A recent audit report on the Botswana Railways (BR) points to violations of International Accounting Standards (IAS), poor internal controls and disregard for laid down company procedures and policies. All these maladies have exposed the organisation to incorrect information that distorts its financial position, and more worryingly left the company vulnerable to fraud.
The auditors took concern with what appeared to be a large variance between the financial statement presented and the trial balance, querying as to why there seems to be an overstatement of the operating costs and understatement of Administration, Marketing and Other Expenses, relative to the figures shown in the trial balance.
The operating costs were overstated by P2 867 550.18 and the Administration, Marketing and Other Expenses understated by P2 869 759.25. The differences, according to the auditors, could be the opposite of true and fair representation of the financial statements.
In response to the query, The management of BR posited that the difference were due to them rounding off figures to the nearest thousand, however they admitted to wrongfully classifying certain classes and they countered by offering new figures which have been reclassified accordingly albeit lower than what they had initial claimed.
As one peruses the audit report it then becomes clearer as to why there has been errors and misstatements that passed through without being identified and corrected. The auditors laid bare their concern regarding an internal audit plan which was not fully executed due to understaffing.
The BR organisational structure entails four employees under the Internal audit manager, but that was not the case as they lost two internal auditors in 2014, one in August and the other in November, leaving internal controls lax as planned audits could not be completed. It took BR an average of 4 months to appoint each internal auditor, effectively meaning the internal audit was understaffed for 8 months. In mitigation, the BR says all areas which were not audited for the financial year under review have been carried forward to 2015/2016 and are in the process of being finalised.
NO REGARD FOR INTERNATIONAL ACCOUNTING STANDARDS
The audit report has also uncovered what seemingly appears to be lack of regard for International Accounting Standards (IAS) as BR violated the standards on more than one occasion. In one instance, the auditors noted that the lack of adherence to some provisions of IAS 20 meant that the Deferred Grants account is misstated by the unrecognised costs related to the items that the grants were intended for. The auditors also found out that the railway company was in violation of IAS 2, the fundamental principle being that inventories are required to be stated at the lower of cost and net realisable value.
A discussion between auditors and management revealed that all inventory is stated at cost. The closing balance for inventories was P73, 267, 796.97, none compliance to IAS 2 means that the inventory may be overstated. In perhaps the most perplexing violation of the basic IAS 1 which governs the presentation of financial statements, BR failed to separate deferred lease rental into current and non-current liabilities resulting in long term liabilities overstated by P1 175 000.00, which should have been classified as current liabilities.
In several findings, the auditors picked up cases of misallocation of assets which could result in misstatements. The Asset Replacement Reserve (Equity) account is represented by the Asset Replacement Fund Investment (Asset) account. It was revealed that in the reserve account funds not utilised stood at P52 808 610.03 as at 31 March 2015, however the investment account as at the same date shows that the funds available are P25 111 653.72, leaving a difference of P27 696 957.21, which lead the auditors to posit that there is a possible misstatement of that difference in the reserves account.
Furthermore they advised the BR management to reconcile the two accounts by updating the reserve account with the transactions that occurred since the account was last updated so it reflects the actual funds available to the company. The management said it will refer back to its journal to equate the two. Similarly, the auditors’ report that the General Insurance Reserve Account and the Accident Reserve Account have balances of P57 508 459.96 and P25 111 653.72, which means the transactions that appear occur in the Accident reserve fund are not captured in the General Insurance Reserve account resulting in the account to be stagnant from previous period hence a possible overstatement of about P32 396 806.24. Management has since undertaken to equate the two accounts so they reflect the true funds available.
LACK OF PROPER CONTROLS AT BOTSWANA RAILWAYS
The lack of proper controls at BR, particularly on procurement could put them in a collision path with their suppliers. In the Audit report, it was revealed that BR risks running out of fuel due to late delivery from suppliers, moreover it was revealed that on two occasions they received more fuel than they have ordered, in other instances the quantity delivered did not match the invoice order, with some extra quantity not paid for.
This opens the organisation to unnecessary liabilities and expenses as well as disputes with suppliers. In another startling revelation, the BR purchased goods worth P239, 217.56 in August 2013 of which auditors found the goods are still yet to be reported as received. Furthermore there is no documentation indicating any follow up attempts by BR for the delayed delivery of goods.
In a shocking twist, it was noted that BR has not adhered to the Finance and Accounts Manual which requires the supplies department to take a physical count of stock items on a regular basis such that all items are counted at least once a year, and some are counted frequently. Therefore stocks worth P8, 848, 152.47 were not counted, leaving the country vulnerable to misstatements of true value as some of the uncounted stock could have been damaged or stolen.
Further compounding the matter was the likelihood that BR could have lost some assets as the organisation again went against its Finance and Accounts Manual Volume which allows for the verification of fixed assets to be undertaken every alternate year under the guise of Chief Internal Auditor and representatives of the concerned departments. This is done to verify actual assets in hand and value.
But it was revealed to the auditors that BR did not carry out physical asset verification exercises in 2013/2014 and 2014/2015. Therefore the condition and existence of some assets cannot be ascertained. It was also noted that BR has no asset management policy hence assets maybe be over-valued by obsolete assets and inventory.
ACCUMULATION OF NEGATIVE LEAVE BALANCES
In an apparent violation of the General Condition of Service, chapter 10, paragraph 1(a) which act as a guide to leave days other than sick leaves, it was found that five employees have negative leave balances, which BR is still to provide reasons for the accumulation of negative leave balances. The audit report notes that provision for leave Pay has therefore been understated by P236, 697.43 due to negative leave balances.
According to the auditors, BR’s revenue system has several shortcomings; it has a weakness of freezing and hanging on invoices while the user is still transacting, in some cases counter sales report omits invoices that have been processed during the day resulting in cash deposit being more than the counter sales report, and even for invoices that have been printed, sometimes they don’t appear in Small Bank report such that cash deposited for the day is more or less than the invoices processed for the day.
The system is also known to prevent an invoice from showing in both the counter sales report and the Small Bank report. As a result, the system opens the organisation to various risks. “Completeness of revenue cannot be ascertained when there are gaps in invoice sequence and sales report and revenue cut-off is challenged due to some invoices showing on later periods,” stated the report.
Other controversial findings in the audit report have put sharp focus on the finance department’s lackadaisical approach in handling of accounts, sparking fear of possible embezzlement and fraud. The fears arise as a result of the organisation’s poorly prepared bank reconciliations. As per normal procedure, monthly bank reconciliations are prepared by an accounts officer, then proceed to be checked by the supervisor or the financial accountant who then passes it to the finance manager to review the bank reconciliation.
However, the findings point to a different reality as eight bank accounts belonging to the organisation have been checked but not reviewed. “It was discovered during audit that these controls are not consistently adhered to as shown,” noted the report which then proceeded to warn BR that fraud and misappropriation of funds may not be detected if controls are not adhered to.
The report also revealed that some supporting documents differ from bank reconciliation, in this case the bank reconciliation and the cash book reconciliation statement had variances that were picked by auditors. The cash book reconciliation is a system generated report that shows unpresented cheques, unpresented deposit and the month end balance.
The unpresented cheques and unpresented deposit figures in the bank reconciliation should be same as those in the cashbook reconciliation statement but the differences for unpresented deposit for January was at P251, 198.87 while the unpresented cheques for the same period showed a difference of P250, 913.88.
POORLY MAINTAINED ACCOUNTS
Furthermore, some accounts have not been properly maintained giving leeway to funds misappropriation. In one case it was found that the interbank transfer clearing account for the month of March 2015 was not maintained, the account should have a zero balance at any point but it had P139, 080.24, prompting auditors to say cash recorded in this account might not belong to Botswana Railways.
Another account was poorly maintained as it had gone for months with neither bank reconciliation nor cash book reconciliation to support bank reconciliation as a result amounts might have been incorrectly recorded in the wrong account and wrong period. There was a wrong classification concerning the Sea Rail Botswana account which classified the amount of P1, 732, 741.2 as cash at the bank and on hand even though this money had been transferred into another Sea Rail account in Namibia, a subsidiary of Botswana Railways.
Therefore there was a misstatement in the Botswana account while the one in Namibia was understated.
Botswana Railways also fumbled in other financial transactions, the spotlight being on accounts payable control among other transactions. It was revealed in the audit report that the payable control was overstated by P398, 250.50 as the money was paid out to the supplier but yet it was still reflected as outstanding. Moreover a payment that was made to the tune of $10, 491.61 was shown as being outstanding despite it being paid.
The railway company also failed to convert a provisional amount of R13, 835, 174.84 to pulas thus the overstatement of the sundry creditors account due to the difference between the rand and the pula equivalent. It has since been revealed that the organisation’s policies have not been followed especially by the tender committee which has the habit of acting beyond its scope.
The committee can only deal with tenders up to the limit of P250, 000.00 but it has since been revealed that they engaged a leading audit firm for services totalling P296, 926.56, a clear violation that flies in the face of the organisation’s laid down procedures. “If policies are not followed, the organisation may be susceptible to fraud and mismanagement of funds” read part of the report. It has been noted that there is no documentation to substantiate the engagement of that particular audit firm.
Lebang Mpotokwane, one of the conveners who presided over the opposition cooperation talks that resulted in the formation of the Umbrella for Democratic Change (UDC), has advised against changing the current umbrella model in favour of a merger as proposed by others.
The Botswana Congress Party (BCP) leader, Dumelang Saleshando recently went public to propose that UDC should consider merging of all opposition parties, including Alliance for Progressives (AP) and Botswana Patriotic Front (BNF).
Saleshando has been vehemently opposed by Botswana National Front (BNF), which is in favour of maintaining the current model. BNF’s position has been favoured by the founding father of UDC, who warned that it will be too early to ditch the current model.
“UDC should be well developed to promote the spirit of togetherness on members and the members should be taught so that the merger is developed gradually. They should approach it cautiously. If they feel they are ready, they can, but it would not be a good idea,” Mpotokwane told WeekendPost this week.
Mpotokwane and Emang Maphanyane are the two men who have since 2003 began a long journey of uniting opposition parties in a bid to dethrone the ruling Botswana Democratic Party (BCP) as they felt it needed a strong opposition to avoid complacency.
Tonota born Mpotokwane is however disappointed on how they have been ejected from participating in the last edition of talks ahead of the 2019 general elections in which BCP was brought on board. However, despite the ejection, Mpotokwane is not resentful to the opposition collective.
He said the vision of opposition unity was to ultimately merge the opposition parties but he believes time has not arrived yet to pursue that path. “The bigger picture was a total merger and we agreed that with three independent parties, members might be against merger eventuality so the current model should be used until a point where they are now together for as long as possible,” he said.
“UDC should gradually perform better in elections and gain confidence. They should not rush the merger. We have been meeting since 2003, but if they rush it might cause endless problems. If they are ready they can anyway,” he advised. For now the constituent parties of the umbrella have been exchanging salvos with others (BCP and BNF).
“There are good reasons for and against merging the parties. Personally, I am in favour of merging the parties (including AP and BPF) into a single formation but I know it’s a complex mission that will have its own challenges,” Saleshando said when he made his position known a week ago.
“Good luck to those advocating for a merger, it will be interesting to observe the tactics they will use to lure the BPF into a merger,” former BNF councillor for Borakalalo Ward and former BNF Youth League Secretary General, Arafat Khan, opined in relation to BCP’s proposed position.
Mpotokwane, who is currently out in the cold from the UDC since he was ejected from the party’s NEC in 2017, said the current bickering and the expected negotiations with other parties need the presence of conveners.
“We did not belong to any party as conveners so we were objective in our submissions. If party propose any progressive idea we will support, if it is not we will not, so I would agree that even now conveners might be key for neutrality to avoid biasness,” he observed. Despite being abandoned, Mpotokwane said he will always be around to assist if at all he is needed.
“If they want help I will be there, I have always been clear about it, but surely I will ask few questions before accepting that role,” he said. UDC is expected to begin cooperation talks with both AP and BPF either this week or next weekend for both upcoming bye-elections (halted by Covid-19) and 2024 general elections and it is revealed that there will be no conveners this time around.
The Botswana Democratic Party (BDP) moved through its lawyers to attach the property of Umbrella for Democratic (UDC) President Duma Boko and other former parliamentary contestants who failed in their court bid to overturn the 2019 general elections in 14 constituencies.
WeekendPost has established that this week, Deputy Sheriffs were commissioned by Bogopa Manewe Tobedza and Company who represented the BDP, to attach the properties of UDC elections contents in a bid to recover costs. High Court has issued a writ of execution against all petitioners, a process that has set in motion the cost recovery measures.
Botswana Sectors of Teachers Union (BOSETU) says COVID-19 as a pandemic has negatively affected the education sector by deeply disrupting the education system. The intermittent lockdowns have resulted in the halting of teaching and learning in schools.
The union indicated that the education system was caught napping and badly exposed when it came to the use of Information System (IT), technological platforms and issues of digitalisation.
“COVID-19 exposed glaring inefficiencies and deficiencies when it came to the use of ITC in schools. In view of the foregoing, we challenge government as BOSETU to invest in school ITC, technology and digitalization,” says BOSETU President Kinston Radikolo during a press conference on Tuesday.
As a consequence, the union is calling on government to prioritise education in her budgeting to provide technological infrastructure and equipment including provision of tablets to students and teachers.
“Government should invest vigorously in internet connectivity in schools and teacher’s residences if the concept of flexi-hours and virtual learning were to be achieved and have desired results,” Radikolo said.
Radikolo told journalists that COVID-19 is likely to negatively affect final year results saying that the students would sit for the final examinations having not covered enough ground in terms of curriculum coverage.
“This is so because there wasn’t any catch up plan that was put in place to recover the lost time by students. We warn that this year’s final examination results would dwindle,” he said.
The Union, which is an affiliate of Botswana Federation of Public, Private and Parastatal Union (BOFEPUSU), also indicated that COVID-19’s presence as a pandemic has complicated the role of a teacher in a school environment, saying a teacher’s role has not only transcended beyond just facilitating teaching and learning, but rather, a teacher in this COVID-19 era, is also called upon to enforce the COVID-19 preventative protocols in the school environment.
“This is an additional role in the duty of a teacher that needs to be recognized by the employers. Teachers by virtue of working in a congested school environment have become highly exposed and vulnerable to COVID-19, hence the reason why BOSETU would like teachers to be regarded as the frontline workers with respect to COVID-19,” says Radikolo.
BOSETU noted that the pandemic has in large scales found its way into most of the school environments, as in thus far more than 50 schools have been affected by COVID-19. The Union says this is quite a worrying phenomenon.
“As we indicated before when we queried that schools were not ready for re-opening, it has now come to pass that our fears were not far-fetched. This goes out to tell that there is deficiency in our schools when it comes to putting in place preventative protocols. In our schools, hygiene is compromised by mere absence of sanitizers, few hand-washing stations, absence of social distancing in classes,” the Union leader said.
Furthermore, Radikolo stressed that the shifting system drastically increased the workload for teachers especially in secondary schools. He says teachers in these schools experience very high loads to an extent that some of them end up teaching up to sixty four periods per week, adding that this has not only fatigued teachers, but has also negatively affected their performance and the quality of teaching.
In what the Union sees as failure to uphold and honour collective agreements by government, owing to the shift system introduced at primary schools, government is still in some instances refusing to honour an agreement with the Unions to hire more teachers to take up the extra classes.
“BOSETU notes with disgruntlement the use of pre-school teachers to teach in the mainstream schools with due regard for their specific areas of training and their job descriptions. This in our view is a variation of the terms of employment of the said teachers,” says Radikolo.
The Union has called on government to forthwith remedy this situation and hire more teachers to alleviate this otherwise unhealthy situation. BOSETU also expressed concerns of some school administrators who continuously run institutions with iron fists and in a totalitarian way.
“We have a few such hot spot schools which the Union has brought to attention the Ministry officials such as Maoka JSS, Artesia JSS, and Dukwi JSS. We are worried that the Ministry becomes sluggish in taking action against such errant school administration. In instances where action is taken, such school administrators are transferred and rotated around schools.”