Keetmanshoop municipality loses over N$77 million amid audit red flags and mismanagement claims

The Keetmanshoop municipality has recorded losses exceeding N$77 million over three years, prompting an adverse audit opinion and concerns over financial mismanagement.

The opinion covered the three financial years ending in 2021, and was provided by auditor general Junias Kandjeke.

He says the council seems to be unable to settle its obligations and continue as a going concern.

An adverse opinion, the most negative of audit opinions, occurs when an auditor finds material and pervasive misstatements in financial statements.

“An adverse audit opinion is being expressed due to the International Public Sector Accounting Standards (Ipsas) as the reporting framework for both financial years.

“This is in contravention with the circular from the Ministry of Urban and Rural Development dated 13 September 2020 that local authorities should implement the Ipsas as a reporting framework from the period ended 30 June 2019,” Kandjeke says.

He also found that the municipality’s accounting policies and the breakdown of income and expenditure were not included in the financial statements.

Kandjeke recommends that the municipality adopt the reporting framework prescribed by the line ministry, and ensure the inclusion of accounting policies and detailed income and expenditure statements.

The municipality accumulated a N$77.3-million loss in the three years ending in 2021, with the biggest loss of N$68.3 million observed in 2020.

Kandjeke recommends that measures be put in place to turn the municipality into a going concern.

A ‘going concern’ refers to the assumption that a company or entity will continue its operations for the foreseeable future, typically at least 12 months from the end of the reporting period.

This means it is not expected to be liquidated or cease operations.

For the 2020 financial year, the report says adjustments to the appropriation account amounting to N$4.3 million could not be traced to the supporting documents or the supporting schedules.

The accuracy, completeness, and valuation of the above-mentioned balance could not be verified.

The fixed asset register’s closing balance amounting to N$85.7 million (2021) and N$80.2 million (2020) differs from the financial statements balance amounting to N$76.4 million (2021) and over N$74 million (2020), resulting in a difference of N$9.3 million and N$6.1 million in the 2021 and the 2020 financial years, respectively, the report states.

It indicates that all additions brought into use in the 2021 and the 2020 financial years were not depreciated in their respective financial years.

The recomputed depreciation and the financial statements depreciation had a difference of N$1.8 million (2021) and N$1.7 million (2020).

For the 2021 financial year, the fixed asset register provided by management did not include the disposed assets to determine the carrying amounts and to calculate the profit or loss on disposal of assets amounting to over N$1 million.

Furthermore, assets could not be traced to the fixed asset register as they are not marked.

The audit finding resulted in the amount of property, plant and equipment of N$76.4 million (2021) and N$74 million (2020) disclosed in the statement of financial position not being verified.

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