Kandjeke raises concern with Grootfontein's overstated assets and missing millions
Auditor-General Junias Kandjeke has issued yet another adverse audit opinion on the Municipality of Grootfontein’s financial statements for the 2019/2020 financial year, citing systemic failures in financial reporting, overstated balances, and widespread non-compliance with international accounting standards.
The report, tabled recently before Parliament, shows that the municipality's financial statements “do not fairly present” its financial position for the year ended 30 June 2020—a grave assessment from the Auditor-General’s office. The municipality’s accounts were only submitted for audit in September 2023, well over three years after the close of the financial year.
“The adverse opinion stems from multiple material misstatements, omissions, and inaccurate disclosures,” Kandjeke said. “These collectively distort the true financial picture of the municipality.”
Assets inflated by millions
One of the most significant issues flagged by the Auditor-General is the overstatement of property, plant, and equipment by N$517,990. The financial statements reflected a balance of N$77.9 million, while the fixed asset register showed N$77.4 million—revealing a mismatch that should have been reconciled.
“The municipality must ensure that the balances in the financial statements reconcile with those in the asset register,” Kandjeke advised.
Kandjeke’s report also reveals that the value of water in municipal pipes at year-end was excluded from inventory—a direct violation of International Public Sector Accounting Standards (IPSAS) 12. Moreover, unsold land (erven) was not valued according to IPSAS requirements, resulting in further misstatements of assets.
In terms of cash and cash equivalents, a staggering N$8.9 million discrepancy was uncovered. The municipality’s main operational bank account reflected a closing balance of N$11.1 million in the financial statements, but the actual reconciled bank statement showed only N$2.2 million.
“This significant overstatement casts serious doubt on the municipality’s cash flow management and reliability of financial records,” the report warned.
Omitted provisions and unrecognised liabilities
The audit also found that Grootfontein Municipality failed to make a provision for the rehabilitation of dumping sites, in line with IPSAS 19. Kandjeke reminded the council that such provisions are mandatory, especially for public entities managing infrastructure that poses environmental risks.
Additionally, finance lease liabilities were incorrectly allocated between short-term and long-term obligations, resulting in an overstatement of the long-term portion by N$309,216 and an understatement of the short-term portion by N$302,245.
In terms of employee-related provisions, the severance pay provision decreased by N$922,788, but this was erroneously reflected as a reduction in employee costs. Another N$1 million adjustment for severance liabilities was not accounted for at all, causing the accumulated surplus to be understated by that amount.
The report further flagged a mismatch in leave provision, where the supporting schedule reflected a closing balance of N$8 million, while the financials recorded only N$7.6 million—a discrepancy of N$409,497.
Budget, revenue, and reporting failures
In another compliance failure, the municipality did not include a comparison of budgeted versus actual figures, as required under IPSAS 1, nor did it provide adequate explanatory notes.
The auditors also noted a restatement of revenue and expenditure for 2019 amounting to N$1.87 million, but no adequate documentation or justification for the adjustment was provided.
The report, tabled recently before Parliament, shows that the municipality's financial statements “do not fairly present” its financial position for the year ended 30 June 2020—a grave assessment from the Auditor-General’s office. The municipality’s accounts were only submitted for audit in September 2023, well over three years after the close of the financial year.
“The adverse opinion stems from multiple material misstatements, omissions, and inaccurate disclosures,” Kandjeke said. “These collectively distort the true financial picture of the municipality.”
Assets inflated by millions
One of the most significant issues flagged by the Auditor-General is the overstatement of property, plant, and equipment by N$517,990. The financial statements reflected a balance of N$77.9 million, while the fixed asset register showed N$77.4 million—revealing a mismatch that should have been reconciled.
“The municipality must ensure that the balances in the financial statements reconcile with those in the asset register,” Kandjeke advised.
Kandjeke’s report also reveals that the value of water in municipal pipes at year-end was excluded from inventory—a direct violation of International Public Sector Accounting Standards (IPSAS) 12. Moreover, unsold land (erven) was not valued according to IPSAS requirements, resulting in further misstatements of assets.
In terms of cash and cash equivalents, a staggering N$8.9 million discrepancy was uncovered. The municipality’s main operational bank account reflected a closing balance of N$11.1 million in the financial statements, but the actual reconciled bank statement showed only N$2.2 million.
“This significant overstatement casts serious doubt on the municipality’s cash flow management and reliability of financial records,” the report warned.
Omitted provisions and unrecognised liabilities
The audit also found that Grootfontein Municipality failed to make a provision for the rehabilitation of dumping sites, in line with IPSAS 19. Kandjeke reminded the council that such provisions are mandatory, especially for public entities managing infrastructure that poses environmental risks.
Additionally, finance lease liabilities were incorrectly allocated between short-term and long-term obligations, resulting in an overstatement of the long-term portion by N$309,216 and an understatement of the short-term portion by N$302,245.
In terms of employee-related provisions, the severance pay provision decreased by N$922,788, but this was erroneously reflected as a reduction in employee costs. Another N$1 million adjustment for severance liabilities was not accounted for at all, causing the accumulated surplus to be understated by that amount.
The report further flagged a mismatch in leave provision, where the supporting schedule reflected a closing balance of N$8 million, while the financials recorded only N$7.6 million—a discrepancy of N$409,497.
Budget, revenue, and reporting failures
In another compliance failure, the municipality did not include a comparison of budgeted versus actual figures, as required under IPSAS 1, nor did it provide adequate explanatory notes.
The auditors also noted a restatement of revenue and expenditure for 2019 amounting to N$1.87 million, but no adequate documentation or justification for the adjustment was provided.
Comments
Namibian Sun
No comments have been left on this article