AG unhappy about municipal mess

THE municipalities of Ongwediva and Karasburg run the risk of being downgraded because of poor financial management, while others such as Omaruru and Mariental need to rethink their operations to make ends meet.

The dire situation of the local authorities is spelled out in the latest reports of the Auditor General tabled in the National Assembly last week. AG Junias Etuna Kandjeke said both Ongwediva and Karasburg faced severe financial problems due to a lack of profitable operations, long outstanding accounts and Government loans that were in arrears.By June 30 2004, the Ongwediva Town Council’s trading results reflected “a huge deficit” of more than N$5,1 million.Just a year earlier, it was N$762 119.Kandjeke said the Council had “a favourable cash-book balance of more than N$1,2 million by the end of the financial year of 2003 but it “changed into an unfavourable cash-book balance of N$24 854 as at year end”.”Furthermore, the investment balance decreased from N$21 603 387 to N$18 981 554,” the AG said in the report.Ongwediva’s debt has also grown over the past three years from N$6,7 million in 2002 to N$8,4 million in 2004.”The amount of debtors outstanding for 120 days and above increased significantly by 15 per cent, whilst the debtors’ book only increased by three per cent.This indicates that the Town Council’s working-capital position is deteriorating and the debt-recovery policy appears to be less effective in collecting amounts locked up in debtors,” the AG report said.At Karasburg, Kandjeke said the increase in irrecoverable debts remained a matter of concern and “the recovery of long outstanding debts seriously threatens the cash flow of the Municipality”.”As also recommended in previous reports, a strict policy of debt collection should be followed by the Council.It is recommended that the Council should consider approaching debt collectors to collect the money on their behalf,” he said.He suggested that the Council write off “uncollectible” amounts to maintain the integrity of its accounting records.Kandjeke said the Municipality could also not meet external loan repayments and the arrears have grown to over N$1 million.”Considering the financial situation of the Municipality, it is clear that the Municipality will not be able to repay these loans,” the report said.The AG suggested that the Municipality negotiate with the Government to postpone the repayment or write off the N$1 million debt.Kandjeke said the Mariental Municipality was guilty of slack financial control through costly investments and undercharging.During the year that ended June 30 2004, the Municipality paid over N$1,435 million by way of premiums to an insurance company, increasing the investments in the two policies to N$2,255 million and N$2,86 million from N$1,68 million and N$2 million.The net surrender values of the two policies were given as N$2,236 million and N$2,710 million.”It appears that the Municipality suffered an investment loss of N$167 860 during the year under review without taking into consideration the interest which it could have earned had the money been invested at fixed interest rates,” the AG said.Kandjeke said the Municipality did also not seek the approval of the Minister of Local Government for the investments.”Council is cautioned not to invest too many funds on a long-term basis, as this may lead to cash-flow problems in the future.It is again recommended that the Council should obtain the necessary approval for investments,” he said.During the year under review, the AG’s office established that the Mariental Municipality charged less than what was spent on maintaining the abattoir, town grounds and houses that are leased to residents.The slaughter fees resulted in a loss of N$94 693 while the high administration costs of the town grounds and pound resulted in a further loss of N$101 729.Leased houses recorded a loss of N$302 015.”It is recommended that Council should review the tariffs in order to compensate for the increase in expenditure,” the AG said in his report.AG Junias Etuna Kandjeke said both Ongwediva and Karasburg faced severe financial problems due to a lack of profitable operations, long outstanding accounts and Government loans that were in arrears.By June 30 2004, the Ongwediva Town Council’s trading results reflected “a huge deficit” of more than N$5,1 million.Just a year earlier, it was N$762 119.Kandjeke said the Council had “a favourable cash-book balance of more than N$1,2 million by the end of the financial year of 2003 but it “changed into an unfavourable cash-book balance of N$24 854 as at year end”.”Furthermore, the investment balance decreased from N$21 603 387 to N$18 981 554,” the AG said in the report.Ongwediva’s debt has also grown over the past three years from N$6,7 million in 2002 to N$8,4 million in 2004.”The amount of debtors outstanding for 120 days and above increased significantly by 15 per cent, whilst the debtors’ book only increased by three per cent.This indicates that the Town Council’s working-capital position is deteriorating and the debt-recovery policy appears to be less effective in collecting amounts locked up in debtors,” the AG report said.At Karasburg, Kandjeke said the increase in irrecoverable debts remained a matter of concern and “the recovery of long outstanding debts seriously threatens the cash flow of the Municipality”.”As also recommended in previous reports, a strict policy of debt collection should be followed by the Council.It is recommended that the Council should consider approaching debt collectors to collect the money on their behalf,” he said.He suggested that the Council write off “uncollectible” amounts to maintain the integrity of its accounting records.Kandjeke said the Municipality could also not meet external loan repayments and the arrears have grown to over N$1 million.”Considering the financial situation of the Municipality, it is clear that the Municipality will not be able to repay these loans,” the report said.The AG suggested that the Municipality negotiate with the Government to postpone the repayment or write off the N$1 million debt.Kandjeke said the Mariental Municipality was guilty of slack financial control through costly investments and undercharging.During the year that ended June 30 2004, the Municipality paid over N$1,435 million by way of premiums to an insurance company, increasing the investments in the two policies to N$2,255 million and N$2,86 million from N$1,68 million and N$2 million.The net surrender values of the two policies were given as N$2,236 million and N$2,710 million.”It appears that the Municipality suffered an investment loss of N$167 860 during the year under review without taking into consideration the interest which it could have earned had the money been invested at fixed interest rates,” the AG said.Kandjeke said the Municipality did also not seek the approval of the Minister of Local Government for the investments.”Council is cautioned not to invest too many funds on a long-term basis, as this may lead to cash-flow problems in the future.It is again recommended that the Council should obtain the necessary approval for investments,” he said.During the year under review, the AG’s office established that the Mariental Municipality charged less than what was spent on maintaining the abattoir, town grounds and houses that are leased to residents.The slaughter fees resulted in a loss of N$94 693 while the high administration costs of the town grounds and pound resulted in a further loss of N$101 729.Leased houses recorded a loss of N$302 015.”It is recommended that Council should review the tariffs in order to compensate for the increase in expenditure,” the AG said in his report.