The 2015 Financial Statement was formally submitted to the Audit Chamber and the SOAB on November 4th, 2016. As such, the auditing activities of both entities started very late in the year. Normally, the financial statements are expected in September.
Despite taking additional time for drafting and presenting the 2015 Financial Statement, Government has once again failed to present a solid and auditable financial statement. “We find this particularly regrettable in light of the improvements that were promised after the audit of the last set of financial statements. More diligence in achieving improvement is expected from a Country that has previously produced five financial statements”.
Besides the lack of progress in dealing with the shortcomings of government’s financial management, the report details government’s failure to adhere to legal requirements when reporting and giving account in the financial statement. This is a reason for concern, according to the Audit Chamber. Based on the response received from the Minister of Finance regarding the Audit Chamber’s report, a financial statement that is in compliance with the National Accountability Ordinance is not expected prior to 2019. “We find this unfortunate”.
“We note a slight improvement in the explanation provided with the 2015 Budget. However, the account presented in the financial statement does not correspond with that of the budget”, according to the Audit Chamber. As a result of this inadequate accountability, proper insight about how public funds were used is missing.
The report refers to the negative advice issued by the Council for Financial Supervision (CFT) on the 2015 Budget. That negative advice necessitated a budget amendment which was never adopted. The Audit Chamber concludes therefore, that the 2015 Budget never formally entered into force. “We conclude that income and expenditures are based on a budget ordinance that did not go into effect in 2015”.
Expenditures were done but for which funds were not made available, and income was not realized as budgeted. Actions were taken contrary to rules and regulations. An example, is the Audit Chamber refers to the personnel expenditure budget overrun.
During the investigation of the 2015 Financial Statement, the Audit Chamber also reviewed the work- and residence permits. Specifically, the Audit Chamber analyzed whether the actual income from these permits was in line with budget estimates. They found that for work permits, there is a chronic shortfall in terms of actual income as compared to the budget. It is the Audit Chamber’s opinion that the shortfall is due to overly optimistic budgeting.
Receipts from residence permits in 2014 fell short of budget estimates for that year. A year later, in 2015, the budget estimate was significantly adjusted downward. However, in 2015 the reported income from residence permits far exceeded the budget estimate. The Audit Chamber finds the methodology for preparing the budget estimates to be unclear. The financial statement should clearly explain deviations between the budget estimates and actual income and expenditures.
The SOAB issued an adverse opinion on Government’s 2015 Financial Statement. The Audit Chamber supports the SOAB’s adverse opinion, and states that Parliament needs to assume its supervisory role and should address the responsible minister(s) on this matter.
While Government drafted a plan for solving the shortcomings in its financial management, little is known about the status of that plan. The Audit Chamber was not provided with progress reports as was promised. After five years of investigating financial statements, the greatest obstacle is the lack of (timely) information. As long those involved in the process of financial management fail to take responsibility, improvement will remain absent.
“The most important recommendation we can make after five years of investigating the financial statements, is to urge everyone to carry out their respective task”.