Auditors present adverse reports on BCC financials

Vusumuzi Dube, Online News Editor

INDEPENDENT auditors have presented adverse opinions on Bulawayo’s financials for 2019 and 2020, saying they do not present fairly, in all material respects, the financial position of the city.

The Government recently gave local authorities an ultimatum to have all their books up to date after noting most of them did not have updated financials thereby exposing the system to abuse.

According to a council report, the local authority has had their financials for 2019 and 2020 audited by Grant Thornton independent auditors and the reports have since been presented to the local authority.

For the 2019 books, the independent auditor noted that the local authority failed to comply with the requirements of hyperinflation accounting and the requirements of foreign exchange accounting.

“The accompanying annual financial statements of the Council have not been expressed in terms of the measuring unit current at the reporting date.

This noncompliance by the Council constitutes a departure from the requirements of hyperinflation accounting.

Had the Council complied with the requirements of hyperinflation accounting, multiple elements in the accompanying financial statements would have been materially restated.

“Consequently, the effects of the Council’s inability to comply with the requirements of hyperinflation accounting have been determined as significant.

We have considered the effects on the financial statements of the non-compliance with hyperinflation accounting to be material and pervasive to the financial statements, taken as a whole,” reads the report.

It was also noted that the local authority incurred a deficit of $91 million owing to a 239 percent increase in allowance for credit losses; an increase of 91 percent on employment cost and general increases in prices.

They further noted that the continued employment freeze in the council saw an increase in overtime costs, negatively affecting the council trust to meet the 30:70 percent ratio of salary to services as per ministerial requirement.

“The operational performance of the City’s revenue budget during 2019 has resulted in a deficit of $91 million.

The deficit needs to be controlled by ensuring the city lives within its means. Cost management measures must be put in place across all departments.

We draw your attention to the fact that the council is in a net current liability position of $238 million as at the reporting date.

“The council also incurred a deficit of $91 million contributing to an accumulated deficit of $273 million.

This accumulated deficit and net current liability position, along with other matters indicate the existence of a material uncertainty that may cast significant doubt over the council’s ability to settle short-term obligations,” reads the report.

The audit further uncovered that during that period, the local authority did not maintain a comprehensive asset register and further the land held for determined and undetermined future use was also not included in the asset register.

Another contentious issue relating to the local authority’s 2019 financials was the failure by council to record all donations they received.

“The council, in common with other entities of a similar nature, receives income from public contributions and inventory donations which cannot be fully controlled until they have been recorded.

As they are not contractual, the donations are neither fixed nor determinable until such time that they have been entered in the council’s accounting records or received from benefactors.

In addition, we considered the council’s accounting and internal control systems for receipting and recording of donations to be inadequate.

We were therefore unable to obtain sufficient appropriate audit evidence about the occurrence and completeness of income from public contributions and inventory donations,” reads the report.

Regarding the 2020 financials operational performance of the city’s revenue budge resulted in a deficit of $34 million, auditors noted that the deficit needs to be controlled by ensuring the city lives within its means and cost management measures be put in place across all departments.

“We draw your attention to the fact that the council is in a net current liability position of $323 million as at the reporting date.

This net current liability position indicates the existence of a material uncertainty that may cast significant doubt over the council’s ability to settle short-term obligations as they fall due and its capacity to continue to provide obligatory services to ratepayers.

“Monthly invoices generated by the council’s reporting package for service charges and property taxes to ratepayers are sequentially numbered.

There were significant gaps in generated invoice numbers for the year for which management was unable to provide satisfactory explanations.

We were unable to obtain sufficient appropriate audit evidence about the completeness of revenue from service charges and property taxes to ratepayers,” reads the report.

The audit further noted that “Creditors’ reconciliation statements were not being prepared and we were unable to satisfy ourselves as to the adequacy of internal controls over trade and other payables.

We were therefore unable to obtain sufficient appropriate evidence about the completeness of trade and other payables and the corresponding expenses.

This matter resulted in a modification to the prior year’s audit report and remains unresolved in the current year.”