Swakopmund audit exposes major control failures
The Swakopmund municipality's audit report shows discrepancies in employee costs of N$14.3 million, long-term receivables of N$11.6 million, cash balances of N$10.8 million and general expenses of N$6.9 million.
Short-term investments worth around N$112 million were misclassified, the auditor-general's report notes, while the municipality’s investment in Erongo Red, valued at N$135 million, lacked supporting share certificates.
Auditor-general Junias Kandjeke issued an adverse opinion for the financial year ended 30 June 2023 for the municipality, warning that its financial statements do not fairly reflect its financial position or performance.
Auditors found that Swakopmund presented financial statements as if under International Public Sector Accounting Standards (IPSAS), but in reality applied fund accounting, a framework not recognised in Namibia.
This inconsistency, coupled with missing accounting policies in the submitted statements, created confusion and undermined transparency, the report states.
The audit added that notes to the financial statements were not initially provided. Instead, they were only sent after auditors requested them, which violates best practice for public accountability.
Asset and cash flow issues
The fixed asset register was flagged as incomplete. It lacked acquisition dates, useful lives, accumulated depreciation and valuation details.
The auditors could therefore not verify the balances of property, plant and equipment.
Open land as per IPSAS 17 was also excluded, and no provision was made for the rehabilitation of the municipal dump site, contrary to IPSAS 19 requirements.
The cash flow statement mixed non-cash items, such as depreciation of N$10.6 million, into cash operations, double-counted land sale proceeds, and failed to separate interest received from finance costs.
Additionally, a statement of changes in equity was not included in the financial statements at all.
Cash and bank balances showed a mismatch of N$10.8 million between reported figures and bank confirmations, highlighting weak reconciliations.
Revenue and receivables gaps
A VAT receivable difference of nearly N$7 million was recorded between the municipality’s figure and the auditors’ recalculations.
Surcharges from Erongo Red also reflected a discrepancy of N$1.35 million, the report noted.
Build Together and mass housing loans did not reconcile with financial statement balances, while receivables from exchange transactions were offset against long-term receivables, which violates IPSAS 1 rules against offsetting.
The provision for doubtful debts was also unreliable because the debtor age analysis did not match the municipality’s own stated accounting policy, preventing auditors from recalculating the allowance.
Employee costs and general expenses
Employee costs disclosed at N$233.1 million were short of the payroll register’s N$247.5 million, creating a N$14.3 million gap.
Severance provisions worth N$21.8 million were also transferred directly to reserves, rather than being recorded as expenses. General expenses showed tallying errors of N$6.97 million, where amounts reported in the statements did not match auditors’ recalculations, the report stated.
Short-term investments of N$111.9 million were misclassified as investments rather than cash equivalents, despite being fully accessible and readily convertible. Meanwhile, Swakopmund’s investment in Erongo Red, valued at N$135.5 million, could not be verified because the municipality failed to produce a share certificate.
Compliance failures
The audit found instances of non-compliance with the law. VAT returns for February to March 2023 were submitted a month late to the Namibian Revenue Agency, in breach of the VAT Act.
The municipality also missed the statutory deadline to submit its annual financial statements to the auditor-general, lodging them on 5 December 2023 instead of within three months of year-end.
The auditor-general's report added that Swakopmund’s financial statements for 2023 are materially misstated and unreliable.
Kandjeke recommended that the council adopt an approved accounting framework as directed by the Ministry of Urban and Rural Development, fully disclose accounting policies and notes in submitted accounts, update the fixed asset register to IPSAS standards, properly reconcile VAT, employee costs and surcharges, reclassify cash and investments correctly, and provide documentary proof for investments such as Erongo Red.
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Short-term investments worth around N$112 million were misclassified, the auditor-general's report notes, while the municipality’s investment in Erongo Red, valued at N$135 million, lacked supporting share certificates.
Auditor-general Junias Kandjeke issued an adverse opinion for the financial year ended 30 June 2023 for the municipality, warning that its financial statements do not fairly reflect its financial position or performance.
Auditors found that Swakopmund presented financial statements as if under International Public Sector Accounting Standards (IPSAS), but in reality applied fund accounting, a framework not recognised in Namibia.
This inconsistency, coupled with missing accounting policies in the submitted statements, created confusion and undermined transparency, the report states.
The audit added that notes to the financial statements were not initially provided. Instead, they were only sent after auditors requested them, which violates best practice for public accountability.
Asset and cash flow issues
The fixed asset register was flagged as incomplete. It lacked acquisition dates, useful lives, accumulated depreciation and valuation details.
The auditors could therefore not verify the balances of property, plant and equipment.
Open land as per IPSAS 17 was also excluded, and no provision was made for the rehabilitation of the municipal dump site, contrary to IPSAS 19 requirements.
The cash flow statement mixed non-cash items, such as depreciation of N$10.6 million, into cash operations, double-counted land sale proceeds, and failed to separate interest received from finance costs.
Additionally, a statement of changes in equity was not included in the financial statements at all.
Cash and bank balances showed a mismatch of N$10.8 million between reported figures and bank confirmations, highlighting weak reconciliations.
Revenue and receivables gaps
A VAT receivable difference of nearly N$7 million was recorded between the municipality’s figure and the auditors’ recalculations.
Surcharges from Erongo Red also reflected a discrepancy of N$1.35 million, the report noted.
Build Together and mass housing loans did not reconcile with financial statement balances, while receivables from exchange transactions were offset against long-term receivables, which violates IPSAS 1 rules against offsetting.
The provision for doubtful debts was also unreliable because the debtor age analysis did not match the municipality’s own stated accounting policy, preventing auditors from recalculating the allowance.
Employee costs and general expenses
Employee costs disclosed at N$233.1 million were short of the payroll register’s N$247.5 million, creating a N$14.3 million gap.
Severance provisions worth N$21.8 million were also transferred directly to reserves, rather than being recorded as expenses. General expenses showed tallying errors of N$6.97 million, where amounts reported in the statements did not match auditors’ recalculations, the report stated.
Short-term investments of N$111.9 million were misclassified as investments rather than cash equivalents, despite being fully accessible and readily convertible. Meanwhile, Swakopmund’s investment in Erongo Red, valued at N$135.5 million, could not be verified because the municipality failed to produce a share certificate.
Compliance failures
The audit found instances of non-compliance with the law. VAT returns for February to March 2023 were submitted a month late to the Namibian Revenue Agency, in breach of the VAT Act.
The municipality also missed the statutory deadline to submit its annual financial statements to the auditor-general, lodging them on 5 December 2023 instead of within three months of year-end.
The auditor-general's report added that Swakopmund’s financial statements for 2023 are materially misstated and unreliable.
Kandjeke recommended that the council adopt an approved accounting framework as directed by the Ministry of Urban and Rural Development, fully disclose accounting policies and notes in submitted accounts, update the fixed asset register to IPSAS standards, properly reconcile VAT, employee costs and surcharges, reclassify cash and investments correctly, and provide documentary proof for investments such as Erongo Red.
[email protected]
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