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.
Despite the President Dr Mokgweetsi Masisi and his Namibian counterpart, Hage Geingob giving an impression that the borderline security disputes are a thing of the past and that diplomatic ties remain tight, fresh developments from Namibia suggest otherwise, following Geingod’s close confidante’s attack on Botswana and its army.
Giving a Zambezi region state of the affairs last week, a Geingob-appointed governor of Zambezi region, Colonel Lawrence Ampofu, a retired Colonel in the Namibian Defence Force, former plan combatant during the liberation struggle of Namibia, in a written speech, charged at the BDF and condemned their killings of the Namibians as unacceptable.
“The security situation within our borders remains calm. The incidence of the Botswana Defence Force shootings and wanton killings on the Nchindo Brothers on 05 November 2020 and other 37 Namibian lives lost since independence remain a serious challenge with our neighbor, Botswana.
Our residents living along the Chobe, Linyanti and Kwandu rivers are living under constant threats, harassment, fear, intimidation and killings and such activities are condemned and not acceptable,” he said under the safety and security title.
The attack suggests that Namibia has not bought Botswana’s story. Ampofu was part of the entourage that accompanied Geingob to the three Nchindo brothers and their cousin who were gunned down by the BDF, and is reported to be privy to the details of the unpublished Botswana-Namibia joint investigations report about the killings as a governor or political head of the region which has eight electoral constituencies.
The report contains the sensitive details of how the three Namibians referred as poachers by the BDF – and Fisherman by the Namibian government were gunned down on 5 November last year along the Chobe River. They were Tommy (48), Martin (40) and Wamunyima Nchindo (36), and their cousin Sinvula Muyeme (44).
His views are not really in contrast to his President’s views who also described the BDF as trigger happy in a scripted report to his cabinet.
The Zambezi region is located in the extreme north east part of Namibia and covers a total of 14,667.6 square kilometres. “We share borders with Angola, Zambia to the north, Zimbabwe to the east and Botswana to the South,” he said.
Sampofu was first appointed governor of the former Caprive Region in 2010 by the former Namibian president, Hifikepunye Pohamba and was reappointed as Zambezi governor by President Dr.Hage Geingob in 2015, a term running to 2025.
37 Namibia residents killed by Botswana army so far
Sampofu is a man who continues to insist that Botswana has killed 37 residents of his region. A video posted by the Namibian Broadcasting Corporation (NBC) shows him alleging that at least 37 Namibians were killed by the BDF, after he met with the community at Impalila.
“It is true, the BDF started long ago. As we speak 37 lives have been lost here in Impalila along the Chobe river going to Linyanti and Kwado rivers up to Lizauli. All those families lost their loved ones,” Ampofu said in the video posted by NBC.
It is not known how the BDF, which has maintained their position that the Namibians were engaging in illegal activities of poaching, treats the constant attacks by the Namibian authorities, but they have repeatedly vowed to continue protecting the country’s sovereignty and natural resources.
Botswana’s premier brewer and leading distributor of beer, Kgalagadi Breweries Limited (KBL), this month dragged the government of Botswana to court after President Mokgweetsi Masisi imposed an alcohol ban with immediate effect. KBL labelled the decision as unjustifiable, irrational and that it overrides the rights that are enshrined in the constitution.
This week, Masisi through attorneys representing the government disparaged the case in his written affidavit of KBL’s application, referring to it as frivolous and that it ought to be dismissed with costs on a punitive scale.
In his court papers, Masisi reminded KBL that Botswana is a Republic whose laws find validity from the constitution, and in terms of Section 17 of the constitution the President is empowered to declare a State of Emergency and that it is a common cause that Botswana is under such state.
“It is common course that there is in existence emergency powers (Covid-19) Regulations 2020 as amended from time to time which is solely designed to regulate the Covid-19 pandemic,” he said.
Masisi pointed out that he denies that the application before Court is proper such as to challenge the lawfulness and validity of a regulation made and a notice published in the exercise of a legislative function in accordance with the Emergency Powers Act which empowers the President to make regulations as appear to him to be necessary and expedient for securing public safety.
Furthermore, the President revealed that the decision to ban alcohol sales was not arrived at willy-nilly, but rather that there had been careful considerations that the risks posed by Covid-19 had increased and therefore it was expedient and necessary to suspend all liquor licenses.
Moreover, Masisi denied that the decision to reinstate the ban should be made by the Director of Health Services as indicated by KBL in their nature of the application, “the Director is to cause the notice to be published in the Gazette after consultation with the President.”
Masisi indicated that the role of the Director of Health Services is to publish a regulation made by the President.
He further, reminded KBL that the power to make regulations in a State of Public Emergency in accordance with the EPA lies with the President, “such power includes the amendment of any enactment, suspending the operation of any enactment or modification of an enactment.”
According to Masisi, his decision to ban alcohol sales was based on evidence provided by the Director of Health Services who indicated to him that there was a sudden spike in the transmission of the Covid-19 virus following the reinstatement of liquor licenses.
Another piece of advice tendered by the Director of Health to Masisi was that bars and other liquor outlets were some of the major hotspots in the sense of such being high-risk areas at which the virus spread rapidly.
“Alcohol was one of the major causes of non-compliance with the health protocols that were put in place to control the spread of the Covid-19 virus. Further, there was an indication that more arrests were made on people failing to adhere to Covid-19 protocols more particularly at places where there were gatherings,” he contended.
He pointed out that therefore, it was expedient and or necessary to preserve lives and to reduce the risks of transmissions of the virus to reinstate the suspension of liquor licenses.
Moreover, the President says that it must be noted that he avers that the Director of Health Services is a credible source on matters of public health of which he also accordingly gave due weight to the Director’s advice on deciding to reinstate the ban through the impugned notice.
“I am aware and was always aware at the time of promulgating the regulation complained of that it shall negatively affect some sectors of the economy. However, after due consideration and receipt of advice, I decided to give priority to the safety and health of the nation,” Masisi said.
He presaged KBL that it would not be prudent and in the best interest of the nation to ignore a health emergency such as Covid-19 and gave preference to trading and making of profits by the applicant. “The results would only be catastrophic to the extent that when we emerge from the scourge we would be left with a depleted and ailing nation from Covid-19 and its side effects.”
Furthermore, his written affidavit further pointed out that the decision to reinstate the ban on alcohol was taken notwithstanding understanding and appreciation of the economic hardships that would befall the country.
However, he said he deliberately made the decision based on the evidence provided to him by the Director of Health, whose evidence he believes to be credible to give public/safety and health priority over economic considerations in some sectors.
In making the decision, Masisi states that he was and considered different options including allowing for sale of alcohol consumption off premises, however the evidence he had been provided with suggested that such other alternatives would not achieve the overall objective of securing public safety and health by reducing the risk of the spread of the virus.
“By the time I imposed the ban, alcohol was already being sold for consumption off-premises. This did not work. The information provided to me by the Director and the Presidential Task-Force team demonstrated that consumers purchased alcohol and then loitered and consumed it within the peripheries of bars and other liquor outlets,” he said.
Attached to the affidavit as emphasis, were photographs and videos of Gaborone West, Phase 4 in mid-June 2021, which he explains circulated on social media and was brought to his attention.
“I need not say much about the photos as they depict a crowd exceeding 50 gathered at the parking area of a bar. There is little or no regard to Covid-19 protocols. It was clear to me and my advisors, including the Director of Health Services and members of the Presidential Task-Force team that the total ban of alcohol was necessary to manage the risk of increase in infections, to understand what seems to have led to an increase in the risk of infection when alcohol is present I was advised by the Presidential Task-Force team that scientifically there has been evidence that alcohol narrows physical distance,” he argued.
Masisi says that allegations made by KBL are serious allegations of infringement of fundamental rights yet they fail to state how imposition and reinstatement of the suspension of liquor licenses out of necessity and expediency of the health of the nation infringes on the rights as alleged.
In an embarrassing turn of events that depicts disintegration in government communication on the fight against COVID-19, President Mokgweetsi Masisi and Assistant Minister of Health & Wellness, Sethomo Lelatisitswe gave two conflicting statements on the same matter, same day, just minutes apart.
The Commander-in-Chef told health practitioners and residents in Ramotswa that the COVAX facility has scammed African countries after billions were paid in a crowd funding effort to procure COVID-19 vaccines in bulk.
“We have pumped money as developing countries of the African continent into the COVAX Facility but the returns were not satisfactory, they cheated us,” the President said in Ramotswa.
According to President Masisi, the COVAX facility Vaccine only came in bits and pieces, frustrating the continent ‘s head immunity targets amid rapidly spreading Delta Variant which is currently reversing all progress made by Africa in containing the contagious virus.
“What we are getting is very small portions of the vaccine, they keep telling us that there is shortage of supply, this is not fair, but we have paid in advance, however what can we do, we have no choice but to spend more money and look for other avenues of securing other available vaccines,” he said.
Meanwhile in Gaborone, Assistant Minister of Health and Wellness told Parliament that vaccine from COVAX facility is anchoring Botswana’s vaccination program.
“I am not aware of such information that COVAX facility is not delivering as expected, we are actually bolstered by COVAX facility in this country,” he said responding to a question from Mahalapye West Member of Parliament David Tshere who is also Chairman of Parliament Committee On Health and HIV/AIDS.
“We have received doses as ordered from the COVAX facility, and we are still receiving more, I have not seen that information which is purported to have been revealed by the President, unless its new information, we as the Ministry we are not aware of any frustrations by the COVAX facility,” he said.
COVAX is co-led by the Coalition for Epidemic Preparedness Innovations (CEPI), Gavi and the World Health Organization (WHO), alongside key delivery partner UNICEF.
Its aim is to accelerate the development and manufacture of COVID-19 vaccines, and to guarantee fair and equitable access for every country in the world.
The facility is a global coalition that works to ensure fair and equitable access of COVID-19 vaccines around the world. So far, 190 countries have joined the COVAX initiative, including all 22 countries in the Eastern Mediterranean Region.
The COVAX Facility aims to have 2 billion doses of COVID-19 vaccines available for distribution across the globe by the end of 2021, targeting those most at risk (e.g. frontline health workers) and most vulnerable severe diseases and death (e.g. elderly and people with co-morbidities).
On other vaccination issues President Masisi revealed, still in Greater Gaborone vaccination centre visits, that Botswana has placed orders with Pfizer, a United States vaccine producer noting that they have promised to deliver next year.
Meanwhile, government kick-started phase two of the Covid-19 vaccination program this week, opening up for ages between 30 and 54.
President Masisi revealed that this was done because some elderly were reluctant to be inculcated.
“We can’t take forever trying to convince people to take vaccine, we moved to the next age segments because we cannot afford to have vaccines-which are already in shortage supply to just lie there,” he said.
On Friday, Ministry of Health revealed that it was receiving large numbers of people below the age of 55 lining up to be vaccinated.
In a statement the Ministry of Health said it, “acknowledges the huge turnout that marked the commencement of the Phase two COVID-19 vaccination program”.
Given this high turnout, especially in the Greater Gaborone region, the ministry announced an extension of operation hours in order to serve the huge crowds that had come for vaccination.
Of the nearly 85 000 doses that were being doled across the country as first doses, the majority of the Greater Gaborone vaccination sites were already getting depleted by 1800hrs on 22 July 2021.
As a result of this development, the ministry took a decision to discontinue the extended hours of operation announced yesterday for vaccination sites in Gaborone.
This means that vaccination sites in Gaborone and elsewhere in the country which still have some vaccines, will offer them in the normal working hours and days of the week.
The Ministry says it appreciates the great desire to be vaccinated shown by thousands of citizens and residents of this country and wishes to assure them that it will continue to expedite their vaccination every time vaccines become available. As has been communicated in various fora, more vaccines are expected in August 2021.
As at July 2021, Botswana has so far received 62, 400 doses of AstraZeneca/COVISHIELD bought through the Covax facility, 30,000 doses of AstraZeneca vaccine donated by the Republic of India, 19, 890 doses of the Pfizer vaccine bought through the COVAX facility, 200, 000 doses of the Sinovac vaccine, donated by the Peoples Republic of China and another 200, 000 doses of the Sinovac vaccine bought through bilateral negotiations with Sinovac company in China.
“We encourage Batswana to remain hopeful that although it’s taking longer than anticipated, enough COVID-19 vaccines will eventually arrive in our country. We urge them to always strictly abide by all COVID-19 protocols so that they protect themselves and others from this deadly virus,” the ministry said.