City could face insolvency

The City of Windhoek could soon face insolvency if it does not urgently address lackadaisical financial management.

This concern was expressed during a public hearing by the National Council's standing committee on public accounts and economy on audit reports of the City of Windhoek for the financial years 2012 to 2015.

The City has been slammed with a disclaimer audit opinion for the years 2012 to 2015 by the auditor-general, due to insufficient and appropriate audit evidence that could not be obtained and therefore no audit opinion could be given.

Some of the reasons listed in the 2015 audit report are that the City did not provide an asset register for audit purposes, year-end stock amounting to N$61.9 million could not be verified and the financial statements for the going concern and commercial insolvency of the City were not disclosed. According to Jerome Davis, the municipality's strategic executive of finance, solvency is a major concern for the municipality and it currently seems that the City is unable to stem its losses. According to him, the 2015/16 financial year actual income for the City was N$44 million more than budgeted.

But expenses were N$643 million more than budgeted, resulting in a loss of N$456 million instead of a budgeted profit of N$144 million.

For the 2015/16 financial year actual income was N$189 million more than budgeted. However expenses were N$414 million more than budgeted, resulting in a loss of N$8 million instead of a budgeted profit of N$233 million.

“To compound the financial problems reflected above the City budgeted for a loss of N$504 million for the current financial year,” said Davis. He said it was anticipated that when all of the unsold land of the City was brought to account, it would not be in an insolvent position, but it cash flow remained extremely critical.



According to the committee the City of Windhoek is not commercially viable and it will soon be insolvent.



“This puts the country in an awkward position. Investors and residents are losing trust in the City. How do we move forward from this? The culmination of losses is worrisome. The next step will be commercial insolvency,” said Joseph Mupetami.



The City's acting CEO, Fillemon Hambuda, said the strategic plan that the City recently launched aimed to address this by decreasing the City's debts and strengthening the balance sheet.



“We are acknowledging what you are saying. We cannot allow the City to go down.”



He said during Windhoek's water crisis money budgeted for other projects was used to address the crisis.



“We recently took over Groot Aub and these are expenses that came and are necessary for our residents.”



Hambuda added that the City wanted to recover 80% of the N$600 million owed to it. “Then we can come back from insolvency.”



The committee further elaborated on the disclaimer audit opinion that the City received for the financial years 2012 to 2015.



“There has been a trend of disclaimer audit opinions, which is one of the worst one can receive. One of the key findings in the audit reports include that special investigations were carried out into fraud, irregular tenders and properties, irregular transfers between accounts and property management. There have been elements of mismanagement and fraud since 2012,” said John Likando.



He said although some of these cases were referred to the Anti- Corruption Commission for further investigation and there should be an internal process for punitive measures.



According to Hambuda the City was disappointed with the disclaimer audit opinions that it received over the past few years. “We are disappointed with ourselves and we are striving for a clean audit.”



He said an internal audit was conducted following the special investigations and it took each case into account and what action was taken.



The chairperson of the committee, Peter Kazongominja, said it was of grave concern that the City's reports were receiving disclaimer opinions.



“Things have to improve. Windhoek is the light of Namibia. If we are receiving this status now, it will not be able to sustain itself.”



The committee also wanted to know why the City did not provide the fixed asset register to the auditors for the financial years 2014 and 2015.



According to George Esterhuizen, the City's strategic executive for housing, property management and human settlement, the fixed asset register had not been submitted for a number of years.



“We went over to a new accounting system and this was not conducive for an asset register. In 2016 it went over to a new accounting standard.”



According to him it will be finalised within this financial year and no fewer than 600 000 line numbers will be recorded on the new system.



The committee further hammered on the fact that the City failed to reconcile its financial statement balances to payroll records for all four financial years and failed to submit supporting documents to the auditors on time.



Several documents were still outstanding, which the committee said were needed to prove that there were no illegal transactions taking place.



Furthermore, the City was asked whether its storage of documents, electronic or manual, was reliable, safe and secure.



Esterhuizen said documents were kept onsite and offsite.



“A lot of documents are coming and going. We are keeping them in storage and some get lost. There is a need for a proper warehouse. Another solution was to scan the documents, but the auditors want the original documents. There is a need for better centralised control of documents.”

ELLANIE SMIT