not under cash at bank and as a result the Investments Abroad Account has been understated by M3,293,

47 ii) Difference in Investments Abroad (M54,280,000.00) There has been a difference observed between the figure reflected in the Public accounts and bank balances due to non-reconciliation by the Treasury as indicated below: Public Accounts M 000 Bank Balance M 000 Difference M 000 Crown Agents call 5,142 29,343 24, Crown Agents- Fixed ,423 *** *** Crown Agents- Surplus balance 87, ,104 30, TOTAL 113, ,447 54,280 Note*** - The bank confirmation was not available, so the difference could not be established. d) Omitted Projects Bank Balances - M6,116, Some Ministries operate bank accounts with the consent of the donor and Accountant General. In approving the project bank accounts, one of the conditions laid down by the Accountant General, is that the project management should submit monthly returns of revenue and expenditure together with bank reconciliations and relevant cash book pages to enable the postings to the Treasury ledgers. However, not all projects complied with these conditions, and as a result the projects bank balances indicated on table 2 below were not incorporated in the public accounts: 42

48 Table 2 Omitted Project Bank Balances Ministry Project Name Donor Amount Health HSRP Hope for Africa IDA M 77, Health HSR PPF PII $ A/C 224, Health HSRP PPF PII Maloti A/C 4, Health HSRP SA US $ ADB 30, Health HSRP SA US $ SADC 123, Health HSRP SA Maloti A/c SADC 26, Health HSRP Maloti EDF 19, Health HSRP Japaness Grant 18, Health HSRP Clinton Foundation 457, Finance Public Sector improvement Human Resource Irish Aid 148, Finance Parliament of Lesotho Irish Aid 307, Support Finance Public Sector improvement for Financial Management Irish Aid 4,662, Employment Project on HIV/AIDS for Migrant Workers Irish Aid 15, TOTAL 6,116, Due to uncertainties and significant amounts of omissions, mispostings and differences disclosed in the preceding paragraphs a) to d), the accuracy and completeness of the bank balances as at 31 March 2007 could not be certified as fairly stated in the Public Accounts. 43

49 3.1.2 IMPRESTS Financial Regulation 1407 requires that all imprests held by Accounting officers during the year must be retired fully at the close of the financial year in order to ensure that all expenditure heads are appropriately charged and cash on hand accounted for; consequently the imprest account as per Treasury records should be showing nil balance at the end of the financial year. There are two types of accounts namely tour imprests and standing imprests. a) Outstanding Tour Imprest - M5,155, Tour imprests are granted to officers travelling outside Lesotho on official duty. Financial Regulations require that the imprests be cleared by the officers on their return to the country by submitting a subsistence allowance disbursement claim and/or cash to the amount of the imprest received. The examination of the imprest register maintained by the Accountant General revealed that an amount of M5,155, remained un-cleared at the end of one financial year 2006/07 as indicated on table 3. Financial Regulation 1407(vi) authorises the Accountant General to deduct the full amount of tour imprest overdue from the next salary payment due to the officer. Apparently the Accountant General did not exercise his powers effectively. 44

50 Table 3 Outstanding Tour Imprests Ministry No. of Imprests Amount (M) Agriculture , Health , Education 5 63, Finance & Planning , Trade , Justice , Home Affairs , Prime Minister s Office , Communications 9 94, Law 3 31, Foreign Affairs 9 62, Public Works 12 70, Forestry 1 6, Natural Resource , Employment , Tourism , Public Service Commission 2 40, Defence , National Assembly , Senate , I.E.C. 9 57, Local Government , Gender , Total 466 5,155, b) Outstanding Standing Imprests- M Financial Regulation 1402 states that if it is necessary that an officer should have at his disposal for disbursement on the public service money for which vouchers cannot conveniently be presented direct to the Accountant General or to an accounting officer for payment, he shall receive an imprest of such amount as the Accountant General may authorise. The regulations further require that the issued imprests should be accounted for and be retired strictly in accordance with the terms of the imprest warrants. At the time of my examination, the following ministries/departments on table 4 below had not retired their standing imprests to the tune of M183, as required by the regulations. 45

51 Table 4 - Outstanding Standing Imprests Imprest No. Ministry/ Department Imprest Holder Amount (M) 2 Legal N. Lehloma 30, Cabinet M. Moleli 5, D.M.A M. Motemekoane 8, Defence S. Mahase 1, Cabinet D. Funds - 100, Forestry M. Mohapi 5, Mines M.M. Rat soane 2, Mines T. Mohapi 1, Trade G.M. Lekoekoe 1, Compol M. Mokotjomela 20, Communications M. Makhele Communications M. Thejane 5, Communications T. Leboko 2, I.E.C. N.M. Tyhali 2, Total 183,

52 3.1.3 ADVANCES a) Advances from the Contingencies Fund: Section 15(1) of the Finance order 1988 provides for the establishment of contingencies Fund to meet certain urgent and unforeseen expenditure not provided for in the estimates. Authority to expend the amount is sought until such times as supplementary estimates of the required can be laid before Parliament. In the Financial year 2006/07, the approved advances from the Contingencies Fund amounted to M106,239, stated hereunder and the actual amount spent by Ministries was M91,953, which remained uncleared as there was no Supplementary Appropriation Act for 2006/07. However the Accountant General has cleared those advances without Supplementary Appropriation Act. MINISTRY ADVANCED AMOUNT AMOUNT SPENT UNSPENT BALANCE Agriculture 1,166, , , Health 4,994, ,057, , Finance 50,781, ,619, ,162, Trade & Industry 3,116, ,876, , Justice & Human Rights 2,760, ,176, ,584, Home Affairs 20,737, ,242, , Prime Minister s Office 4,525, ,238, , Law 500, , Foreign affairs 1,644, ,644, Natural resource 2,722, ,632, , Employment 167, , , Tourism 1,228, , , His Majesty Office 1,809, , , Defence 8,426, ,974, ,452, National Assembly 153, , Gender Youth & Sports 1,462, ,462, Public Service 41, , TOTAL 106,239, ,953, ,286,

53 b) Cash Shortages: Finance laws require that when there had been loss of cash or cash shortage, a loss report should be prepared and submitted to the Principal Secretary for Finance and advance voucher be made on the name of the officer responsible for loss or shortage. The advance is cleared when the officer repays or PS Finance approves a write off. The cash shortage balances as indicated on table 5 below could not be verified as my office was not provided with the loss reports or any other documentation relating to these advances. Table 5 - Cash Shortages Balances 2004/05 M 2005/06 M 2006/07 M Headquarters - - (25,000.00) Sub-Accountancy 63, , , Other Ministries - 80, , Leribe 3, , , Berea 287, , , Mohale s Hoek 80, , , c) Refer to Drawer (RD) Cheques: The account represents cheques paid to the Government but have been dishonoured by the bank. The advance voucher is raised in the name of the drawer of the dishonoured cheque and on recovery the advance account is credited to clear the advance. i. RD Cheques Income Tax and Sales Tax Departments I have indicated in my previous report that I have not been provided with the information or evidence as to how the advance accounts for Sales Tax and Income Tax totalling M12,206,057 have been treated as they no longer appear in the government accounts. The information was not availed for the financial year 2006/07. 48

54 ii. Advance Accounts with credit balances Advance account should either have a debit or nil balance at the end of the year. As indicated from previous reports, a credit balance shows bad management of the account. I had previously reported on the anomaly but the situation still prevailed in 2006/07 as shown on Table 6 below. Table 6 Advance Accounts with credit balances 2004/ / /07 RD Cheques Headquarters RD Cheques Sub Accountancy 305,000.00cr 308,000.00cr 375,000.00cr - 1,000.00cr 1,000.00cr d) Parastatals Loans: M202,031,000-00cr I have already indicated that advance account should either show debit or nil balance but this account shows a credit balance of M202,031, The amount was a repayment of Parastatals loans which were debited under the clearing accounts (428) but the repayments were credited under General Advances (423). I have not been provided with the explanation as to why the adjustment could not be made. e) Advances Ministers, Statutory and Public Officers I had previously raised my concern about car advance accounts which still feature in the government accounts even though the car loans are awarded by the banks. The Government acts as guarantor to the banks on behalf of the public officers and facilitates collection of repayments for onward transmission to the banks. Once again, I repeat my recommendation that the use of these advance accounts should be discontinued and moneys deducted from public officers be credited into a deposit account for onward transmission to the banks. My other point of concern was the huge outstanding amount of salary advances. I had stated that was a clear indication that effective measures are not taken to recover public moneys as the 49

55 PS Finance had long stopped giving salary advances to the public officers. My concern still stands as the recoveries made during 2006/07 amounted to M17, only. Table 7 below shows the status of Advances Ministers, Statutory and Public Officers Table 7 - Advances Ministers, Statutory and Public Officers 2004/05 M 2005/06 M 2006/07 M Advances-cars 3, , Car Advances Lesotho Bank 46, , , Car Advances Ned bank - 1, (786,000.00) Car Advances Ned bank 12, , (170,000.00) Salary Advances 3,536, ,518, ,501, Comprehensive Insurance 836, , , Advances Ministers, MPS, Statutory 3,857, ,128, (2,075,000.00) 50

56 3.1.4 ADVANCES CLEARING ACCOUNTS Section 17(1)(c) of the Finance Order 1988 gives authority to the Principal Secretary for Finance with prior concurrence of the Minister to authorise the issue of repayable advance from the Consolidated Fund within the amount appropriated for this purpose to or on account of funds or accounts administered by the Government or to or on behalf of bodies corporate or individuals where such advances are in public interest and are recoverable within a period not exceeding twenty four months from the date when the advances are made and as such interest rates and service charges as the Principal Secretary, in consultation with the Minister, may stipulate. The status of these advances clearing accounts for the past four years is as follows: 2003/ / / /07 (M 000) (M 000) (M 000) (M 000) 2,694,946 4,778,145 4,723,334 4,431,185 a) Clearing Account Opening Balances In my previous reports, I had raised a concern on this advance account which basically serves to cater for unexplained differences. I have not been informed of how this advance would be eventually cleared so that Government assets are properly presented. It is evident that this advance account represents a very large portion of Advances Clearing Accounts as shown below: 2003/ / / /07 (M 000) (M 000) (M 000) (M 000) 2,487,366 4,590,995 4,536,184 4,474,558 b) Clearing Account Loans to Parastatals The balances reflected by the Treasury ledgers differ totally from the balances shown by the Ministry of Finance. This is due to repayments made, which have not been captured by Treasury. Treasury reflects a total outstanding debt of M184,974, while the Ministry of Finance records reflect M85,660,

57 DESCRIPTION OUTSTANDING DEBT PER TREASURY RECORDS OUTSTANDING DEBT PER FINANCE RECORDS PARASTATAL LOANS (166,254.72) - ODA FIRST LINE OF CREDIT (998,546.12) 1,321, KFW NYENYE INFRUSTRUCTURE (43,591.00) 2,995, ODA 1 204, , FACTORY SHELLS B.E.S.O 283, , ODA III FAC. SHELL 8,400, , RECONSTRUCTION OF LNDC 1,259, ,900, EIB CARCA F/WEAR 177, , EIB JADE F/WEAR 2,361, ,168 EB U/CLOTHING 4,003, ,968, ODA 2ND LINE OF CREDIT 883, ,294, KFW LOTI BRICK 18,175, , ADB LINE OF CREDIT 588, ,882, REPLACE MSU PENTEX 5,821, IDA THETSANE DEV. AREA 1,786, ,949, THETSANE DEV.AREA 8,553, ,410, LEC PMT TO ESKOM 24,074, LONG TERM W/CAP FLOOR MILLS 1,850, ,074, MSU PERI URBAN FROM BADEA 1,095, LOAN CAPITAL TO IMPERIAL 13,040, ELECTRICTY SUPPLY 41,000, TIKOE INDUSTRIAL E 29,796, ,377, LINE OF CREDIT LNDC 258, , IDA INDUSTRIAL INFRASTRUCTURE 13,022, ,341, TELECOM LINE - MOHALE 6,448, ,448, REPLACE SEBABOLENG 2,507, REPLACE MSU PENTEX 1,490, REHABILITATION OF MHA - 1,900, TOTAL 185,875, ,755, c) Non Repayment of Loans Scrutiny of records from the Ministry of Finance revealed that there were loans not repaid during the financial year 2006/07 as indicated on Table 8 below. The information was not provided as to why the loans were not repaid and the action taken to recover the loans. 52

58 Table 8 Loans not repaid in 2006/07 DESCRIPTION ORIGINAL LOAN OPENING BAL CLOSING LOAN ADB Line of Credit 26,452, ,882, ,882, Carca Footwear 896, , , EIB Jade Footwear 355, , , EIB Clothing 3,636, ,968, ,968, NIEN Hsing / Tikoe Industrial 71,981, ,377, ,377, EIB Plastic 1,259, ,259, ,259, Line of Credit LNDC 5,366, , , Telecom Line to Mohale 6,448, ,448, ,448, Resuscitation of LNDC 2,941, ,941, ,941, EIB m/s Printing 916, , ,

59 3.1.5 SUSPENSE CLEARING ACCOUNTS Section 19 of the Finance Order 1988 empowers the Principal Secretary for Finance to authorize the operation of specific clearing accounts within the amount appropriated for the purpose to which may be charged during a financial year sums due to agents in respect of services rendered to Government and payments for public purposes made by specific Departments of Government which cannot immediately be charged to any vote provided that: Provision exists in the estimates of that financial year to meet such charges; and Wherever appropriate such charges are cleared to relevant heads or subheads before the close of accounts of that financial year. Basically the law requires that at the end of the financial year the clearing account should reflect a nil balance. It was however observed that the Treasury records reflect a total credit balance of M1,697, under these votes. Table 9 indicates that, where there is a debit balance, the transfer of such charges raised were not made to the relevant heads of expenditure thereby understating expenditure under those heads, while the credit balance implies that, more than the actual expenditure charged to the clearing account was transferred to the votes thereby overstating expenditure under those heads. Table 9 Suspense Clearing Accounts Account code Description Balance at M Exel Petroleum 559, Imperial Fleet Services (2,256,000.00) TOTAL (1,697,000.00) 54

60 3.1.6 TRADING ACCOUNTS: Directions for operation of the Trading Accounts require the production of the annual accounts not later than three months after the close of the financial year. I have mentioned in my previous reports about non-observance of this requirement, yet similar incident occurred during 2006/2007. Consequently, in the absence of the departmental annual accounts, the extent of completeness of the Trading Accounts balance of M4,648, reflected in the Public Accounts could not be substantiated. Table 10 below shows the position of the Trading Accounts Balances as at 31/03/2007 per Treasury records. Table 10 Trading Accounts Account Code Description Balance at M Printing Material (964,000.00) Printing Paper (325,000.00) Printing Stationery ((3,319,000.00) Dairy Cattle Fund (40,000) TOTAL (4,648,000.00) 55

61 3.1.7 LOSSES a) Losses of Cash & Stores and Vehicle Accidents The statements of losses and vehicle accidents produced by the Accountant General showed a total of 131 losses and vehicle accidents amounting to M1,716, which were reported in 2006/07 financial year. My office was not provided with supporting documentation to confirm the accuracy and completeness of the statements of Losses and Vehicle Accidents. However, my office compiled a Statement of Losses and Accidents from the copies of the Loss and Accident reports received from the reporting ministries. Our records were reconciled with PS Finance records for any reports that might not have been obtained by my office. According to the record kept by my office, One hundred and seven (107) losses and vehicle accidents involving an amount of M1,223, were reported during the period 1 April 2006 to 31 March Table 11 shows comparison of losses and vehicle accidents per Treasury records and records maintained by my office while table 11 shows breakdown of losses and vehicle accidents per ministries. Table 11 - Losses and Vehicle Accidents 2006/07 ITEM TREASURY AUDIT DIFFERENCE CASH 8 183, , (5) 12, STORES 12 83, , (11) (23,240.09) ACCIDENTS 111 1,449, , , TOTAL 131 1,716, ,223, ,

62 Table 12 Breakdown of Losses and Vehicle Accidents CASH STORES ACCIDENTS TOTAL MINISTRY No. AMOUNT No. AMOUNT No. AMOUNT No. AMOUNT Agriculture , , Health 2 16, , Education Finance 4 8, , , Trade Justice 3 11, , Home Affairs , , PM s Office , , Communications 1 79, , , , Law Foreign Affairs His Majesty's 1 49, , Works , , Forestry , , Natural Resources Employment 0-1 2, , , Tourism Auditor General P.S.C 1 1, , National Assembly Senate 0-1 1, , Ombudsman , , I.E.C , , Local Government 1 3, , Defence , , Environment Gender 0-1 2, , TOTAL AMOUNT , , , ,223,

63 3.2 LIABILITIES: PUBLIC DEBT: a) General The Constitution of Lesotho empowers the Minister of Finance and Development Planning to raise loans for the Government both externally (External debt) and internally (Domestic debt) for the purpose of financing development projects or such other purposes and to provide for the guarantee by the Government of loans raised by certain bodies (e.g. Parastatals) b) Public Debt Stock According to the records maintained by the Debt Section in the Ministry of Finance and Development Planning, total external debt amounted to M4,641,634,411 and domestic debt was M688,583,248 for the financial year 2006/07. i) External Debt Stock The outstanding loans balances from foreign sources are analysed on Table 13 below: Table 13 External Debt Stock Types of Loans 31 March 2005 Amount 31 March 2006 Amount 31 March 2007 Amount Bilateral Loans 306,753, ,073, ,933,009 Multilateral Loans 3,501,794,069 3,381,866,275 4,288,296,457 Fin. Institutions Loans 301,705,062 99,996,073 70,856,875 Export Credits Loans 54,670,526 56,632,184 52,548,070 TOTAL 4,164,923,061 3,789,568,056 4,641,634,411 ii) Domestic Debt Stock: These are loans raised internally through the issue of Treasury bills and bonds and the outstanding debt as at 31 March 2007 was M688,523,249 as broken down in Table 14: 58

64 Table 14 - Domestic Debt Stock Date Instrument Maturity Amount Bonds 10 years 114,658, TB days 15,852, TB days 47,919, TB days 157,232, TB days 166,906, TB days 166,838, TB days 19,176,046 TOTAL 688,583,248 c) Servicing of External and Domestic debt The Treasury has not properly captured and recorded the transactions, from the primary records maintained by the Public debt section, which were materially and accurately reconciled against the bank statements from the Central Bank of Lesotho. So the differences observed have resulted in the Public accounts that are materially not correct. i) External Debt - Loan Repayments and Interest Payments The records relating to principal repayments and interest payments are maintained by the public debt section in the Ministry of Finance and Development planning. The expectation was that the same information as reflected on the records in the Public Debt Section should have been captured in the GOLFIS ledger maintained by the Treasury Department. However, differences were observed as follows: Debt Section Treasury Difference Principal Repayments Interest Payments * * Note*The figure for interest payments reflected in the GOLFIS ledger has however, included an interest payment of M50,525,736 on the Domestic Debt. So the actual net figure exclusive of the difference according to the Treasury Department records should be M220,434,327. Therefore actual difference between Public Debt Section and Treasury department records has to reflect M50,963,555 not M437,

65 ii) Domestic Debt - Interest Payments The Public Debt Section maintains records of interest payments on the Bonds, Treasury Bills and interest payment on the loans made by the Members of Parliament (MPs) and other high ranking Government officials. It was however observed that the GOLFIS ledger and the Public Debt Section records reflected different figures of interest payments made in the financial year ended 31 March The differences have resulted in an interest overstatement of the Public Accounts by M2,673,818 as shown on Table 15. Table 15 Interest Payments Instrument GOLFIS Public Debt Difference Ledger Section 10 year Bond 9,942,420 9,947,420 (5,000) Loans to MPs& others 592, , , days Treasury Bills 33,466,844 31,800,315 1,666, days Treasury Bills 6,524,456 5,800, ,708 Total 50,525,736 47,851,918 2,673,818 60

66 3.2.2 DEPOSIT ACCOUNTS: The main use of the deposit accounts is to record receipts which are held temporarily to be refunded to the payer or third party. Deposit accounts are also used to record receipt of donor funds to be applied to specific off-budget purposes. The monies are credited to the deposit accounts as authorised by the Accountant General. Payments out of the deposit accounts can be made on submission of authorised documentation. If properly managed, the balances on the deposit accounts must reflect either credit/negative or nil balance on the GOLFIS ledger. Debit/positive balances indicate that the accounts have been overdrawn. Depositors are also required to maintain independent records and their accounts have to be reconciled with Treasury records. The balances in the deposit accounts have not been confirmed by the responsible ministries and departments on the basis of their reconciled records hence their correctness remains doubtful. Table 16 below shows the positions of deposit accounts for the past four years which in all cases reflected net credit balances: Table 16 Position of Deposit Accounts Code Description 2003/ / / / Unspent Grants 176,942,733 75,150,000 75,150,000 75,150,000 and Loans 503 Deposits Other 1,156,562,692 1,135,238,000 1,144,223,000 1,198,749, General 1,556,429 1,790,000 2,068,000 2,430,000 Deposits Total 1,335,061,854 1,212,178,000 1,221,441,000 1,276,329,000 a) Accountant Sundries M 945,358, CR In essence, this deposit account should serve to hold funds temporarily which cannot be immediately given their correct classification code or funds received for onward transmission to some other destination. A credit balance of this magnitude would suggest that the account is not regularly monitored so as to ensure that monies received or erroneously credited to this deposit account are ultimately transferred to their final destination. 61

67 In my audit report for the financial year 2001/2002 paragraph B.4.2, I have reported that amounts totaling M862,359, from Lesotho Highlands Revenue Fund have been transferred to this deposit account instead of the Consolidated Revenue Fund as required by Lesotho Fund for Community Development Legal Notice No.15 of No action seems to have been taken to regularise the position. The Status of the Accountant Sundries account from 2003/04 is as follows: 2003/ / / /07 (M 000) (M 000) (M 000) (M 000) 945, , , ,358 b) Deposit Account with Debit Balances (2006/07) The 2006/07 Annual accounts reflected a total of 43 deposit accounts with debit balances, indicating that the accounts were overdrawn by M62,744, This implies that the depositors have withdrawn more than the amounts deposited in the respective accounts. Table 17 shows Deposit Accounts with overdrawn (debit) balances. In my previous reports, I have recommended that the Accountant General should take necessary steps to investigate the overdrawn accounts and appropriate action be taken. But the problem still persists and the amount has doubled showing that no action has been taken to regularise the position. In 2005/06 the overdrawn amount was M35,320, representing 48 deposit accounts with debit balances. 62

68 Table 17- Deposits with Debit Balances VOTE DESCRIPTION 2003/04 M /05 M 2005/06 M 2006/07 M PLANNING- ACC.SUNDRIES 1, , , , IBMIN. ACC. SUNDRIES , P.S.C.-ACC-SUNDRIES , , DEFENCE-ACC.SUND 11, , , LAT.SUBSCRIPTION - 36, , INCOME TAX ARREARS - 140, PRISONERS PROPERTY , , , PRISONERS PROPERTY 10, , , , PRISONERS PROPERTY 4, , , , PRISONERS PROPERTY 4, , , PRISONERS PROPERTY 1, , , SALES DUTY CUSTOMS 1,030, METROPOLITAN LIFE 48, , , , L.N.I.C GROUP SCHEME , , , METROPOLITAN-BR - 1, METROPOLITAN-J.S - - 3,397, ,890, METRO FUNERAL - 3,265, ,890, , S.S.R.P./TA/DC SALARIES 97, LNIC 122, ,113, ,021, ,238, GROUP FUNERAL-L.N.I.C - - 1,140, ,139, STARLION 527, , , , ALLIANCE I.G.I , PVPS VEHICLES RENEWALS A/C 1,623, METROPOLITAN J. S , UNIT TRUST 10, METROPOLITAN LIFE - 674, ,441, ,820, METRO FUNERAL - 256, , L.N.I.C - 184, , ALLIANCE I.G.I 29, , , , INFUND LOAN - 8, , LETSEMA FIN. SERVICE 77, , , , LNLAC PREMIUM , SEOTLONG MULTIPURPOSE , XMAS DONATIONS QE 13, , , PRISONERS PROPERTY T/TSEKA 5, , , , CAR LOAN REPAYMENTS LES 39, , , , POLICE INSURANCE 2,655, ,655, ,655, ,655, FMU EMPTY BAGS 4, TVD/MTI OPERATIONS 16, DONATIONS SOCIAL WELFARE 1, UNICEF-DONATIONS - - 5, , % DED. AT SOURCE - - 3,899, ,740,

69 Table 17 (Continued) MOTOR VEHICLE INSUI - 591, ,591, ,591, OPEN LEARNING (C/SE 77, , , OPEN LEARNING TSD - 55, , ,546, R.L.M.P. BURIAL SCHEME - 15, INFUND LOAN (MABOTE) 5, , , LAT SUBSCRIPTION 12, , , , RETENTION FEES - EDU 849, C.B.L.LOAN-DEFENCE , , MAMOTH MICRO LEND 328, , , , LTTU SUBSCRIPTION 213, , , , PETROLEUM FUND 5,199, POSTAL-LENDING 406, , , , SALES TAX ARREARS , EDU-SSU (WORLD BANK) 181, LESELI MULTI SERVICE 1, , , POLICE STAFF ASS MEDICAL AID-SECHABA 4, , , , GAP FUNERAL SECHABA PERS LOANS - - 1,078, ,123, EEZY MANAGEMENT SERV , NEW HORIZON FUNERAL M'HOEK-FTC 30, , , LAT LOANS 541, ,270, ,318, ,392, VIP TOILETS-TEACHERS GEN DEPOSIT BEREA - 18, , , GEN DEP. THABA TSEKA - 1, , GEN DEP. BUTHA BUTHE , TOTAL 14,192, ,330, ,320, ,744,

70 c) Dormant Deposit Accounts-M 2,245, The deposit accounts shown on Table 18 below were made known to be dormant in 2005, but they are still included in 2006/07 annual accounts. This distorts the balances of the annual accounts by M2,245, In the case of the Accountant Sundries, the concerned ministries have shown no knowledge of the deposit accounts and therefore they have got no records of the accounts. Table 17 - Dormant Deposit Accounts VOTE DESCRIPTION 2004/ / / L.N.I.C INSURANCE (9,322.92) (9,322.92) (9,277.93) L.N.I.C. GROUP SCHEME 2, , , ALLIANCE LGI MORTGAGE (91,842.65) (91,842.65) (91,842.65) METROPOLITAN S BR (21,097.57) (21,097.57) (21,097.57) METROPOLITAN J.S -2,030, ,030, INFUND LOAN 8, , , METRO LIFE (LES) (93,892.46) (93,892.46) (93,646.26) XMAS DONATION Q.E 23, , , U.N.FUND FOR WOMEN (21,748.57) (21,748.57) (16,196.57) C.B.L.LOAN-DEFENCE 1, , , NEW HORIZON FUNERAL SERVICE , EDUCATION-ACC.SUNDRIES (744,679.03) (744,679.03) (743,079.03) TRADE ACC.SUNDRIES (98,115.32) (98,115.32) (98,115.32) PLANNING-ACC.SUNDRIES (2,564.00) (2,564.00) (781,115) TOURISM-ACC.SUNDRIES (405,161.70) (405,161.70) (407,814.70) P.S.C.-ACC.SUNDRIES 1, , , WASA WATER BILLS PENSIONS GARNISHEE ORDERS-SOOKNANA - - (7,030.00) M/HOEK-FTC 7, , , P.M.S OFFICE-ACC.SUNDRIES (18,268.36) (18,268.36) (18,268.36) VIP TOILETS-TEACHERS TOTAL (3,492,321.51) (3,491,998.71) (2,245,049.50) d) Leper Prisons M19, Cr Prisons sell vegetables grown at the Leper Prison area. The cash collected from the sales is deposited into a deposit account-leper Prison (vote ) 65

71 However, there is a special fund called Prisons Rewards administered by the Director of Correctional Services, which is used to deposit the revenue collected from other Prisons, for the sale of vegetables, bricks etc. I therefore believe that revenue collected from the Leper prison should be deposited into the Prisons Reward fund as the money is not held temporarily in the Deposit Account. e) Prisoners Property, Court Deposit and General Suspense The balances in these accounts could not be verified due to nonavailability of records from the Sub-Accountancies, except for Mokhotlong district. The balances as reflected by the records for the said Sub-Accountancy differ totally from the balances as reflected in the Treasury records (GOLFIS). This is evidence of nonreconciliation between the two sets of records as shown hereunder:- Descriptions Balance per Golfis Ledger Balance per Sub- Accountancy Court Deposit 368, , Prisoner s Property , f) Deposit Account Motor Vehicle Insurance Levy (MVA) M5,591, Motor Vehicle Insurance Amendment Order 1991, Section 3 (3) requires that the levy imposed should be paid into Special Account established under Section 18 (1) (c) of the Finance Order In line with this requirement, the insurance levy should be operated as a Special Fund under the 511 classification. It was observed that, the Special Account was never established instead a Deposit Account was created to account for receipts of MVA levy from Petroleum Companies for onward transmission to Lesotho National Insurance Co. 66

72 The balance in the deposit account as at 31 st March 2006 and 31 st March 2007 stood at M5,591, Debit indicating that the account was overdrawn and there was no movement in the Deposit Account during the year 2006/2007. It was further observed that revenues from the Petroleum Companies were credited under Recurrent Revenue Vote 115/040/02043 hence no movement in the deposit account. It could not be established from which account/s the insurance premiums to Lesotho National Insurance Company were paid. 67

73 3.2.3 SPECIAL FUNDS Special Funds are moneys held in trust by the Government. The regulations establishing each fund normally stipulates how the fund would operate and who shall be the Administrator of the fund. Since Special Funds are not Government moneys, the GOLFIS ledger would show a negative (credit) balance if the fund has money but if the account has been overdrawn then the fund would have a positive (debit) balance. Table 19 below shows the position of the special funds for the three financial years: Table 19 - Position of the Special Funds Balances Special Funds 2006/07 (M 000) 2005/06 (M 000) 2004/05 (M 000) Plant Pool 3,450 3,450 3,450 Guardian Fund (11,652) (8,551) (6,246) Mines Revolving Fund (716) (715) (715) Police Band (47) (47) (38) Police Rewards (148) (40) (336) Prisons Rewards (7) (13) (3) Reserve Fund (201,457) (54,252) (54,252) Wool and Mohair (2,013) (1,601) (887) Loan Bursary Fund (84,758) (57,982) (48,560) Forest Fund (1,087) (1,261) (1,488) Workmen s Compensation L.C.U. Revolving Fund Disaster Management Fund (1,447) (9,625) (4,998) Post Office Fund (77,911) (78,797) (85,572) L.D.T.C. (10) (93) (7) L.D.F. Rewards and Fines Fund (79) (309) (437) TOTAL (377,760) (209,616) (199,798) a) Post-Office Fund Outstanding Salary Advances The Director of Postal services grants salary advances payable in six months to public officers. It was however observed that total salary advances amounting to M206, as indicated on table 20(a) below granted in the previous years were not yet repaid during the financial year 2006/2007. The officers concerned had either resigned, deceased, dismissed, retired or discharged. There were seventeen (17) officers claimed to be unknown by the Human Resource Officers from the respective ministries who had not repaid the advances totalling M31, as shown on Table 20(b). 68

74 I have not been informed of the decision the Director of Postal Services intends to take on the outstanding advances. Table 20(a)- Outstanding Salary Advances Ministry No. of officers Amount Home Affairs 7 16, Education 11 26, NSS 1 1, Local Government 10 11, Health 23 31, LMPS 5 5, Labour 3 1, IEC 1 6, Finance 5 5, Works 3 9, Public Service 1 1, PM s 6 6, LAW 5 15, Gender 1 2, Forestry 2 1, Tourism 1 2, LDF 7 16, Justice 6 10, Communication 16 30, Commerce 1 1, Senate 3 1, Totals , Table 20(b) - Outstanding salary advances (Unknown Employees) Ministry No. of employees (M) Education 8 22, Local Government 3 1, Prime Minister s Office 3 4, Law 3 3, Totals 17 31, b) Forest Fund Non adherence to Fund Regulations Forest Fund Regulations of 1983 states that during the harvest time, 100% of the forest would be harvested and used for afforest purposes, with the aim of returning 20% of the revenue to the community. 69

75 However the revenue belonging to the communities had not been reimbursed for many years. According to Treasury records, the total revenue collected as at 31/03/2007 was M1,489, but the figure could not be verified as there were no returns from the districts. c) Guardian Fund Non-Publication of List of Unclaimed Moneys- M1,025, Section 97 of the Fund regulations provides for publication of list of all amounts standing in the books of Guardian Fund which are claimable and unclaimed to be inserted in the gazette by the Master of High Court in the month of July each year. I had previously indicated that the Master of the High Court failed to publicise the list of claimable and unclaimed moneys as required by law. The same situation prevailed in 2006/07 as the amount of M1,025, was not published for the public to make appropriate claims. d) Mines Revolving Fund The Commissioner of Mines explained that for the financial year 2006/07 Mines Revolving Fund was not operational and the funds amounting to M716, were transferred to Miners Account at Nedbank. The funds do appear in the Miners Account at Nedbank but I could not be provided with records transferring funds. If the funds were properly transferred, therefore, the public accounts should show a nil balance. 70

76 PART 4 4. ABSTRACT ACCOUNTS 4.1 RESOURCES OF THE GOVERNMENT OF LESOTHO The Government of Lesotho raises resources to perform its sovereign functions, maintain its existing network for delivery of social and economic services, extend the network of these services through capital expenditure and discharge its debt servicing obligations. Recurrent and Capital are the two streams of receipts that constitute resources of the Government of Lesotho. Recurrent receipts consist of tax revenue and non-tax revenue while capital receipts comprise loans, grants and miscellaneous capital receipts. Table 21 below shows recurrent and capital receipts per public accounts for the year under review: Table 21 Recurrent and Capital Receipts for 2006/ /06 (M 000) 2006/07 (M 000) Increase (M 000) Increase (%) Recurrent Receipts 4,359,778 6,298,773 1,938, Capital Receipts 135, ,853 89, Total 4,495,509 6,523,626 2,028, a) Application of Resources: Out of M6,523,626,000 received during 2006/07 financial year, 77% was spent on different types of expenditure and the Government managed to secure a surplus of 23% as illustrated in figure 1 below. 71

77 Figure 1 Application of Resources 72

78 4.2 RECURRENT ACCOUNT The annual trend rate of growth of recurrent revenue from 2001/02 to 2005/06 ranged between 8-13% and increased significantly in 2006/07 by 31%. Rate of growth of recurrent expenditure increased by 10% in 2006/07 from M3,967,204, /06/07. There was a surplus of M1,874,703,000 on the recurrent account in 2006/07 which represents an increase of 79% as compared to the surplus of M392,574,000 in 2005/06. Chart 1 below shows the position of recurrent revenue and expenditure for the past six financial years. Chart 1 73

79 4.2.1 RECURRENT REVENUE: a) Budgetary Performance: Chart 2 below shows the budgetary performance of recurrent revenue for the past six years. For the financial years 2001/02, 2002/03 and 2004/05 the actual revenue fell short of the estimates while in 2003/04, 2005/06 and 2006/07 actual revenue exceeded the budgeted amounts. Chart 2 b) Actual collection of revenue by Ministries: As illustrated on Table 22 below there has been significant growth of recurrent revenue by ministries for the past five years. 74

80 Table 22 Status of Recurrent Revenue MINISTRY 2002/ / / / /07 Agriculture 7,118,346 8,363,253 5,605,935 3,748,767 4,154,381 Health 9,334,276 8,410,369 11,104,651 12,070,267 12,188,893 Education 3,300,338 2,824,787 4,175,302 3,950,610 4,126,821 Finance 2,776,137,558 3,237,285,330 3,632,174,490 4,210,110,319 6,080,028,183 Trade 1,754,534 1,789,831 2,402,793 2,536,004 2,247,542 Justice 1,634,767 2,093,981 27,606,522 2,129,417 17,219,828 Home Affairs 12,820,431 14,617,726 12,407,543 14,407,117 18,585,862 Communications 9,541,986 3,140,716 3,545,196 6,571,799 4,372,070 Law 802,926 10,760, , , ,752 Public Works 5,770,717 5,436,837 5,090,997 5,759,547 7,544,993 Forestry ,590 44,794 Nat. Resources 91,490,343 57,649,661 65,564,140 84,059, ,540,468 Employment 2,372,589 2,793,316 2,850,790 2,645,500 2,796,809 Tourism 422, , , ,382 1,337,080 Auditor General 148, , ,700 84, ,760 Defence 3,962,240 3,674,856 2,506,765 3,988,422 2,595,892 IEC , ,050 83,634 Loc. Government 4,325,343 7,967,347 4,263,097 4,593,730 11,059,389 Gender 37,260 45,361 64,434 53,450 23,538 Public Service 2,175, ,710 1,392,422 1,062,661 1,256,281 Total 2,933,150,822 3,368,177,567 3,782,890,512 4,359,776,792 6,298,772,968 Rate of Growth % c) Economic classification of Recurrent Revenue: Recurrent Revenue was categorised into economic classification and there was an overall increase of revenue as shown on Table 23 below. Table 23- Economic Classification of Recurrent Revenue 2004/ / /2007 Tax Revenue: SACU 2,012,404,000 2,306,022,456 3,944,969,756 Income Tax 729,220, ,471, ,539,897 Value Added Tax 541,891, ,819, ,879,021 Oil Levy 48,704,163 36,947,736 44,571,479 Other Tax Revenue 23,085,750 45,004,220 99,128,370 Non-Tax Revenue: Other Non-tax 233,118, ,003, ,888,434 Water Royalties 194,465, ,508, ,796,011 Total 3,782,890,515 4,359,776,794 6,298,772,968 d) Non-reconciliation of Ministries Revenue Reports with Treasury records: Some ministries had prepared the monthly revenue reports and had sent the copies to Accountant General and Auditor General. However, the monthly reports have not been reconciled with the Treasury GOLFIS ledger. Table 24 below shows variances between Treasury and Ministries 75

81 records and where there are no figures in the Ministry s records column, revenue reports were not available. Table 24 - Comparison of Ministries and Treasury Records Ministry Treasury Records Ministry Records Variance Agriculture 4,154,381 7,512,256 (3,357,875) Health 12,188,893 6,421,889 5,767,004 Education 4,126, Finance 6,080,028, Trade 2,247,542 3,877,404 (1,629,862) Justice 17,219, Home Affairs 18,585,862 18,846,906 (261,044) Communications 4,372,070 5,813,404 (1,441,334) Law 456, ,849 (11,097) Public Works 7,544, Forestry 44, Natural Resources 128,540, Employment 2,796, ,665 2,296,144 Tourism 1,337, , ,370 Auditor General 109, , Defence 2,595, ,386 2,244,506 IEC 83,634 83,634 - Local Government 11,059, Gender 23,538 44,833 (21,195) Public Service 1,256,281 1,256,281 - TOTAL 6,298,772,

82 4.2.2 RECURRENT EXPENDITURE: a) Economic Classification of Expenditure Recurrent costs are those incurred for goods and services consumed in the course of a budget year, and which must be regularly replaced. Staff salaries are the most obvious, and often the biggest single item of recurrent costs. Salaries are defined to include gross payments to staff, before deductions for tax or other items. For the years under review, recurrent expenditure was mainly for the following: Salaries and Wages, Goods and Services Grants and Subscriptions During the financial year 2006/07, Salaries and Wages accounted for 39% of the total expenditure on heads; Goods and Services absorbed 37% whereas Grants and Subscriptions accounted for 24%. Chart 3 below shows rate of growth of expenditure per economic classification. Chart 3 77

83 b) Functional Classification of Recurrent Expenditure Recurrent expenditure incurred as further categorised according to the type of service rendered in 2006/07 as shown in figure 2. Chart 4 c) Recurrent Expenditure Budgetary Performance During the financial year 2006/07, recurrent expenditure estimated and approved by Parliament was M3,655,359,450. The public accounts reflected an amount of M263,767,455 as Supplementary Estimates for the year 2006/07. The overall funds released by warrants amounted to M3,739,815,621. Actual expenditure amounted to M3,569,217,348 resulting in overall under expenditure of M170,1598,273 based on released funds. I raised a concern in my previous report that the Accountant General stated an amount of M103,222,690 as supplementary estimates though there was no Supplementary Appropriation Act in 2005/06. The same situation prevailed in 2006/07, an amount of M263,767,455 was stated as supplementary estimates without the Act and therefore the amount as stated in the public accounts remains unauthorised. Table 25 shows recurrent expenditure performance in 2006/07. I have already stated somewhere in this report that clearing advances without the Supplementary Appropriation Act is illegal and therefore expenditure amounting to M91,953,067 78

84 (representing advances from the Contingencies Fund) charged to different heads of expenditure in 2006/07 remain unauthorised. 79

85 Table 25 - Recurrent Expenditure Performance 2006/07 Ministry Approved Estimates Supplementary Estimates Total Estimates Released Funds Actual Expenditure (Over)\Under Expenditure Agriculture 106,050,040 1,166, ,216, ,340, ,318,334 (977,546) Health 386,453,060 4,994, ,447, ,102, ,622,585 50,480,065 Education 927,421, ,421, ,036, ,289,710 25,747,059 Finance 532,097,610 75,764, ,862, ,140, ,654,820 30,485,900 Trade 38,808,480 3,116,456 41,924,936 38,717,250 35,398,401 3,318,849 Justice 124,901,380 9,150, ,052, ,038, ,429,346 14,608,752 Home Affairs 211,413,990 20,737, ,151, ,904, ,705,639 8,199,266 Prime Minister's 84,431,320 4,525,153 88,956,473 92,943,072 96,695,481 (3,752,409) Communications 47,384,180-47,384,180 47,991,313 42,899,938 5,091,374 Law 43,067, ,000 43,567,240 43,034,975 37,889,450 5,145,525 Foreign 161,142,600 1,644, ,787, ,472, ,709,936 7,762,944 Public Works 128,746,210 15,800, ,546, ,483, ,112,012 13,371,888 Forestry 31,343,700-31,343,700 31,343,700 31,961,150 (617,450) Natural Resources 50,551,670 2,722,562 53,274,232 50,502,010 45,554,720 4,947,290 Employment 23,359, ,770 23,527,600 23,227,842 22,407, ,112 Tourism 40,144,500 1,228,486 41,372,986 40,128,690 39,135, ,315 Auditor General 11,647,470-11,647,470 11,647,470 10,439,382 1,208,088 His Majesty's Office 7,378,770 1,809,527 9,188,297 7,368,270 6,626, ,857 Public Service Comm. 3,843,410-3,843,410 3,843,410 3,912,210 ( 68,800) Defence 245,415,220 35,249, ,665, ,236, ,859,315 3,376,735 National Assembly 42,112, ,356 42,265,646 41,702,790 31,053,736 10,649,054 Senate 12,595,780-12,595,780 12,476,080 8,111,660 4,364,420 Ombudsman 3,871,550-3,871,550 3,867,885 3,294, ,748 IEC 67,128,850 81,600, ,728,850 67,128, ,501,222 (67,372,373) Local Government 276,865,320 1,931, ,796, ,273, ,861,869 46,411,371 Gender 31,509,200 1,462,408 32,971,608 31,195,215 29,290,599 1,904,616 Public Service 15,674,720 41,650 15,716,370 15,666,800 12,482,142 3,184,658 Total 3,655,359, ,767,455 3,919,126,905 3,739,815,621 3,569,217, ,598,273 80

86 d) Requirements of finance laws in relation to excess expenditure: In terms of section 4 read with section 11 of Finance Order of 1988, every Chief Accounting Officer responsible for financial management and control of funds under his\her ministry is required to prepare a statement of expenditure in excess of the amount appropriated. The Minister of Finance shall lay the statement of excesses before the legislature and if the reasons are acceptable the expenditure is authorised through supplementary appropriation. Section 32 of Finance Order of 1988 states that if the Accountant General s records show that expenditure has been incurred in excess of the authorised provision for a head of expenditure, a surcharge of M or the amount of the excess whichever is the lesser amount, shall be imposed on the person who was the Chief Accounting Officer for that head at that time. The requirements of the Finance Order were not complied with. Up to the time of my reporting, I have not been advised of the action taken against the Chief Accounting Officers responsible for excess expenditures. e) Excess Expenditure on Voted Heads: As much as the net actual expenditure was within appropriated sums for years under review, four heads out of 28 voted heads of expenditure exceeded the appropriated amounts in 2006/07 as indicated in table 26 below Table 26- Excess Expenditure on Heads Ministry Total Approved Estimates Actual Expenditure (Over)/Under Expenditure Agriculture 107,216, ,318,370 (102,171) PM s Office 88,956,473 96,695,481 (7,739,008) Forestry 31,343,700 31,961,150 (617,450) Public Service 3,843,410 3,912,210 (68,800) Total 231,359, ,887,212 (8,527,430) 81

87 f) Detailed Statement of Expenditure My office has compiled a detailed statement of expenditure to show the overall position of each expenditure item for the voted heads for the financial year 2006/07 as indicated on Table 27. Table 27 Detailed Statement of Expenditure Personnel Emoluments Released Funds Actual Expenditure (Over)/Under Expenditure Salaries Established 1,274,570,089 1,240,528,884 34,041,205 Salaries New Posts 10,347, ,021 10,676,411 Wages 26,097,180 24,102,242 1,994,938 Wages New 616, , ,444 Allowances 117,523,269 99,258,116 18,265,153 Local Training 6,305,391 4,593,594 1,711,797 Gratuities 12,030,000 10,134,455 1,895,545 Sub Head Total 1,447,489,799 1,378,763,307 68,726,493 Travel and Transport Vehicle Maintenance 98,811, ,838,833 (6,027,418) Fuel and Lubricants 47,651,162 72,059,697 (24,408,534) Standing Charge 11,320-11,320 Short Term Hire 11,518,240 14,606,407 (3,088,167) Private Hire Motor Mileage 1,068, , ,900 Fares Local 2,430,712 1,837, ,781 Subsistence Local 39,958,433 36,377,614 3,580,819 Freight 5,062,754 3,934,488 1,128,266 Equine Hire 153,422 56,968 96,454 Fares International 34,724,811 30,623,595 4,101,216 Subsistence International 33,630,382 27,738,968 5,891,414 Sub Head Total 275,021, ,754,569 (17,732,949) Operating Costs Power 42,818,481 38,016,108 4,802,373 Communications 52,642,795 49,019,881 3,622,914 Other Office Overheads 169,771, ,276,793 7,494,861 Printing 12,707,807 7,682,760 5,025,046 Stationery 25,689,406 22,621,825 3,067,580 Maint. Of Public Assets 79,184,497 66,725,389 12,459,108 Upkeep of Institutions 207,925, ,318,655 3,607,088 Running Costs 87,104,840 70,673,777 16,431,063 Purchase and Production 98,567,614 85,702,591 12,865,024 Minor Works 20,182,001 17,169,568 3,012,433 Counterpart Contribution 21,130,528 19,654,721 1,475,808 Drugs 63,050,141 39,930,372 23,119,769 Dressings 9,819,563 4,806,947 5,012,616 82

88 Table 27 (Continued) Vaccines 1,351, , ,127 Dips and Anthelmintics 184, ,428 81,582 Official Entertainment 6,264,111 4,643,512 1,620,599 Official Gifts 893, , ,222 Losses 59,935 40,000 19,935 Sub Head Total 899,348, ,196, ,151,149 Special Expenditure Office Equipment 30,563,034 24,045,234 6,517,800 Office Furniture 18,321,850 17,151,372 1,170,479 Books and Publications 17,725,943 10,621,580 7,104,363 Non-Office Equipment 22,140,769 15,923,367 6,217,403 Vehicles, Cycles & Equines 10,337,061 10,281,778 55,283 Non Recurrent Expend. 95,139, ,151,638 (64,012,354) HIV/AIDS 557, ,595 (156,624) Subhead Total 194,785, ,889,564 (43,103,651) Grants and Subscriptions Subsidies 440,594, ,594,000 - Grants 225,029, ,035,117 21,993,935 Grants in Aid 242,277, ,410,875 26,866,825 Subscriptions 15,269,506 6,573,032 8,696,474 Subhead Total 923,170, ,613,024 57,557,234 Ministries Total 3,739,815,623 3,569,217, ,598,276 g) Excess Expenditure on some items: The Detailed Statement of Expenditure indicates that the over expenditure mainly occurred on vehicle maintenance, fuel and lubricants and short term hire. Most ministries incurred excess expenditure on fuel and lubricants as shown on Table 28 below. Under short term hire specific mention should be made on the Independent Electoral Commission (IEC) and Prime Minister s Office which exceeded the budget by more than 1000%. IEC was allocated M32, and incurred expenditure amounting to M1,712, whereas PM s Office had the budget of M189, and actual expenditure was M2,400, Under vehicle maintenance, the PM s Office again exceeded the budget by 172%. Funds allocated amounted to M2,503, and expenditure was M6,805,

89 IEC also exceeded the budget by 135% under Non-recurrent Expenditure item. Funds released amounted to M50,603,880 and funds spent amounted to M118,667, Many Ministries exceeded their budgets on fuel and lubricants out of 27 voted heads, 19 exceeded the budget as illustrated on Table 28 below. Table 28 Excess Expenditure on Fuel and Lubricants Ministry Released Funds Actual Over Expenditure Over Expenditure (%) Agriculture 5,897,010 6,676,457 (779,447) 13 Health 2,070,500 7,335,597 (5,265,097) 254 Education 1,485,275 5,371,153 (3,885,878) 262 Trade 1,372,560 1,413,504 (40,944) 3 Justice 2,800,403 3,040,249 (239,845) 9 Home Affairs 7,110,024 9,513,182 (2,403,158) 34 PM s Office 1,106,780 4,915,749 (3,808,969) 344 Communications 2,144,020 2,666,049 (522,029) 24 Foreign 1,412,300 1,618,290 (205,990) 15 Works 3,151,770 4,276,925 (1,125,155) 36 Forestry 1,875,690 2,004,406 (128,716) 7 Natural Resources 2,168,962 2,473,918 (304,955) 14 Employment 422, ,008 (61,228) 14 Tourism 690,500 1,187,401 (496,901) 72 Public Service 64, ,833 (58,883) 91 Defence 7,471,120 9,772,180 (2,301,060) 31 IEC 578, ,196 (281,859) 49 Local Government 1,414,500 3,934,990 (2,520,490) 178 Gender 933,710 1,303,744 (370,034) 40 Total 44,171,192 68,971,830 (24,800,639) 56 h) Unauthorised Excess on Expenditure Items M200,657,628 Excesses totalling M200,567,628 were incurred on 739 expenditure items during the financial year 2006/07 yet finance laws permit the Principal Secretary for Finance to approve a virement from one subhead with surplus balance in aid to another subhead with deficient balance. Table 29 has details. 84

90 Table 29 - Excess on Expenditure Items Over Expenditure Under Ministry Items Amount Expenditure Net Expenditure Agriculture 77 13,413,048 12,435,466 ( 977,582) Health ,454,976 78,935,042 50,480,065 Education 4 7,380,575 33,127,634 25,747,059 Finance 31 1,311,770 31,797,670 30,485,900 Trade ,633 3,850,482 3,318,849 Justice 27 2,870,877 17,479,630 14,608,752 Home Affairs 31 10,607,964 18,807,231 8,199,266 PM's Office 6 15,611,059 11,858,649 (3,752,409) Communications 6 942,058 6,033,432 5,091,374 Law ,889 5,841,413 5,145,525 Foreign ,105,156 28,868,100 7,762,944 Public Works 15 5,059,254 18,431,142 13,371,888 Forestry 45 4,302,489 3,685,039 (617,450) Natural Resources 96 4,315,597 9,262,887 4,947,290 Employment 3 210,030 1,030, ,112 Tourism 12 2,696,833 3,690, ,315 Auditor General 1 21,903 1,229,991 1,208,088 His Majesty's Office , ,857 PSC 4 147,412 78,612 (68,800) Defence 13 2,715,682 6,092,416 3,376,735 National Assembly 1 99,330 10,748,384 10,649,054 Senate - - 4,364,420 4,364,420 Ombudsman , ,748 IEC 4 70,080,120 2,707,747 (67,372,373) Local Government 51 6,174,046 52,585,418 46,411,371 Gender 13 1,856,726 3,761,341 1,904,616 Public Service 3 53,201 3,237,859 3,184,658 Total ,657, ,255, ,598,273 85

91 4.3 CAPITAL ACCOUNT The capital account is a summary of all capital revenue and expenditure of Government. Capital Revenue compromises grants, loans and other miscellaneous items. Capital Expenditure is basically project expenditure CAPITAL REVENUE Table 30 - a) Differences between Public Accounts and Loan Disbursement Statement Figures An audit test of checking whether the capital revenue figures brought to the Detailed Statement of Capital Revenue as per Public Accounts match with those in the Loan Disbursement Statement (maintained by the Public Debt office) was carried out, and the following variances were discovered as shown on Table 30 below. Variances between Public Accounts and Loan Disbursement Statement PUBLIC ACCOUNTS FIGURE (M) LOAN DISBURSEMENT FIGURE (M) MINISTRY PROJECT NAME DONOR VARIANCE (M) AGRIC SADPMA IFAD 4,291, ,073, , SANREMP IFAD 9,331, ,331, (3-30) HEALTH HSRP vi IDA 11,735, , ,976, HSRP vi 12,903, ,903, EDUCATION 2 nd Education IDA 53,295, ,887, ,408, FINANCE LUSRP IDA 19,796, ,920, ,876, Works Likalaneng Thaba-Tseka Road BADEA 32,207, ,842, ,364, NATURAL RESOURCES Maseru Water Supply II BADEA 3,557, ,790, (2,233,517-31) TOTAL 147,119, ,606, ,512,

92 b) Omitted Loan Disbursements Further scrutiny of the Loan Disbursement Statement and Detailed Statement of Capital Revenue as per Public Accounts revealed that the loan disbursements made in respect of the project HNRRIEP in the Ministry of Natural Resources, amounting to M13,334, have not been incorporated into the Public Accounts, hence understating the Capital Revenue by the same amount. c) Differences between Public Accounts and Audited Figures The financial statements of the following projects have been audited for the financial year 2006/2007. It has however been discovered that the revenue figures brought to the Public Accounts are different from the revenue figures revealed by audited financial statements. This has therefore understated the Capital Revenue figure by M46,991, Details are shown on Table 31 below. Table 31 - Variances between Public Accounts and Audited Figures PUBLIC MINISTRY PROJECT NAME DONOR ACCOUNTS FIGURE (M) AUDITED FIGURE (M) VARIANCE (M) AGRICULTURE SANREMP IFAD 9,331, ,806, (3,474,877.30) EDUCATION 2 nd Education IDA 53,295, ,757, (11,461,865.03) Support Education IRISH AID ,078, (16,078,868.00) Education Project ADF ,033, (2,033,956.00) Basic Education UNICEF , (494,199.00) FTI Catalytic ,083, (13,083,227.83) NATURAL RESOURCES Water Sector Improvement IDA 6,675, ,040, (364,518.28) 69,303, ,294, (46,991,511.44) 87

93 4.3.2 CAPITAL EXPENDITURE a) Budgetary Performance The total capital expenditure for the financial year 2006/07 amounted to M580,929, as against the appropriated amount of M1,033,914, The spending capacity of the government on capital projects fell short by 46%. This does not reflect a good picture on the performance of the government on its developmental achievements. This may be an indication of poor/inadequate budgeting or delays in implementing the projects as these funds could have been used for other purposes beneficial to the public. An example to this is the Likalaneng - Thaba-Tseka Road Construction which has been in the Estimates since 2004/2005 financial year, but its implementation only commenced in August 2006 (i.e. in 2006/2007 financial year). The test checks performed disclosed that total expenditure amounting to M156,988, has been omitted from the Public Accounts and therefore understating the Capital Expenditure amount. The Capital Expenditure in the Public Accounts should have been M737,917,290 as indicated below: Expenditure per Public Accounts Understatements in Public Accounts Omissions per Ministries Records 580,929, ,178, ,917, b) Comparison of Released Funds and Actual Expenditure The financial laws provide that the issue from the consolidated fund to meet the appropriated expenditure shall be authorized by the Minister of Finance and Development Planning (MoFDP) by warrant. Before expenditure can be made, Requisition to Incur Expenditure (RIE) should be obtained from MoFDP. During the financial year 2006/2007, 88

94 the total actual expenditure fell below the expenditure authorized by RIE s by M160,887, as indicated on Table 32 below. Table 32 - Budgetary Performance HEAD MINISTRY APPROVED BUDGET (M) FUNDS RELEASED BY RIE s (M) ACTUAL EXPENDITURE (M) VARIANCE ((OVER)/UNDER) (M) 701 Agriculture 24,460, ,481, ,670, ,811, Health 81,276, ,036, ,016, ,020, Education 86,020, ,000, ,137, (61,137,809.25) 704 Finance 105,581, ,563, ,201, ,362, Trade 20,000, ,628, ,313, ,315, Justice 6,040, ,690, ,372, , Home Affairs 4,500, ,500, , ,586, PM s Office 85,300, ,710, ,993, (22,283,939.92) 710 Communication 28,000, ,000, ,007, ,992, Works 266,550, ,882, ,857, ,024, Agric-Forestry 8,937, ,682, ,122, , Nat. Resources 132,296, ,076, ,616, ,460, Tourism 44,469, ,464, ,444, ,019, His Majesty s Office 2,000, ,000, , , Highlands 107,223, ,223, ,472, ,751, Local Government 56,491, ,491, ,495, ,996, Gender 15,539, ,384, ,150, ,233,74992 TOTAL 1,074,685, ,816, ,929, ,887, c) Unauthorized Excess Expenditure on Capital Projects The purpose of a budget is to give notification that constitutes sufficient authority for the government ministries to incur expenditure, and the budget should not be exceeded without authority. However, during the financial year 2006/2007, unauthorized excess expenditure amounting to M141,874, was incurred over authorized provision in the following capital projects as shown on the Table below

95 Table 33- Unauthorized Excess Expenditures MINISTRY PROJECT NAME DONOR EXPENDITURE AUTHORISED BY RIE s (M) ACTUAL EXPENDITURE (M) EXCESS AMOUNT (M) AGRIC SADPMA LG 300, , (499,969.88) SanRemp LG 2,320, ,520, (200,219.77) HEALTH Health Sector Reform LG 9,000, ,936, (14,936,703.64) HIV/Aids Capacity LG 2,000, ,347, (347,423.48) Support to TB Control LG 750, ,357, (603,722.23) Programme Disabled Support LG 500, ( ) EDUCATION E Governance 0 456, (456,950.16) Free Primary Education LG 10,000, ,597, (3,597,313.97) Irish Aid to Education DCI 0 12,747, (12,747,578.19) Education Sector LG 10,000, ,410, (23,410,826.65) Development Education Sector IDA 0 16,407, (16,407,923.04) Development Construction Primary LG 1,000, ,347, ( ) Education Development 0 428, (428,820.68) Education Development ADF 0 724, (724,006.10) Early Childhood 0 2,741, (2,741,730.03) Development E-Government Project LG 2,000, ,584, (584,357.47) FINANCE Micro Projects 0 5,223, (5,223,243.15) LUSRP 0 7,584, (7,584,671.28) LUSRP LG 2,581, ,885, (304,956.98) JUSTICE Renovation to Mokhotlong Correctional Institution LG 1,190, ,190, (273.84) PM S OFFICE HIV/AIDS Program GF ( ) HIV/AIDS Program LG ( ) PUBLIC WORKS Rural Roads LG 1,500, ,616, (116,143.92) Improvement Mapholaneng St. DCI 0 80, (80,749.79) Martins Structures Programme DCI 0 89, (89,415.80) FORESTRY Watershed Management GOL 8,000, ,036, (36,554.57) NATURAL RESOURCES Lesotho Water Sector GOL 1,604, ,999, (1,394,996.87) Improvement National Adaptation GEF 0 182, (182,743-37) Programme Lesotho Water Sector IDA 0 2,574, (2,574,002.81) Improvement Rural Water Supply DCI 0 26,226, (26,226,979.70) TOURISM National Biosafety GOL (504.20) GENDER Political Empowerment GOL 0 108, (108,721.00) TOTAL ( ) 90

96 d) Differences between Public Accounts and Audited Figures The financial statements of the following projects have been audited for the financial year 2006/2007, and it has been discovered that the expenditure figures brought to the Public Accounts are different from the audited figures (i.e. those verified by auditors). As a result, the Capital Expenditure has been understated by M41,178,972.60, thus impairing the reliability of the Public Accounts. Table 34 -Variances between Public Accounts and Audited Financial Statements MINISTRY PUBLIC ACCOUNTS FIGURE (M) AUDITED FIGURE (M) PROJECT NAME DONOR VARIANCE (M) AGRIC SANREMP IFAD 2,965, ,005, (9,039,925.89) SANREMP LG 2,520, ,476, , HEALTH Health Sector Ref. IDA 3,723, ,344, , Health Sector Ref. ADF 4,128, ,567, (7,438,592.11) Health Sector Ref. DCI 9,859, ,733, , Health Sector Ref. WHO 0 2,147, (2,147,955.00) HIV/Aids Capacity LG 2,347, ,939, (6,592,373.52) HIV/Aids Capacity IDA 2,157, ,108, (5,950,526.63) Health Sector Ref. UNICEF 819, ,770, (2,950,771.09) Support to TB Control GF 353, ,316, (962,900.33) Disabled Support NORD 223, , ( ) WORKS Integrated Transport Project IDA 2,375, ,521, (1,145,607.39) Integrated Transport Project GOL 2,616, ,877, (261,077.24) Road Improvement Unit GOL 14,902, ,944, (41,287.59) NATURAL RESOURCES TOURISM Water Sector Improvement IDA 2,574, ,809, (5,235,756.05) Water Sector Improvement GOL 2,999, ,214, , Maloti Conservation & GEF 7,038, ,533, (2,495,310.52) Development Maloti Conservation & GOL 6,748, ,938, ,809, Development TOTAL ( ) e) Capital Expenditure Omitted from Public Accounts The audit checks carried out revealed that the following projects were operational in the financial year 2006/07 and incurred the total expenditure amounting to M115,809, as shown by the records maintained by the respective government ministries. However, the stated expenditure figure has not been incorporated into the Public Accounts, hence understating the Capital Expenditure figure. 91

97 Table 35 - Omitted Capital Expenditures MINISTRY PROJECT NAME DONOR EXPENDITURE AMOUNT (M) AGRIC Priority Support Programme DFID 3,246, Support to Vulnerable Households RSA 3,470, Support to Vulnerable Households DFID 4,021, Agricultural Inputs and Training EDF 3,360, Support to Conservation Agric FAO 1,062, South Cooperation FAO 469, EDUCATION Population and Family Life LG Education Sector Development III LG 361, E-Governance Project LG 1,615, Basic Education Project UNICEF 2,728, WORKS Thaba-Tseka Sani-Pass BADEA 1,222, Feasibility Study Likalaneng Thaba-Tseka BADEA 28,893, Likalaneng Thaba-Tseka ADF 39,704, FORESTRY Civil Engineering BADEA 497, NATURAL RESOURCES Maseru Per-Urban BADEA 6,091, Water Supply Phase I Electricity Access Pilot Project WB 3,877, HIGHLANDS Katse, Lejone & Mohale Water Sanitation EIB 11,140, GENDER Youth Resource Centre GF 4,044,928.12* Note: *The expenditure figure includes 3 cheques amounting to M788, issued out in 2006/07, but not presented during the same year. 92

98 PART 5 5. PRE-AUDIT OF TERMINAL BENEFITS: During the Financial Year 2006/07, my office received 1845 files and there were 453 outstanding files from the previous year and thus making a total of 2298 files. Out of the total of 2298 files; 1364 files with complete information were approved and 372 files were rejected due to incomplete information and 562 were outstanding as at 31 st March I have once again noted that the public officers were wrongly paid during their term of service which resulted in salary overpayments and underpayments. Table 34 indicates that from the selected 249 approved files, 126 of the officers were overpaid salaries by M938, and 123 officers were underpaid salaries by M1,1446,97.18 during their term of service due to the following: Delay in issuance of casualty return for stoppage of salary following retirement, expiry of contract and death which often result in continuous salary payment. Salary payment while absent without permission and thus contravening Section 407 of the Public Service Regulations 1969 which states that; If an officer absents himself without permission the appropriate paying authority may cease payment of the whole of his salary for the period of absence without prejudice to any disciplinary action which may be taken under the provisions of the Public Service Act, 1968, as the case may be, or to any order by either Commission for the restoration of the whole or part of that salary. Payment of full salary for officers on study leave thus contravening Ministry of Public Service Circular Notice No.19 of 1988 which states that; 93

99 Officers who proceed on study leave are to receive full salary for the first six months of their training and in lieu of salary, a dependent s allowances at the rate of 50% of individual officer s salary for the remaining period of study. Placement on wrong annual increment following first appointment, promotion or re-grading of positions. Ambiguity in the assimilation structure and conversion rules for teachers employed before 1 st April 1991 as per Education External Circular N0.9 of 1991 dated 13 th March Ambiguity in the salary structure and assimilation of Disciplined forces employed prior to 1 st January 1985, 1 st April 1988 and 1 st April It was further observed that the authenticity of cancelled salary cheques could not be verified because original cheques were not attached to the journal vouchers as required by Section 618 (iii) of the Financial Regulations 1973 which provides that; In the case of adjustment, each journal voucher must clearly reflect the reason for the adjustment, with a reference to previous documents originating the transactions. 94

100 Table 36 Salary Overpayments and Underpayments Selected Approved Files Ministry/Agency Appointment Terms Cause of Termination Pension Payable (Per Annum) Gratuity Payable (Lump sum) Death Gratuity Payable (Lump sum) Salary Overpayment Salary Underpayments M M M M M 9 Other Contract Expiry of - 379, , Ministries/Agencies Contract 40 Other Contract Expiry of - 4,175, , Ministries/Agencies Contract 21 Other Pensionable Retirement 483, , , Ministries/Agencies 6 Other Pensionable Retirement 92, , , Ministries/Agencies 25 Other Pensionable Death - - 1,720, , Ministries/Agencies 20 Other Pensionable Death , , Ministries/Agencies 10 Defence Pensionable Retirement 216, , , Defence Pensionable Death , , TSD Pensionable Retirement 539, ,247, , TSD Pensionable Death , , TSD Pensionable Death , , TSD Non-Pensionable Resignation - 249, , TSD Non-Pensionable Resignation - 481, , TSD Non-Pensionable Death , , TSD Non-Pensionable Death , , ,332, ,767, ,503, , ,446,

101 PART 6 6. MINISTERIAL PARAGRAPHS GENERAL OBSERVATIONS: In accordance with the audit strategy auditors have undertaken several audit inspections of Ministries and Departments. There were a number of findings that were repeated across a number of Ministries and Departments which cause concern regarding non-compliance to government rules, regulations and procedures and the potential for fraud and loss to the Government that arises. Individual cases are rarely material in value, but are indicative of a lack of knowledge of or commitment to following the Government s prescribed procedures: a) Lack of Reliable Records for the Control of Public Assets Stores ledgers not properly maintained as required by the Stores Regulations It is also the best practice that stores ledgers be maintained to control receipts and issuance of stores. b) Improper Maintenance of the Vote Control Books Financial Regulations require that the Vote Books should be maintained to record expenditure and commitments. This is basically a control mechanism to monitor expenditure. There were cases whereby orders were not committed in the vote book and only straight payments were made. The commitments of the orders in the vote book are made such that the expenditure is monitored in order to avoid over-expenditure. c) Non-reconciliation of Records It is an accounting requirement that the department s records should be reconciled with the records maintained by the Accountant General or by the Banks. The primary purpose of this is to verify that the two sets of records are in agreement and to detect errors and irregularities and also to ensure that the official records are accurately maintained. This is further emphasised by the Financial Regulation 506 on the reconciliation of the department s records with the Accountant General s records and also 96

102 Financial Regulation 1203 on the reconciliation of the bank statement and the cash book. The problem of non-reconciliation still prevails in many departments and ministries contrary to the requirements of the accounting standards and the financial regulations. d) Failure to Prepare Arrears of Revenue Returns Financial Regulation 816 requires accounting officers responsible for the collection of revenue to render within one month of the end of the financial year, a return showing all amounts which remained uncollected at the end of the previous financial year, excluding bills raised in March. The regulation further requires accounting officers to render Returns of Arrears of Revenue to the Accountant General with a copy to the Auditor General. The requirement was not met by some departments and ministries as they failed to prepare Arrears of Revenue returns. e) Failure to Report Losses and Accidents Finance laws require that all losses of Government money and stores, as well as vehicle accidents should be reported immediately to the Principal Secretary for Finance. It has been observed that some ministries did not report the losses and accidents. 97

103 6.1 MINISTRY OF AGRICULTURE AND FOOD SECURITY BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Actual Over (-) /Under Programme Released Funds Expenditure Expenditure Administration 23,430,991 21,956,623 1,474,368 Livestock 8,536,100 7,402,380 1,133,720 Crops 13,499,535 11,338,395 2,161,140 Extension 11,866,027 13,728,505 (1,862,479) Butha Buthe 3,222,426 3,494,824 (272,398) Leribe 2,656,638 2,528, ,814 Berea 3,217,553 4,845,720 (1,628,167) Mafeteng 1,619,599 2,065,282 (445,684) Mohale s Hoek 3,389,775 2,634, ,980 Quthing 3,853,210 3,539, ,834 Qacha s nek 3,190,246 5,318,312 (2,128,067) Thaba Tseka 4,097,713 4,686,283 (588,570) Mokhotlong 4,844,018 5,240,967 (396,949) LAC 12,083,920 12,606,104 (522,184) Research 6,833,038 5,931, ,094 Total 106,340, ,318,334 (977,546) DISTRICT AGRICULTURAL OFFICE (DAO) LERIBE Delay in banking The Financial Regulations 1204(1) of 1973 states that; When local banking facilities are available, cheques, postal orders and similar items and any cash in excess of immediate requirements shall be banked daily or as often as the bank is open for business. Contrary to the stated regulation, scrutiny of records at District Agricultural Office in Leribe revealed that revenue collected was kept for up to 50 days before banking. If this remains the practice that revenue collected is kept for a month in the hands of the cash collectors that cash is highly subjected to theft and misappropriation. 98

104 6.1.3 DISTRICT AGRICULTURAL OFFICE (DAO) THABA-TSEKA a) Arrears of Revenue Section 816(1) of these regulations further states that; Accounting Officers who are responsible for the collection of revenue shall render within one month of the end of the financial year, a return showing all amounts which remained uncollected at the end of the previous financial year, excluding bills raised in March. Contrary to requirements of the regulation, arrears of revenue returns were also not prepared for the following centres: i) Farmers Training Centre Scrutiny of invoice books for Farmers Training Centre (F.T.C) revealed that some Government departments as well as private organizations had not paid their debts to the total of M101, for the financial years 2006/2007. ii) Matheko Youth Training Centre According to the fee structure, fees for boarding students and day scholars are M and M per annum respectively. The amounts include registration and sports fees of M15.00 and M20.00 respectively which are due when the school re-opens and the balances are paid quarterly. Scrutiny of the students register revealed that in 2006/2007 Academic Year, there were outstanding fees amounting M2, b) Officers on Study Leave without Approval The Ministry of Public Service Circular Notice No. 15 of 2003 prohibits officers from embarking on training without approval of the Minister of Public Service. According to the circular, officers who do not comply will be deemed to have deserted the service. 99

105 It was observed that two officers at DAO Thaba-Tseka had gone for long-term training without approval. One officer proceeded on study leave in August 2007 and the other in January 2008 respectively. The officers were still paid their salaries during the time of the audit in September c) Compensation Payment of M345, According to an accident report dated 21/08/2007, vehicle registration number X6079 of the District Agricultural Office Thaba-Tseka, was involved in an accident on the 05/05/2007 with a minibus (Mercedes Benz sprinter. Scrutiny of records further revealed that, the vehicle s insurance policy was last renewed in 2006 as per Policy number CMPC 1162 and there was no Insurance cover for the year The owner of the minibus claimed compensation amounting to M345, from Government which was paid in November Failure to renew the vehicle s insurance cover for the year 2007 has resulted in the Government incurring the above stated loss as there was no insurance to cover the claimed compensation. During the time of the audit it was not clear whether any action had been taken on the driver of the vehicle by the department. 100

106 6.1.4 DISTRICT AGRICULTURAL OFFICE QACHA S NEK a) Unauthorized Purchase of Protective Clothing Cabinet (Personnel) Circular Notice No:14 of 1980 lists categories of employees who qualify for uniform/protective clothing. It also indicates items that should be bought for respective categories. This is further emphasized by Stores Regulation 3104 of 1967 which reads thus; Issues of uniform and protective clothing are made in conformity with the approved scales of issues for each category and designation of staff. Contrary to the above legal requirements, it was observed that DAO Qacha s Nek not only purchased uniform/protective clothing for employees categorised in the circular but for every member of staff. During the period under review, 16 pairs of Hukker Hi Boots to the value of M5,472 and 28 Freezer suits amounting to M6, were purchased. The management was advised to ensure that protective clothing is only provided to personnel who qualify in accordance with the laws and regulations. 101

107 6.2 MINISTRY OF HEALTH AND SOCIAL WELFARE BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Programme Released Funds Actual Expenditure Over (-) /Under Expenditure Administration 78,484,473 75,927,323 2,557,150 +Queen II Hospital 104,353,969 90,426,286 13,927,683 Maseru District 2,399,460 2,620,664 (221,204) Butha Buthe 12,168,896 11,845, ,814 Leribe 21,037,398 20,879, ,843 Berea 12,869,620 13,309,123 (439,503) Mafeteng 13,287,369 11,662,134 1,625,236 Mohales Hoek 14,896,201 11,149,912 3,746,289 Quthing 12,074,280 9,394,907 2,679,373 Qacha s Nek 11,341,513 9,325,533 2,015,980 Thaba Tseka 3,438,310 2,857, ,788 Mokhotlong 10,733,654 8,966,259 1,767,395 LFDS 5,931,300 5,695, ,097 Mental Health 8,759,077 9,734,225 (975,148) Health Education 2,008,360 1,950,904 57,456 Family Health 3,389,909 2,450, ,720 Disease Control 36,382,521 18,108,493 18,274,029 Environ. Health 2,403,570 2,422,017 (8,447) Leprosy Control 3,227,964 3,065, ,385 Lab. & Research 9,661,550 7,195,541 2,466,009 NHTC 8,687,217 8,195, ,760 Social Welfare 8,566,040 8,440, ,361 Total 386,102, ,622,585 50,480, LOSS OF A VEHICLE The Medical Superintendent reported to the Principal Secretary, Ministry of Health and Social Welfare on 28 th July 2006, loss of a vehicle, Toyota Tazz bearing registration number Y8647. The vehicle was stolen in South Africa whereby one officer was attending a course for medically handicapped children at the Donald Gordon Medical Centre. The vehicle was found missing at the parking lot of a hotel where the officer was staying and it was further stated that the hotel had security guards. Further information has not been availed to my office of any progress made on the case. 102

108 6.2.3 NATIONAL DRUG SERVICE ORGANISATION a) Decline in Profit The financial statements for the financial year ended 2006/2007 indicated that the viability of the Organisation in the future seems threatened by the unsatisfactory management of its activities resulting in a substantial decrease of net profit for the year during the two years period as follows:- 2006/ / /05 Retained Profit for the year M817,935 1,166,475 M1,419,720 As previously reported, this calls for special attention by the Council to identify the root cause for the decline in profit and devise the measures that will redress this anomaly in order to reverse the current trend. b) Accounts Receivable As at 31 March 2007 the Accounts Receivable amounting to M20,441,496 could not be verified for accuracy and completeness. Therefore I could not satisfy myself that the Accounts Receivable figure was fairly stated as at 31 March, 2007 due to absence of supporting documentation. 103

109 6.2.4 MOKHOTLONG DISTRICT UNDER-STATED RETURNS OF PUBLIC ALLOWANCES Public Assistance is a monthly allowance paid to the destitute families at the rate of M per family. The procedure is that a voucher is prepared based on the number of eligible people. The voucher is then presented to the Sub-Accountancy whereby the cheque will be drawn and cashed. Any money which remains unclaimed after the payments have been effected should be returned to the Sub-Accountancy where a receipt will be issued in terms of Financial Regulation 711 of 1973 which states that; Cash drawn for the payment of wages in excess of requirements or unclaimed wages shall be returned to the Sub-Accountant from who was originally drawn. The Sub-Accountant shall issue a general receipt for the money repaid. Scrutiny of pay sheets and pay in vouchers submitted to the Sub-Accountancy after payment of allowances revealed a shortage of M10, as narrated on Table 37 below; Table 37 - Understated Returns of Public Assistance Allowances Date Total Allowances drawn Total Allowances claimed Unclaimed allowances Unclaimed Allowances returned to Sub-Accountancy (per receipt issued) Variance (Understate d returns) April and May 91, , , , , Nov , , , , Total 14, , ,

110 6.2.5 HEALTH CENTRES THABA-TSEKA Un-accounted Receipt Books Financial Regulation 905 (b) states that; It is the duty of Chief Accounting Officers and accounting officers to see that all revenue receipt forms are properly accounted for so that at any time the whereabouts of any book of forms whether used, partially used or unused, is on record. It was however observed that seven receipt books which were issued to different Health Centres in the Thaba Tseka District were not accounted for. During the time of audit, there was no indication that they had been used as there were no paying-in vouchers bearing any of the receipts from the said books. No follow up seemed to have been taken by the main Health Centre to account for those receipt books. Details of the receipt books are shown on Table 38 below. Table 38 - Missing Receipt Books Serial Numbers Health Centre Issued To Date of Issue B B Mokoto B B Khohlo-Nts o AA AA Seshote AA AA Sehong-Hong AA AA Sehong-Hong AA AA Linakeng AA AA Sehong-Hong The receipt books might have been used to collect revenue which was never paid in or lost before collections were made. 105

111 6.2.6 DISTRICT MEDICAL OFFICE MOHALE S HOEK Missing Laptops Equipment purchased for a ministry or department remains the property of that particular ministry or department. It was however observed that three laptops purchased in October 2006 to the value of M38, were not available for verification during the audit. According to the stores ledger they were issued to the former District Medical Officer (D.M.O), the former Matron and the Administrator. The explanation given by the Administrator was that both the former D.M.O. and Matron had taken the laptops with them when they were transferred to their new duty stations. The other laptop, which was issued to him, was at his home in Mazenod. It was recommended that the hospital management should ensure that the laptops are recovered from the officers who are no longer with the hospital and handed over to new office holders in accordance with Stores Regulation 3078 (i) of NATIONAL HEALTH TRAINING CENTRE Misappropriation of Funds M16, Cash survey conducted by my office at the National Health Training Centre on the 27July, 2006 revealed misappropriation of funds amounting to M16, by one Accounts Clerk. Auditors recommended a surcharge and that further disciplinary actions should to be taken on the matter. 106

112 6.3 MINISTRY OF EDUCATION AND TRAINING BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Programme Released Funds Actual Over (-) /Under Expenditure Administration 19,087,243 22,322,933 (3,235,691) Early Childhood 2,718,676 2,566, ,213 Basic Education 467,257, ,942,104 5,315,256 Secondary Education 233,422, ,971,175 14,451,236 Tech & Vocational 24,879,246 23,626,615 1,252,631 Teacher Development 27,201,180 20,819,047 6,382,133 Higher Education 124,073, ,930, ,937 Curriculum Dev 8,578,336 8,171, ,207 Education Policy 6,579,717 5,629, ,524 Lifelong Education 5,336,390 5,013, ,706 Decentralised Edu. Mgt 8,902,259 9,297,354 (395,095) Total 928,036, ,289,710 25,747, THABA-TSEKA TECHNICAL INSTITUTE a) Recurrent Revenue Deposited into Private Bank Account According to Recurrent Revenue Estimates, school fees are budgeted for under the recurrent revenue. All the school fees for students should be accounted for under the recurrent revenue. It was however discovered that, funds amounting to M1,061,376 in respect of students sponsored by National Manpower Development Secretariat (NMDS), were deposited in a private bank account number operated by the Institute at Standard Lesotho Bank, instead of being paid into the Sub-Accountant under relevant revenue vote. That was contrary to Financial Regulation 801(2) which stipulates that; It is the duty of the Chief Accounting Officers and other collectors of revenue to ensure that revenue which is payable to them is collected promptly and that all collections of revenue or other receipts are properly brought to account. 107

113 Financial Regulation 802 further states that; Chief Accounting Officers shall acquaint themselves with the laws and instructions governing the collection of revenue which concern their departments, and ensure that the collections are correctly classified in accordance with estimates. It was further observed that proceeds from the sale of desks and chairs manufactured at the Institute were deposited into the bank account instead of the consolidated fund. The total amount deposited was M461, It should be noted that, production costs for those products were charged from the recurrent budget. Enquiries from the management regarding the operation of the private Bank Account revealed that the Institute is operating a revolving fund which is operated through the bank account. It could not be ascertained whether the revolving fund had been established by the Principal Secretary for Finance in accordance with section 18 of the Finance Order b) Unaccounted for Revenue Financial Regulation 801(1) requires that money received by government officers in their official capacity should be accounted for to the Accountant General. Financial Regulation 206 further stipulates the financial responsibilities of Officers. Contrary to the requirements of the stated regulations, it was discovered that an amount of M collected using receipts numbers to was not banked in accordance with the regulations. The explanation given by the collector of revenue was that the then Director, who at the time of audit was the District Administrator, took the money with the promise that he would refund it at a later date. That also contravened Financial Regulation 818 of 1973 which states; 108

114 Between the time of receipt and the time of payment into the Treasury, Sub- Accountant s office or bank, no revenue collector may use public money in anyway whatsoever. Nor may an officer on any pretext advance or lend public money for which he/she is responsible. It was further observed that an additional M collected per receipt numbers 41594,41595,41596,41599 and was also not banked. Loss Reports for shortages were not prepared and submitted to the Principal Secretary for Finance as required by finance laws. 109

115 6.4 MINISTRY OF FINANCE AND DEVELOPMENT PLANNING BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Support Services 157,043, ,504,081 3,539,083 Treasury 44,599,440 38,236,723 6,362,717 Budget 3,460,240 2,197,770 1,262,470 Economic Policy 14,805,210 9,089,073 5,716,137 Development Planning 5,688,290 4,417,275 1,271,015 Private Sector Dev. 32,649,780 24,186,713 8,463,067 Statistics 14,085,766 11,085,475 3,000,291 NMDS 285,808, ,939, ,119 Total 558,140, ,656,820 30,483, QACHA S NEK SUB-ACCOUNTANCY Non maintenance of Advances Ledger Advances ledger is meant to record advances made to public officers for cash shortages, or third parties. The auditors tried to verify whether outstanding advances amounting to M241, which appeared in the Audit Inspection Report for 2003/04 financial year had been cleared or not; and whether cash shortages as stated in the Loss Reports for Rats oleli Local Court, Qabane Local Court and Matebeng Local Courts had been recorded in the ledger. It was however observed that the Sub-Accountant was no longer maintaining Advances Ledger and as such the auditors could not verify the clearance of outstanding advances and recording of losses. 110

116 6.4.3 MAFETENG SUB-ACCOUNTANCY Missing Receipt Books Mafeteng Sub-Accountant reported on the 15 June 2006 that four (4) receipt books bearing the following serial numbers went missing. H H H H To date of this report, I have not been informed of the results of the Police investigations LERIBE SUB-ACCOUNTANCY a) Loss of Cheque No In August 2006, the Sub-Accountant of Leribe was informed by the Standard Lesotho Bank about the cheque with serial number which was queried by the bank because the signatures on the cheque were different from the specimens held by the bank. On perusal of Sub-Accountant records, it was discovered that the counterfoil of the same cheque was cancelled and replaced by cheque number The payment was stopped and the matter reported to the police (case no. Maseru RCI 33/08/06). b) Loss of 4 Receipts Four receipts bearing numbers in a receipt book serial number were found missing by the Sub-Accountant on 2 nd March The matter has been reported to the Police and my office had not been informed of the results on the case number RC 155/05/06 relating to the loss. 111

117 6.4.5 TREASURY DEPARTMENT Erroneous Credits under Sundries - M292, Total revenue collected under Sundries for the year under review amounted to M9,599,687, however sample checks disclosed that funds which were due to ministries as refunds by Imperial Fleet Services for services overcharged were erroneously credited to sundries. Financial Regulations 809 clearly stipulates that; all receipts on account of over-payments made on expenditure votes other than on development Projects shall be accounted for as follows: If recovered during the same year in which payment was made, credit head, sub-head of expenditure originally charged. if recovered after the close of the financial year in which payment was made: credit revenue head miscellaneous sub-head sundries. It would appear from the records that refunds amount to M292, made in the same year (2006/07) were erroneously credited to Sundries Account instead of the relevant expenditure vote. By so doing revenue collection under sundries was overstated and similarly Vehicle Maintenance Vote was overstated in various ministries by M292,

118 6.5 MINISTRY OF TRADE, INDUSTRY, COOPERATIVES AND MARKETING BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 20,863,628 19,624,334 1,239,294 Trade 2,363,519 1,239,289 1,124,230 Industry 1,662,720 1,484, ,451 Marketing 4,826,693 4,844,707 (18,014) Cooperatives 8,317,600 7,854, ,566 Standards & Quality Assurance 683, , ,322 Total 38,717,250 35,398,401 3,318, BASOTHO ENTERPRISE DEVELOPMENT CORPORATION (BEDCO) a) Absence of Lease for Estates Sites BEDCO owns properties in Mohale s Hoek and Botha- Bothe that cost in total M10,372, When requesting for ownership documents, it was discovered that the Corporation did not have legal entitlement of those assets. Without the lease for the above-mentioned properties, the Corporation faces a risk that they can lose these assets should anybody claim them. It was recommended that as a matter of urgency, the Corporation of should secure legal entitlement in the form of lease in respect of all assets referred to above. b) Micro Finance Loans In the previous years, I have raised a concern with regard to slow recovery of the long overdue balance from the beneficiaries. However, the balance has increased from M3,257,137 in 2005/06 to M3,450,107 at 31 st March I strongly recommend as I did before, that the management of the Corporation should continue to intensify the efforts to recover the outstanding balance. 113

119 6.6 MINISTRY OF JUSTICE, HUMAN RIGHTS AND REHABILITATIONARY AFFAIRS BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Programme Released Funds Actual Over (-) /Under Expenditure Administration 29,062,396 23,485,845 5,576,551 Judiciary 47,397,475 44,843,793 2,553,682 LCS 55,578,228 49,099,708 6,478,520 Total 132,038, ,429,346 14,608, MAGISTRATE - MOKHOTLONG Missing Revenue M9, Scrutiny of receipt books issued to Mokhotlong Magistrate disclosed that a receipt book with serial number H H was returned to Sub-Accountancy incomplete because collections made from 29 th September to 13 th October 2006 were running short by M9, The loss was reported to PS Finance on 2 nd November An advance voucher Number dated 31 st October 2006 was issued by the Sub-Accountant in favour of the Clerk of Court. It was however observed that no action had been taken to recover the advance from the officer concerned MAGISTRATE QACHA S NEK Loss of Public Funds M11, Examination of accounting records (receipt books) at the Magistrate Court revealed that cash collected from the listed Local Courts in Table 39 was not brought to account to the Qacha s nek Magistrate Court. It could not be established whether appropriate action were taken against officers responsible for the losses. 114

120 Table 39 - Lost receipt books Local Court Name of Receipt Book Ratsoleli Local Mats eliso le Court Beile Ratsoleli Local Makhotla a Court Basotho Qabane Local Fees and Court Fines Qabane Local Bail And Court Compensation Matebeng Local Court Receipt Book Nr. Amount Remarks X34451 X , K64134 K K39303 K , Y Y , Details not Attached to loss report. Total 11,

121 6.7 MINISTRY OF HOME AFFAIRS, PUBLIC SAFETY AND PARLIAMENTARY AFFAIRS BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 21,648,027 17,179,918 4,468,109 Police Directorate 1,908,586 1,866,944 41,642 Police Complaints Authority 6,216,030 4,627,943 1,588,087 Inspector of Police 1,083, , ,193 Immigration 12,024,483 10,107,669 1,916,814 LMPS 168,023, ,992,438 31,422 Total 210,904, ,705,639 8,199, DEPARTMENT OF IMMIGRATION THABA-TSEKA Irregular Issuance of Temporary Travel Documents Temporary travelling documents are normally issued to people who have applied for passports. It was however discovered that Temporary Travelling Documents were issued without quoting application numbers. Furthermore, the copies did not have photos attached to them nor dates to show when they were issued. Explanation given was that at times people had one photo instead of two; and that application numbers on the temporary travel documents had been omitted by mistake. These irregularities can lead to temporary travel documents being unlawfully issued to people who have not applied for passports. Furthermore, it was observed that some copies of temporary travel document forms were not dated (neither by stamp nor hand written). 116

122 6.8 PRIME MINISTER S OFFICE BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Released Funds Over (-) /Under Expenditure Programme Actual Government Secretary 76,014,604 77,729,355 1,714,751 FMU 6,415,128 8,293,262 (1,878,134) DMA 6,752,200 7,775,573 (1,023,373) FNCO 3,761,140 2,897, ,849 Total 92,943,072 96,695,481 (3,752,409) NATIONAL AIDS COMMISSION NAC was established by National AIDS Commission Act of 2005 as a corporate body to replace the Lesotho AIDS Programme Coordinating Authority (LAPCA) which was abolished due to its lack of independence. Its main responsibility is to develop and coordinate policies, strategies and programmes for HIV and AIDS response within the country. It also facilitates the implementation, monitors and evaluates the implementing structures. A performance audit of the National AIDS Commission (NAC) was conducted to assess whether the operations of the Commission are being carried out with regard to its legislative, strategic and process requirements. The following observations were noted during the course of the audit: a) Reporting Structure NAC reporting structure provides that the Chief Executive reports to the Board which in turn reports to the Office of the Prime Minister. While the Act provides a clear reporting structure between the Board and the Office of the Prime Minister (OPM), it does not indicate how often the Board should report to the Prime Minister. NAC management and the Board have confirmed that since the inception of NAC, no formal meetings were held with the Office of the Prime Minister to provide feedback or to update on HIV and AIDS issues. 117

123 It was also established that there was a Cabinet Sub- Committee on HIV and AIDS comprising of nine Ministers which interact with NAC and discuss issues regarding HIV and AIDS activities. Although this was an effective forum where information was discussed and decisions made, it was not clear how often NAC and the Sub-Committee should interact. It was recommended that meetings between the Office of the Prime Minister and NAC should be formalized for the sake of accountability and the role of Cabinet Sub-Committee should be clarified as the importance of NAC interaction with this committee is very crucial for its efficient and effective performance. b) Accreditation of HIV and AIDS Testing Centres Section 18 of NAC Act of 2005 states that; all testing centres, clinics or laboratories offering HIV testing services shall obtain accreditation from the Commission However NAC did not have the capacity and/or technical ability to conduct this exercise. It was also established that NAC did not have information on the accredited centres by the Ministry of Health and Social Welfare. Since accreditation is a highly specialist activity that needs regulatory bolstering which can be performed by the Ministry of Health and Social Welfare (MOHSW), it was therefore recommended that NAC and MOHSW should consider discussing this matter for consideration and appropriate action. However, NAC indicated that this activity does not need capacity as this activity can be outsourced since putting it under MOHSW would require the revision of the legislation. c) Public Sector Organisations The need for public sector involvement in the fight against HIV and AIDS for a full coverage national response compels government ministries and other public sector organizations to mainstream HIV and AIDS into their planning and activities. It was established that the focal persons who were trained on HIV and AIDS were assigned this task as an additional responsibility to the already existing duties as such lacked commitment in HIV and AIDS activities in the 118

124 ministries. It was also noted that while ministries were supposed to budget for HIV and AIDS activities, they did not and as a result, public sector response was minimal. The auditors advised NAC to strengthen its coordinating strategies to ensure that public servants are also assisted as it is crucial for the national response. Public sector organisations should budget for HIV and AIDS activities under their recurrent programmes. NAC noted that it provides training on HIV and AIDS competency to public servants and that discussions are underway with the government to ensure availability and utilization of resources for HIV and AIDS activities by all ministries. d) Relationship with Ministry of Health and Social Welfare The Ministry of Health and Social Welfare (MOHSW) is the major stakeholder in HIV and AIDS activities and it has established HIV and AIDS unit whose responsibility is to oversee HIV and AIDS programmes implementation. While the roles and responsibilities of the Ministry of Health and Social Welfare (MOHSW) and that of NAC are defined, there has been overlapping activities at the district level and these include coordination of HIV and AIDS human resource and condom distribution strategy. Overlapping of activities could result in waste of resources. It was recommended that MOHSW and NAC should undertake a review of HIV and AIDS related activities to ensure that areas of duplication are identified so that savings can be realized. NAC had confirmed that discussions are going on with MOHSW. e) Conflict of Interest One of the restrictions and principles of the Grant Policy is that there should be no conflict of interest to ensure accountability and transparency. The team established that there was a conflict of interest in the membership of three Board members who also held leadership positions with the implementing partners. In order to adhere to the principles and restrictions of the grant policy, it was suggested that the Commissioners should not be allowed to have dual roles to avoid conflict of interest as conflict of interest should be considered a disqualification to serve on the Board. NAC indicated that when appointing the Board members it has interest in people 119

125 who are already actively involved in the area of HIV and AIDS activities. f) Implementing Partners (IPs) Audit of Accounts The Grant Policy requires that Implementing Partners accounts should be audited. It was however established that for the financial year 2006/07, NAC spent M17,078, on implementing partners yet only one IP submitted the audited financial statements. Given the substantial amount of money spent by NAC on IPs the auditors advised NAC to expedite the process of developing guidelines and to retain the audit fees to ensure that every IP is audited by reputable auditing companies for the sake of accountability. g) Procurement Procedures The audit team also noted that tender procedures were not properly followed in that in some instances tender documents such as VAT registration certificates and trading licenses were submitted to NAC way beyond the closing dates for tenders. It was recommended that procurement procedures should be followed properly for the sake of accountability. NAC indicated that the Procurement Policy and Manual had been developed and approved. 120

126 6.9 MINISTRY 0F COMMUNICATIONS, SCIENCE AND TECHNOLOGY BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 22,118,140 20,707,203 1,410,937 Information 3,070,256 2,885, ,506 Broadcasting 16,673,177 13,240,487 3,432,690 LENA 2,289,340 2,129, ,281 Science & Technology 3,840,400 3,937,440 (97,040) Total 47,991,313 42,899,938 5,091, MANAGEMENT OF SICKNESS ABSENCE The Office of the Auditor General (OAG) with the assistance of the United Kingdom National Audit Office (NAO) undertook a review of Management of Sickness Absence aimed at establishing the cost of sickness absence and finding out what problems were encountered in its management within the public service. The Ministry of Communications, Science and Technology (MCST) was selected as a case study. The following are the findings and recommendations to be considered by all government ministries/departments which will be distributed where applicable:- a) Medical Certificates Public Service Regulation (PSR) 551 of 1969, states that a Head of Department may on the recommendation of a state medical officer grant sick leave to a public officer. The team found out that medical certificates from private doctors were brought forth and accepted by the ministry. This was because people seemed to have lost confidence in state medical centres, due to long queues and shortage of medication. 121

127 It was recommended that the Ministry of Public Service should consider including in the new Guidelines for Public Service Regulations; clauses that enable civil servants to get sick-leave from any licensed/accredited medical practitioners. b) Late submission of sick leaves According to the Public Service Regulations, a sick-leave has to be approved by the Head of Department. The team however, discovered that some officers did not seek the Head of Department s approval to be on sick-leave. They only absented themselves from work and later brought in their medical certificates or claim that they were on the forty eight (48) hour sick-leave. Due to lack of good record keeping, the team did not have anything to substantiate how many cases were involved. This was attributable to lack of close supervision and monitoring. Government loses money on production/ service delivery and cannot get value for the money paid for salaries of people who absent themselves from work. It was therefore recommended that Heads of Departments should ensure that officers take responsibility in accessing and adhering to the Public Service Regulations. c) Deductions from annual leave As per PSR 555, one day has to be deducted from any sickleave in excess of seven consecutive days as periods of sickleave do not earn annual holiday. The team however found out that during the period under review no such deductions were made from all the sick-leaves that exceeded seven days. There were officers who still enjoyed the benefit of the annual leave that they had not earned. 122

128 d) Record keeping Sickness absence information should be recorded and reflected in the personal files. The team found out that 82% of the reviewed personal files did not contain such information. This was attributable to the fact that heads of departments did not always ensure that the medical certificates reached human resource department and the forty eight hour sick-leave was not recorded at all. As a result a lot of officers might have enjoyed the benefits of being absent from work due to illness and also the annual leave earned during the same period. It was recommended that Heads of Departments should ensure that all forms of sick-leave are recorded. e) Measuring Sickness Absence Sickness absence should be measured in order to manage it properly. The team discovered that there was no measurement, in terms of money and time. People s salaries were not calculated on the basis of how much time they spent at work, so they still got their full remuneration regardless of whether they had been coming to work or not. For example during the period under review 43% of the questionnaire respondents called-in sick, while they were actually not. As a result MCST lost money on salaries of people who pretended to be ill. 22% of the reviewed personal files had sick-leave record as opposed to 78% that did not have any sick-leave record. For this 22% there was an indication that the Ministry lost an approximated M79, for 1, 430 man-days attributed to sickness absence. In the long-run the government will pay civil servants for the service that they have not rendered. It is recommended that controls and procedures in management of sickness absence should be strengthened. 123

129 f) Awareness It is vital for each civil servant to be aware of the Public Service Regulations. The team established that about 65% of the questionnaire respondents had limited or no knowledge of the PSRs relating to sickness absence. This was because no in-house or on-the-job training had been offered to middle managers and employees. They only learned about the Public Service Regulations during the induction course at Lesotho Institute for Public Administration and Management (LIPAM). Managers and officers seemed to be ignorant of the Public Service Regulations relating to sickness absence. The LIPAM Induction Course emphasises that it is the civil servant s responsibility to acquire all material regulating the civil service. It was evident that not all civil servants were aware of the regulations that govern them, as 62% of the questionnaire respondents had not even seen the Public Service Regulations, 1969 that related to sick-leave. This resulted in civil servants straying from the Public Service Regulations. g) Staff motivation Staff motivation is one of the key factors that enhance staff commitment to their job. The interviews held with some staff members and management of the Ministry of Communications, Science and Technology revealed that the Ministry s management did not have any motivational strategies for their staff. This was because they perceived staff demoralisation broadly, as a problem for the whole Civil Service. This resulted in some staff members attending to their personal matters during working hours under the pretence that they were ill. It was therefore recommended that there should be some motivation strategy to keep staff committed to their jobs. 124

130 6.10 MINISTRY OF LAW AND CONSTITUTIONAL AFFAIRS BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 7,407,312 6,985, ,493 Attorney General 3,878,434 3,017, ,736 Civil 3,230,787 2,627, ,449 Criminal 14,462,953 13,766, ,782 Registrar General 3,339,960 2,762, ,094 Drafting 3,001,221 2,554, ,948 Government Printer 6,388,200 5,055,328 1,332,872 Law Reform 1,326,109 1,119, ,152 Total 43,034,975 37,889,450 5,145,

131 6.11 MINISTRY OF FOREIGN AFFAIRS AND INTERNATIONAL RELATIONS BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 24,346,596 21,610,772 2,735,824 United Nations 10,565,740 10,199, ,891 Washington 6,518,520 6,225, ,093 London 8,870,290 9,123,669 (253,379) Addis Ababa 8,358,390 8,446,161 (87,771) Ottawa 7,363,380 5,959,216 (1,404,164) Cairo 3,268,340 2,893, ,491 Copenhagen 2,000,194 1,345, ,599 Berlin 11,997,350 11,651, ,354 Brussels 11,149,000 9,383,063 1,765,937 Geneva 14,990,880 12,199,265 2,791,615 Rome 7,707,840 8,260,329 (552,489) Beijing 8,701,810 6,648,972 2,052,838 Pretoria 6,529,550 6,269, ,169 Johannesburg 6,623,980 4,938,529 1,685,451 Durban 2,487,590 2,229, ,132 Libya 4,689,740 4,225, ,840 Dublin 8,005,120 6,782,131 1,222,989 New Delhi 6,298,570 14,316,372 (8,017,802) Total 160,472, ,709,936 7,762, GENERAL OBSERVATIONS ON THE DIPLOMATIC MISSIONS a) Hotel Accommodation on Arrival at Post: Public Service Regulation 123 (4) requires that in the case where a public officer is obliged to live in a hotel or recognised boarding house longer than seven days, the officer shall seek the authority to do so from the Principal Secretary. The diplomatic staff would normally stay in the hotels for more than seven days and in some cases even stayed ± 2 months without authority from the Principal Secretary. 126

132 These lengthy stays in the hotels without authority may lead to excess expenditure. The Chief Accounting Officer might not be aware of the situation and as such would not make necessary financial adjustments where necessary. It was therefore recommended that Management should adhere to PSR 123 (4). b) Payment of Net Salaries and Foreign Service Allowances using a Fixed Rate I have raised on several occasions the issue of applying a fixed rate when paying diplomatic staff net salaries and foreign service allowances especially in the EURO zone. A decision was made some time back to cushion net salaries and foreign service allowance by applying 0.54 to convert Maloti into US Dollars. In most Missions, staff draw their salaries and allowances in US Dollars and thereafter make their own arrangements to convert into the local currency. However the Missions in the EURO zone, after converting Maloti into US Dollars, they apply again a fixed rate of 0.86 to convert to Euros. At the end, they get more salaries than their colleagues in other Lesotho Missions. For Example: Accountant other mission - Net Salary and Foreign Service Allowance- M1, Maloti into USD: M1,000*0.54= 540 USD (Take Home Pay) Accountant Euro Zone - Net Salary and Foreign Service Allowance- M1, Maloti into USD: M1,000*0.54= 540 USD - USD into Euro: 540 /0.86= 627 Euro (Take Home Pay) 127

133 It is a common knowledge that Euro is stronger than USD. If 1 Euro is equal to 1.35 USD, it basically means the Accountant in the Euro Zone takes home 846 USD whereas the Accountant in other mission gets 540 USD. I have recommended often times that the practice should be stopped to standardise salaries and allowances of foreign mission staff as well as to comply with the authority in place. c) Irregular clearing of Imprests: Financial Regulation 1403 states that; When an imprest is issued the amount drawn shall be debited to Imprests. Credit shall be given to the same account by the issue of general receipt when the imprest is retired It was observed that when the imprests were retired, instead of crediting remaining cash to the Imprest Account it was credited to the Revenue Vote (104/020/0501 Sundry) and therefore overstating revenue. The concern had been raised several times and the Accountant General had been advised to ensure that proper instructions are given to Third Secretaries to avoid distortion of public accounts. 128

134 NEW DELHI MISSION INDIA a) Irregular Payment of Retention Fee An amount of USD 1, was deposited at Hotel Samrat Chanakyapuri, New Delhi by Anugrah Services Delhi against booking a room for the Deputy Clerk to the National Assembly. However the Deputy Clerk had to cancel the trip at the last minute and the hotel claimed a retention fee of USD which had to be paid by the Mission in January, Two reminders were sent to the National Assembly to provide relevant votes to charge expenditure accordingly but there was no response. It was recommended that bookings which require deposits should be made on the basis of the approval from the Principal Secretary for Foreign Affairs and International Relations stating relevant votes of expenditure to be charged. A loss report should have been submitted to the Principal Secretary for Finance as US$ was paid for services not rendered. b) Late Payment to Suppliers In the Missions or foreign countries, purchase orders are not acceptable but for expenditure control measures, requisition forms should be filled. These procedures conform to current Stores Regulation 3005(i) which requires that; Officers ordering stores must ensure that financial provision for stores exists. Section 29(i) of the Finance Order 1988 also stipulates that; Neglect or default by officers may, without prejudice to the generality of the meaning of these words, include ordering or procuring the supply of any stores or equipment or services 129

135 for more than the fair and reasonable price or without due authority and failing to comply with any law relating to the procurement of goods and services. Contrary to the abovementioned requirements, it was observed that furniture and furnishing fabrics were purchased for the residence without checking availability of funds. As a result, the invoices could not be honoured because funds were not available to clear the debts in 2005/06 financial year. These invoices had to be honoured in the following financial year 2006/07. This is in itself an embarrassment to the Lesotho Government as the suppliers had to be paid in instalments and might have considered the Lesotho Government as a government which cannot meet its financial obligations. 130

136 LESOTHO PRETORIA a) Overpayment on Diplomats Salaries-R3,071, Staff salaries for Lesotho-Pretoria were converted from South African Rand into US Dollars like missions outside the rand monetary area. This practice continued even after a directive was issued by the Principal Secretary for the Ministry of Foreign Affairs and International Relations notifying all missions to stop using arbitrary conversion rates. This resulted in salary overpayment of R3,071, with effect from July, 2006 up to September It was recommended that overpaid amounts should be fully recovered from the Diplomats salaries. b) Irregular Medical Claims Section 125 (1) and (4) of the Public Service Regulations requires that; the staff of the mission, spouse, children and domestic servant of the Head of the Mission shall be covered by medical insurance paid out of public funds, but where such medical insurance is not available the cost of such medical treatment shall be paid from public funds where; i. the treatment was given by qualified practitioner ii. the Head of Mission has satisfied himself that the treatment given was essential Contrary to the above stated clauses of the law, it was discovered that Johannesburg Consulate staff and all those entitled to medical insurance seek medical treatment from any doctor and claim such expenses without any authorization from the Head 131

137 of Mission. For instance, The Consular General s medical claims ranged from R to R49, per month while those for the Third Secretary ranged from R to R45,500 per month during the year under review. For 2006/07 total amount of R329, was claimed by the diplomats. There is need for further investigation due to substantial sums claimed and choice of any practitioner. The fact that diplomats are covered by insurance does not mean that Government sends non-medically fit officers abroad who will be claiming such substantial amounts from public funds. 132

138 LESOTHO - WASHINGTON a) Lesotho Cultural and Tourism Promotion The Ambassador requested the Principal Secretary for the Ministry of Agriculture and Food Security to release a group of traditional or cultural dancers to the cultural event in Washington in an effort to promote the culture of Lesotho and expose the host country s tourists to the opportunities that Lesotho holds. The Mission made a payment of USD9, in March 2007 for the airfare of traditional dancers. The event was held in August The following irregularities were noted: i) There was no authority from the Principal Secretary for Foreign Affairs and International Affairs for the Mission to invite and pay for air tickets in respect of the traditional dancers. ii) Since the Ministry of Tourism, Environment and Culture (MTEC) is mandated to promote tourism and culture, it would have been proper for the Principal Secretary for Foreign Affairs and International Relations to communicate with the Principal Secretary for Tourism Environment and Culture to organise traditional dancers. It was recommended that proper procedures should be followed to ensure that every Ministry or Department plays its mandated role. The authority of the Principal Secretary for Foreign Affairs should be obtained whenever required. 133

139 b) Refund for Credit Card USD1, The former Ambassador used her credit card to secure accommodation for one of the Honourable Ministers from 13 to 16 December 2006 at the Hilton Garden Inn, in Washington. It appeared that the Honourable Minister paid for his accommodation but the Management of the hotel still debited an amount of USD1, for the Minister s accommodation from the Ambassador s credit card. The Embassy refunded the Ambassador an amount of USD1, That practice was found to be improper as the hotel could only reimburse the former Ambassador but not the Mission so the Mission should not have made such a refund. It was further observed that the expenditure for the refund was charged under Official Entertainment vote which does not cater for accommodation. The Ambassador should have pursued the hotel to refund her. The Principal Secretary for Foreign Affairs was advised to see to it that the former Ambassador pays back USD1, owing to the Government. c) Motor Vehicle Accidents: The auditors have noted from the records that the Mission s vehicles had been involved in accidents but Accident Reports had not been submitted to the Principal Secretary for Finance and Development Planning as required by regulations. It appeared from the records that the Mission s car (Chrysler) was hit by an unknown driver on 27 May The accident occurred at 2511 Massachusetts Avenue, where the car was parked. The amount involved was USD The records further revealed that on 24 September 2006, the Chrysler was involved in collusion. The records stating the driver of the vehicle and the location of the accident were not availed to the auditors. However the records from the Insurance 134

140 Company indicated that the amount involved was USD3, It was recommended that regardless of whether the vehicles had been insured or not, Accident Reports should have been submitted to the Principal Secretary for Finance and Development Planning as required by the regulations. 135

141 6.12 MINISTRY OF PUBLIC WORKS AND TRANSPORT BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 18,101,503 15,950,976 2,150,528 Building Design Services 7,903,681 7,623, ,093 Roads 79,833,577 70,814,731 9,018,846 Buildings 11,916,500 12,500,595 (584,095) Civil Aviation 15,457,516 13,554,287 1,903,229 Traffic 11,271,122 10,667, ,287 Total 144,483, ,112,012 13,371,

142 6.13 MINISTRY OF FORESTRY AND LAND RECLAMATION BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 11,388,925 10,239,982 1,148,943 Forestry 2,435,827 2,824,367 (388,540) Conservation 3,076,975 3,221,196 (144,221) Range 1,454,848 1,574,188 (119,341) Districts 12,987,126 14,101,418 (1,114,292) Total 31,343,700 31,961,151 (617,451) ADMINISTRATION DEPARTMENT a) Maintenance of Government Vehicles at Private Garages without Source Approval Examination of the Ministry s records disclosed that there were government vehicles which were maintained and serviced at private garages, as well as purchases of spare parts without source approval from Imperial Fleet Services. The total expenditure incurred amounted to M70, for the financial year 2006/07. This is contrary to Section 12.1 of the contractual agreement between the Government of Lesotho and Imperial Fleet Services which states that; It shall be in the discretion of the purchaser as to the extend to which it may outsource maintenance service, or do the maintenance and servicing itself, provided that it shall outsource within Lesotho at least 30% of the services to be effected within a reasonable period. The maintenance 137

143 services to be carried out by the purchaser under this clause will be done in Lesotho subject to the exclusion and period for compliance as contemplated in clause 12.1 above. b) Cell phones not Brought to Account Government circular Savingram of 11 th August 2005, article 7, requires that handsets (cell phones) will be replaced after two years in each instance. For these purposes, an accurate register will be kept in each ministry/department of all the official handsets and their date of purchase. It further states that disposal of the old handsets will be according to the relevant Financial Regulations on disposing of Government property. Examination of the records revealed that there were cell phones with more than two years in the hands of some officers which were not returned to the department upon purchase of new sets as shown below: Designation Type Serial number Principal Secretary Nokia Principal Secretary Nokia Deputy Principal Secretary Nokia 6310i Director- Forestry Nokia 6310i Minister s Secretary Nokia It was highly possible that if cell phones are not returned to stores on replacement, they will be turned to personal property, hence a loss to the Government. It was therefore recommended that management should see to it that the Government directive communicated by the savingram mentioned above is complied with. 138

144 6.14 MINISTRY OF NATURAL RESOURCES BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 11,860,383 12,036,359 (175,976) Mines 3,597,711 3,337, ,961 Water Affairs 10,459,339 10,057, ,289 Energy 2,197,392 2,119,382 78,010 Meteorology 4,594,353 4,626,415 (32,062) Water Commission 4,203,201 1,890,588 2,312,613 Rural Water Supply 13,589,630 11,487,175 2,102,455 Total 50,502,010 45,554,720 4,947,

145 6.15 MINISTRY OF LABOUR AND EMPLOYMENT BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 13,598,140 13,023, ,574 Labour 6,152,932 6,152, Ntlafatso Skills 1,779,480 1,711,989 67,491 Labour Disputes 1,697,290 1,519, ,376 Total 23,227,842 22,407, , DIRECTORATE OF DISPUTE PREVENTION AND RESOLUTION (DDPR) a) Absence of Receipts It has been discovered that over the years DDPR received moneys from various sources such as, refunds of employer s contribution from LNIG in respect of officers who resigned from the employ of the Organisation, car administration fee, workshops etc. No formal receipts were issued upon receipt of such monies. In the absence of such receipts, the accuracy and completeness of other income could not be substantiated. An amount of M85, reflected in the financial statements for the year ended 2006/2007 could not be checked for accuracy in the absence of receipts. It was recommended that DDPR should issue receipts whenever they receive moneys from various sources to avoid risks of misuse of funds. All the moneys received by the Directorate should be accounted for in the books of accounts in conformity with the financial policies and guidelines. 140

146 b) Sitting Allowance Section 46(a) of the Labour Code Amendment Act 2000 states that; the Director DDPR shall be an exofficio member of the Industrial Relations Council and shall be its secretary. This implies that the Director plays this role as part of his normal day to day duties. He attends meetings by virtue of his position being a full time employee of the Directorate. Therefore the Director is not entitled for payment of sitting allowance. However, the Director was paid sitting allowance to the tune of M7, in the financial year 2006/2007 contrary to the above-mentioned Section of the code. It was recommended that the amount paid to the Director should be recovered from his salary and the practice should stop forthwith. c) Purchase of vehicles In 2006/07, three vehicles were disposed off and two of them traded-in for purchase of three new vehicles. In terms of DDPR policies and guidelines, Section 7.5 of Services and Purchases Orders, if the item to be purchased is equal or exceeds M50,000.00, a panel of three (3) persons including the Director should append signatures on a quotation chosen by the panel. Contrary to these guidelines, on purchase of these three vehicles, no quotations were sought. The cost price of the new vehicles was as follows:- Model of Vehicle Isuzu 4 x 2 D/cab Isuzu D/cab Corolla Total Amount M233, M233, M M603,

147 d) Job Evaluation and Grading Consultancy A scrutiny of payments to the consultant engaged for job evaluation and grading structure revealed the following:- The consultant Camphor Management Consulting (Pty) Ltd. was paid a total amount of M123, No formal agreement duly signed by both parties was made available to auditors for scrutiny. The terms of reference and exchange correspondence were communicated through s. The consultancy work was not advertised before engaging Camphor Management Consulting (Pty) Ltd. contrary to the procurement regulations and procedures. Both DDPR and the Consultant ought to have entered into a contract which clearly stipulates the terms and obligations of each party and append their signatures as proof of mutual agreement on the conditions of the contract. 142

148 6.16 MINISTRY OF TOURISM, ENVIRONMENT AND CULTURE BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Programme Released Funds Actual Over (-) /Under Expenditure Administration 26,884,900 27,411,203 (526,303) Culture 5,751,450 5,584, ,373 National/Environment Sector 7,492,340 6,140,094 1,352,246 Total 40,128,690 39,135, , MALUTI-DRAKENSBURG TRANSFRONTIRR a) Under-Performance At the end of the financial year 2006/07, funds allocated for Civil Works to the tune of USD1,517,000 had been utilised by the Project Management. This posed a threat to the completion of the planned work and the project s closing date had to be extended. It was recommended that management should intensify efforts in accelerating the implementation process by utilising the funds so as to enable planned activities to be achieved before project completion date. b) Payment of Consultancy Services An amount of M107, (US$14,959.90) was paid to Mr. Martyn Murray and Mr. James Aitken for undertaking an Independent Review of Project Effectiveness. This amount was paid without a formal contract signed by both parties. 143

149 It was recommended that a formal contract stipulating in clear terms the obligations of each party, timeframe, costs and modalities of payments, should be drawn and signed by all parties providing services to the project. This could facilitate resolution of issues in cases where misunderstandings and unrealistic expectations arise from either party. 144

150 6.17 HIS MAJESTY S OFFICE LOSS OF CASH - M40, The Chief Accounting Officer at His Majesty s Office reported a theft of tour imprest money amounting to M40, that was not returned nor reconciled with the Treasury. I was not provided with further details of the theft. The following is the breakdown of the amounts. Imprest No. Accountable Amounts 910 2, , , , Total 40,

151 6.18 MINISTRY OF DEFENCE AND NATIONAL SECURITY BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 6,294,579 6,762,123 (467,544) LDF 184,816, ,617,110 3,199,411 Makoanyane 9,978,498 9,145, ,305 Air wing 39,815,161 40,727,914 (912,753) NSS 31,331,293 30,606, ,317 Total 272,236, ,859,315 3,376,

152 6.19 MINISTRY OF LOCAL GOVERNMENT AND CHIEFTAINSHIP AFFAIRS BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 42,227,290 38,417,829 3,809,461 Decentralisation 3,578,310 1,422,469 2,155,841 Maseru 25,684,420 22,863,327 2,821,093 Berea 20,439,710 14,638,815 5,800,895 Leribe 27,915,960 27,698, ,655 Butha-Buthe 18,655,430 15,764,963 2,890,467 Mokhotlong 23,615,890 19,405,508 4,210,382 Qacha s nek 20,615,370 14,948,588 5,666,782 Thaba-Tseka 16,615,450 13,416,034 3,199,416 Quthing 16,705,270 11,616,570 5,088,700 Mohale's Hoek 24,123,760 20,706,338 3,417,422 Mafeteng 22,490,650 20,707,163 1,783,487 LSPP 7,107,770 5,682,833 1,424,937 ATS 3,850,670 2,814,643 1,036,027 Chieftainship 4,647,290 1,758,482 2,888,808 Total 278,273, ,861,869 46,411, DISTRICT ADMINISTRATION OFFICE THABA-TSEKA a) Stale Cheques Kept in a Safe M116, In the Audit Inspection Report dated November 2006, it was reported that seventy-one (71) stale cheques amounting to M41, in respect of deceased chiefs were found in the safe. During the follow-up auditors found two hundred and ten (210) stale cheques, amounting to M116, in the safe. Keeping stale cheques is contrary to section 1212 (c) of the Financial Regulations of 1973 which states the action to be taken in respect of a stale cheque as follows; 147

153 For a stale cheque, prepare a general receipt crediting the original vote of charge if in the same financial year or miscellaneous revenue if the cheque was drawn in a previous financial Furthermore no casualty returns had been prepared to notify the Accountant General to stop paying the deceased chiefs allowances. 148

154 6.20 MINISTRY OF GENDER AND YOUTH, SPORTS AND RECREATION BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 12,184,085 11,205, ,935 Gender 2,089,210 1,401, ,567 Youth 4,430,610 4,928,905 (498,295) Sports 12,491,310 11,754, ,409 Total 31,195,215 29,290,599 1,904,

155 6.21 MINISTRY OF PUBLIC SERVICE BUDGETARY PERFORMANCE - RECURRENT EXPENDITURE Over (-) Programme Released Funds Actual /Under Expenditure Administration 8,770,511 7,197,718 1,572,793 LIPAM 6,896,289 5,284,424 1,611,865 Total 15,666,800 12,482,142 3,184,

156 PART 7 7. GENERAL MATTERS 7.1 BUSINESS PRACTICE The Office of the Auditor General (OAG) has got the strategic plan that contains greater specificity in presenting the objectives, strategies and initiatives to guide progress. Objectives and strategies have been developed focusing on people, clients, products and services as well as business performance in order to achieve improvement in the following areas: Management of the workforce, including ability to build and sustain a long-term organisational capability Using knowledge and information to enhance the quality of audit products and services Methodologies and approaches, including how the impact of work will be measured and/or assessed Relationships with clients and stakeholders Delivery of quality services which meet the evolving needs of clients 7.2 OAG STAFF Reliance is entirely on OAG staff and their collective skills, experience and knowledge to deliver the outputs mandated by the governing legislation. It is absolutely essential that adequate staff is recruited, trained and developed and that best people are retained so that audit work meets and exceeds the high standards as set. 151

157 a) Staff position The overall establishment is one hundred and sixty one (161) positions out of which one hundred and thirty six (136) are auditing staff and twenty five (25) provide support services. In March 2007, the number of auditing staff in post was 118 and 22 support staff. The staff in place was inadequate for the workload which has substantially increased due to Government initiatives and reforms. b) Training and Development The Office of the Auditor General strives to be a learning organisation that harnesses the full brainpower, knowledge and experience to make it possible to evolve continually for the benefit of all its stakeholders. The culture of learning within OAG has become of greater importance. We have entered the knowledge era and therefore survival in a rapidly changing world depends on adaptability, and adaptability depends on the capability to learn, which is dependent on the motivation for continuous learning of everybody in the organisation. Therefore OAG must provide the support for this continuous and lifelong learning. Learning is really a lifetime process, and people working and learning together generate organisational success. Depending on the costs, content and the instructional expertise required, OAG utilised a variety of means such as on-the-job training, study tours, classroom training and distance learning activities to address development needs. i) Short-Term Training During the financial year 2006/07, eighty (80) officers attended fifteen (15) training activities within and outside the country. ii) Long-Term Training During the financial year 2006/07 six (6) officers were on long-term training. 152

158 7.3 PRODUCTS AND SERVICES The Office of the Auditor General basically carries out financial, regularity and performance audits. I examine the annual financial statements of the Government of Lesotho, donor funded projects and Statutory Bodies to obtain reasonable assurance that they are free of material misstatement, and expresses an opinion on the fairness and consistency in the presentation. During the course of the year, the auditors carry out inspections and review transactions to see if ministries and departments conformed to specific laws and regulations that govern their operations. This involves checking the spending authority contained in the appropriation acts and other relevant authority. My office also undertakes Performance Audits which examine management practices, controls and reporting systems with a focus on results. Performance Audit does not question the merits of government policies; rather, it provides information to help the government to judge how well policies and programmes have been implemented. 7.4 CLIENTS AND STAKEHOLDERS It is important for OAG to establish good working relations with its clients and stakeholders to ensure that accountability requirements are met. Clients should understand and appreciate the fact that audit is not designed primarily to detect irregularities but most importantly to add value to their operations. There were major problems faced in the process of auditing including: Lack of responses from audited entities in respect of audit queries and findings leading to a large number of unsettled audit observations Delay in compilation of financial information by the audited entities especially donor funded projects which in most cases causes my staff to work under pressure because of the demands from donors. 153

159 OAG also provides advice and assistance to the Public Accounts Committee and other stakeholders. 7.5 FUNDING The ability for my office to carry out its work depends on an adequate level of funding and physical resources to meet its operational needs. The OAG budget is financed directly from the national budget. Even though the office gets 100% financing from the state budget, it has benefited a lot from donor countries which assisted in the capacity building and institutional strengthening. The Government of Ireland continued to provide support to OAG to enhance its capability to operate efficiently as an organisation and to focus mostly on improving the core business of the office. OAG also benefited from funding provided by the Englishspeaking Supreme Audit Institutions (AFROSAI-E). The funding is aimed at increasing technical capacity building of the Supreme Audit Institutions in the region. 7.6 INTERNATIONAL RELATIONS My office is a member of various international bodies such as International Organisation of Supreme Audit Institutions (INTOSAI), Commonwealth Auditors General and African Organisation of Supreme Audit Institutions (AFROSAI). INTOSAI is the professional organisation of Supreme Audit Institutions (SAIs) in countries that belong to the United Nations or its specialised agencies whereas AFROSAI is the organisation of SAIs in countries that are members of the African Union. AFROSAI is a regional grouping of INTOSAI and has three language groupings namely Arabic, English and French. My office is a member of AFROSAI-E which comprises of all English speaking African Countries. It has an opportunity to share technical materials and technical expertise with these entire members which are affiliated to INTOSAI. 154

160 a) Attendance to Conferences, Seminars and Attachments During the year under review, I managed to attend the following Seminars/Conferences Attachments:- i. International Symposium and Committee Meeting on Money Laundering held in Moscow, Russia, 8 9 May, ii. iii. iv. Technical Update regarding Audit Development relevant to AFROSAI-E Region in Cape Town, South Africa, 6 10 November, Study Visit/Attachment to the Office of the Auditor General of Uganda in Kampala, 5 9 February, AFROSAI-E Annual Governing Board Meeting of Heads of SAIs in Luanda, Angola, 5 9 March, b) Inter-SAI Activities: Some SAIs from Southern African part namely Botswana, Lesotho, Namibia and Swaziland are making efforts to ensure that members of staff take pride in their work. These efforts include encouraging interaction with colleagues from other SAIs within the region. The SAIs hold annual rotational visits whereby they share experiences and challenges facing their offices and discuss topics of common interest. The rotational visits mean that 50 to 100 staff members from three SAIs travel to one SAI for a bilateral conference followed by cultural and sporting activities. The beneficial impact of the opportunity to mingle with their peers, create professional contacts and in other ways interact with staff from neighboring SAIs is partially credited with the maintenance of morale and dedication to duty despite the disparity in wages between the private sector and the civil service. Encouraging mild competition between staff of neighboring SAIs can lead to 155

161 improvements in skills as each SAI will wish to put its best foot forward. Another Inter-SAI event was held in Namibia in September 2006, and the theme of the Conference was The Role of Auditor General in combating Corruption and HIV/AIDS on the workplace. 7.6 ACKNOWLEDGEMENTS I would like to express my special gratitude to the Accountant General and his staff for their assistance during the course of audit. I would also like to acknowledge the cooperation afforded by the ministries and departments in providing all the necessary information during the execution of this important assignment. Finally, I would like to record my appreciation to all members of my staff who worked tirelessly towards the production of this report. LUCY L LIPHAFA AUDITOR GENERAL 156