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Botswana Railways vulnerable to fraud – Audit

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.

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BPS, Mosala Funeral Parlour butt heads over SA national remains

19th September 2023

A squabble has broken out between Pule Mosala Funeral Parlour and the Botswana Police Service (BPS) over the remains of a South African national who has been in the Mosala mortuary for more than nineteen months. The deceased was one of 10 suspects who were controversially shot dead during a lengthy shootout with law enforcement authorities in Gaborone’s Phase 2 early last year.

The deceased individual’s family based in Soweto, has encountered difficulties in repatriating the body which has been in the care of Mosala Mortuary Services. Following the incident, it has emerged that all 10 bodies were transported to PFG mortuary in Lobatse for a brief period while the police attempted to locate their next of kin.  It is reported that the families of the deceased were eventually identified and informed to come and identify their loved ones, including other South African nationals who were part of the criminal group. These families also witnessed the autopsy procedures conducted at Princess Marina Hospital in Gaborone.

Except for the family from Soweto, nine of the bodies were claimed and taken by their separate relatives. The Soweto family claims they lack the resources to bring the body back to South Africa and has made it known that they are looking for money. To end the supposed verbal agreement over the body’s storage for repatriation, Mosala Funeral Service has filed a case against the police at the Lobatse High Court.

According to Keakantse Mmotlhana, the company’s Sales and Marketing Manager, 10 people who were killed in Phase 2 by gunfire were all temporarily transferred to one of PFG’s branches in Lobatse by the police while efforts were made to find their next of kin. She expressed outrage at the statement made by the Minister of Defense and Security, recently.

After Assistant Police Commissioner Dipheko Motube called her office to apologize for giving the Minister wrong information during a news conference, she confirmed that they had accepted the apologies. He made it clear that one of the victims was still at Pule Mortuary in Lobatse.

Bushie Mosala, the director and owner of Mosala Funeral Services, confirmed that the body of a South African national has been in his mortuary for the past nineteen months. He expressed his desire for the police to remove the corpse from the mortuary, characterising the situation as a “nightmare.” He has instructed his legal team to file a lawsuit against the police in the Lobatse High Court concerning the body.

Mosala urged the acting Police Commissioner to come forward and apologize to the nation for the situation, asserting that the public has the right to know the truth regarding the body of the South African national, w

C -002Bhich was preserved by the police as evidence.

The South African High Commission in Gaborone had not responded to queries from Weekend Post at the time going of going to press.

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BOSETU frustrated by Gov’t new dispute winning strategy

19th September 2023

Botswana Sectors of Teachers Union (BOSETU) has expressed alarm over a troubling trend by the government. Tobokani Rari, Secretary General of the BOSETU, stated that it appears that these days, whenever there is a dispute between workers and the government, the administration is fast to run to the courts to attempt and muffle unions.

“This is quite disturbing development, we have seen it with the Botswana Doctors Union, there was a disagreement over the shift allowance, government rushed to court, they indeed got order that was saying the doctors should go and do the work. We have seen it with the nurses, they rushed to court they got the order, we are now seeing it with the teachers, they rushed to the court and they got what they wanted,” said Rari, who also served as the Secretary General of BOFEPUSU.

Rari raised concerns that the government’s enforcement of teacher’s work, through a court order will result in reduced classroom productivity and morale. Rari added that this situation would negatively impact labour relations and teachers emotional wellbeing due to dissatisfaction in their work places leading to persistently poor academic outcomes.

“You can get an order that forces people to work, but what happens at work, it heightens emotions, it destroys relationships and the morale goes down and productivity does. Courts and judgments don’t solve productivity issues. Productivity only comes when people are satisfied at the workplace, so if you force them to work through a court order then you may not get the maximum out of the working population,” said Rari

MESD vs BOSETU COURT CASE

“As you are aware, the Ministry of Education approached courts and they were demanding three things from the court in this case between BOSETU and the ministry. First, they were demanding that the joint letter that was written by BOSETU and Botswana Teachers Union (BTU) asking members to stop doing course work because there was no agreement be declared unlawfully and BOSETU should write to its members and withdraw that letter within 24hrs. The second thing that they were looking for, was to interdict BOSETU from further issuing any instructions to that effect going forward. Lastly was that court should hold BOSETU to pay the cost of the lawsuit on a punitive scale,” Rari said.

Rari stated that the court decided to rule in favour of the Ministry of Education on all three relieves sought, that the savingram should be declared unlawful, that BOSETU should withdraw the contents savingram within 24hrs.

Court also said BOSETU should not issue any of such instructions going forward up until the case of contempt that BOSETU has taken to court, the contempt of the 2009 judgment has been decided. Court also awarded cost to the ministry on a punitive scale.

“BOSETU is a law abiding citizen and therefore we are bound by any laws and judgments that are there in Botswana and arise on the courts of Botswana hence we have complied with the order. On the 31st after the court case, we wrote to all our members and told them that the contents of that savingram as far as coursework is concerned has been withdrawn,” said Rari.

Rari said what happened in this case is that the judge decided to listen to the urgency without the responding affidavits of the opposing party, BOSETU, and went on to rule the merit of the case, which surprised the union.

“However we have been in discussion with our lawyers because if we leave things like this, we feel like we cannot leave that unchallenged. We have taken a decision to appeal the judgment,” Rari confirmed.

2023 COURSEWORK AND INVIGILATION AGREEMENT

“We would like to make our members aware that the following day after the judgment, we were able to meet the Ministry of Education and we have arrived at a conclusion that we signed an agreement that coursework rates will be increased by 5%. If court had ruled that coursework is the duty of the teachers’ means it wouldn’t have been any agreement after the court case, it tells you that the issue is still open and it is on the table. We have arrived at an agreement that there is going to be an increment on all components of coursework and invigilation,” Rari pointed out.

Rari further explained that Article 2 says union party is to submit detailed proposals on the intensity of the coursework for further engagement. Intensity of coursework means where the coursework payment starts in terms of varying from different subjects. He said the outcome based subject that are taught Maun Senior Secondary School and Moeng college which are agriculture and hotel and tourism is that ministry have agreed and acknowledge  that there are some peculiarity in their coursework and   therefore should be paid in line with the peculiarities that are contained in their coursework.

CONGRESS RESOLUTION

Rari pointed out the resolutions taken at the conference where the issue of application of corporal punishment was addressed.  “BOSETU will issue out a memo to their members to advise them that they should not apply corporal punishment, they should leave it to be applied in line with the Education Act.”

 

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BMC sees red as mass buffaloes disrupt plans to supply schools

19th September 2023

The Botswana Meat Commission (BMC) which had struck a deal with the Ministry of Education to supply some schools in the northern part of the country is counting losses as mass migration of buffalos jeopardize the Commission’s plans. 

Information reaching this publication shows that the beef exporter was recently given the greenlight to supply government schools with beef. According to documents seen by this publication, as a result BMC had scheduled to buy and collect cattle in the Nata-Gweta and Boteti constituencies from 11 to 17 September.

This was after BMC and the Ministry of Education struck a deal for the former to supply government schools with beef. Letters exchanged between Ministry officials state that it has been recommended to the ministry to support BMC by allowing it to supply schools with beef products.

The Ministry indicated that it was aware that some schools have contracts that are currently running with suppliers such as local butcheries.

The Ministry revealed that at the same time BMC has 256 tins of frozen quality meat at its Maun Plant.

The Ministry requested the Director-Regional Operations to appoint an officer to manage the procurement of meat for schools that do not currently have running contracts. The Ministry further stated that Modalities of collection will be arranged between the region and the schools identified.

According to the Ministry, a list of schools including the condition of their cold rooms and their number of deliveries and kilograms per week they buy should be compiled. The Ministry also requested its officials to share the list with headquarters and the acting director-Basic Education, and engage BMC accordingly to procure.

But this plan ran into trouble after it emerged that between 300 to 500 buffalos migrated from the buffalo fence area to Nata, Dukwi and Mosetse areas.

The Department of Veterinary Services sprang into acting by revising movement protocol for cloven-hoofed animals with immediate effect following buffalo sightings in zone 3b which covers Nata/Sowa, zone 3c which is around the Dukwi areas as well as zone 6a, which covers the Mosetse area, which fall under zones, 3b, 3c, 5,6a and 8.

The Department of Veterinary Services indicated that as a result, movement of live cloven-hoofed animals and their products out of zones 3b, 3c, 5, 6a and 8 were prohibited and that movement of live cloven-hoofed animals within and into these zones is only allowed for direct slaughter at licensed slaughter facilities under veterinary movement permit issued through BAITS.

The department also indicated that the movement of fresh products derived from cloven-hoofed animals such as raw milk, skins and fresh meat into these zones is also only allowed under a similar arrangement.

Movement of live cloven-hoofed animals into these zones for rearing and other purposes will not be allowed, and farmers and the general public is requested to continue being vigilant and report any buffalo sightings to the nearest veterinary office, the police or the Department of Wildlife and National Parks, the department said.

Meanwhile the Ministry of Agriculture has stated that following the press release on prohibition of movement of live cloven-hooved animals and their products in and out of Zones 3b, 3c, 5, 6a & 8, the acting Minister of Agriculture Karabo Gare, his counterpart Acting Minister of Environment, Wildlife &  Tourism Mabuse Pule, acting Permanent Secretary in the Ministry of Agriculture Mr. Joshua Moloi, Director of Veterinary Services Dr Kefentse Motshegwa and other government officials visited the areas of Sepako and Dukwi respectively on a mission to consult with communities regarding the invasion of the places by buffalos.

Minister Gare alluded that they have been sent by the President of Botswana, who is equally worried by the current situation. He noted that the affected areas have a total of around 300000 cattle and if the situation goes unchecked, there might be detrimental effects on the economy of this country.

He encouraged the communities to help government going forward by reporting any spotted buffalos in their areas, emphasizing that buffalos are dangerous and can kill people and that care should be exercised at all times.

The Director of Veterinary Services mentioned that they closed the above mentioned zones to allow for testing of buffalos & cattle for foot & mouth disease. The wildlife department’s Director Mr. Moremi Batshabang assured farmers and the community that they will eliminate small clusters of buffalos found within communities and translocate larger clusters to ensure their safety.

 

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