1

REPORT OF THE AUDITOR GENERAL

ON THE ACCOUNTS

OF THE

BOTSWANA GOVERNMENT

FOR THE

FINANCIAL YEAR ENDED 31 MARCH 2002

2

REPUBLI

C OF BOTSWANA

TELEPHONE 3617100 OFFICE OF THE AUDITOR GENERAL

FAX 3908582/3188145 PRIVATE BAG 0010

REFERENCE: GABORONE.

31 March 2003

Honourable B Gaolathe, MP Minister of Finance and Development Planning Private Bag 008 Gaborone Dear Sir, In accordance with Section 124 (3) of the Constitution of Botswana, I have the honour to submit my Report on the audit of the accounts of the Government for the financial year ended 31 March, 2002.

I have the honour to be, Sir,

M.B. Masisi AUDITOR GENERAL

OFFICE OF THE AUDITOR GENERALOFFICE OF THE AUDITOR GENERALOFFICE OF THE AUDITOR GENERALOFFICE OF THE AUDITOR GENERAL

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VISIONVISIONVISIONVISION

To be an iTo be an iTo be an iTo be an independent and proactive supreme audit ndependent and proactive supreme audit ndependent and proactive supreme audit ndependent and proactive supreme audit

institution which is responsive to the needs and institution which is responsive to the needs and institution which is responsive to the needs and institution which is responsive to the needs and

expectations of the national and keeps abreast of expectations of the national and keeps abreast of expectations of the national and keeps abreast of expectations of the national and keeps abreast of

regional and global developments.regional and global developments.regional and global developments.regional and global developments.

MISSIONMISSIONMISSIONMISSION

Our mission is to promote accountability through quality Our mission is to promote accountability through quality Our mission is to promote accountability through quality Our mission is to promote accountability through quality

audit in the puaudit in the puaudit in the puaudit in the public sector and assure the nation that blic sector and assure the nation that blic sector and assure the nation that blic sector and assure the nation that

public resources are applied for purposes intended.public resources are applied for purposes intended.public resources are applied for purposes intended.public resources are applied for purposes intended.

VALUESVALUESVALUESVALUES

The following statements of value are to help guide the The following statements of value are to help guide the The following statements of value are to help guide the The following statements of value are to help guide the

behaviour of all staff members of the Office of the behaviour of all staff members of the Office of the behaviour of all staff members of the Office of the behaviour of all staff members of the Office of the

Auditor General, both audit and support staff.Auditor General, both audit and support staff.Auditor General, both audit and support staff.Auditor General, both audit and support staff.

� TimelinessTimelinessTimelinessTimeliness

� Independence, Objectivity and ImpartialityIndependence, Objectivity and ImpartialityIndependence, Objectivity and ImpartialityIndependence, Objectivity and Impartiality

� IntegrityIntegrityIntegrityIntegrity

� Professional DevelopmentProfessional DevelopmentProfessional DevelopmentProfessional Development

� No Conflict of InterestNo Conflict of InterestNo Conflict of InterestNo Conflict of Interest

� CompetenceCompetenceCompetenceCompetence

� Political NeutralityPolitical NeutralityPolitical NeutralityPolitical Neutrality

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CONTENTS SECTION I. INTRODUCTION II. GENERAL III. STATEMENT OF ASSETS AND LIABILITIES IV. CONSOLIDATED FUND V. DEVELOPMENT FUND VI. OTHER STATEMENTS VII. MINISTERIAL ACCOUNTING

Parliament State President Ministry of Finance and Development Planning Ministry of Labour and Home Affairs Ministry of Agriculture Ministry of Education Ministry of Trade, Industry, Wildlife and Tourism Ministry of Local Government Ministry of Works, Transport & Communications Ministry of Minerals, Energy and Water Affairs Ministry of Health Administration of Justice Attorney General Ministry of Foreign Affairs & International Co-operation Independent Electoral Commission Ombudsman Ministry of Lands, Housing and Environment

VIII. AUDITS OF LOCAL GOVERNMENT AUTHORITIES IX. PERFORMANCE AUDIT X. PARASTATALS Air Botswana

Botswana Telecommunications Authority Botswana Export Development and Investment Authority Botswana Savings Bank Botswana Railways Botswana Power Corporation Water Utilities Corporation Botswana Agricultural Marketing Board Botswana Meat Commission Botswana National Productivity Centre Botswana Housing Corporation Botswana Postal Services Botswana Telecommunications Corporation Motor Vehicle Accident Fund

XI. CONCLUSION

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REPORT OF THE AUDITOR GENERAL ON THE ACCOUNTS OF THE

BOTSWANA GOVERNMENT FOR THE YEAR ENDED 31 MARCH 2002

I. INTRODUCTION

1. Audit of Public Accounts

I am required by Section 124 of the Constitution to audit the Public Accounts of Botswana and of all officers, courts and authorities of the Government of Botswana and submit my Report thereon to the Minister responsible for Finance who shall cause them to be laid before the National Assembly.

In discharging these duties, I am required in terms of Section 29 of the Finance and Audit Act (Cap.54:01) to satisfy myself; i) that all reasonable precautions have been

taken to safeguard the collection and custody of public moneys and that the laws, instructions and directions relating thereto have been duly observed;

ii) that the disbursement of public moneys has

taken place under proper authority and for the purposes intended by such authority;

iii) that all reasonable precautions have been

taken to safeguard the receipt, custody, issue and proper use of public stores, and that the instructions and directions relating thereto have been duly observed and

iv) that adequate instructions or directions exist

for the guidance of officers responsible for the collection, custody, issue and disbursement of public moneys or the

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receipt, custody, issue and disbursement of public stores.

In addition, I have the duty, by virtue of the same Section of the Finance and Audit Act, as amended, to examine the economy efficiency or effectiveness with which any officer, authority or Institution of Government has, in discharge of his/her or its official function, applied or utilised the public moneys or public supplies at his/her or its disposal and submit my report on the findings thereon to the Minister who shall lay such reports before the National Assembly.

2. Scope of Public Accounts

The scope of the audit mandate, in terms of Section 124 of the Constitution, currently encompasses the accounts of 17 Ministries – consisting of 91 operational departments and 16 Botswana diplomatic Missions abroad and of 4 Parastatal organisations. The Departments include numerous-up country offices in the towns and major villages which have, of necessity, to be visited for audit purposes.

In addition, under the Finance and Audit Act, I am required to carry out the performance audits of the various entities of Government Ministries, and Local Authorities . In terms of the same Act, notwithstanding the provision of any other written law for the audit, I am empowered to carry out investigations into the financial affairs of any parastatal organization, where I consider it in the public interest to do so.

I am also required by the terms of the Local Government (District Councils) (Amendment) Act No. 10 of 1999, the Town council (Amendment) Regulations 1999, and Tribal Land (Amendment)

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Regulations 1999 to audit the accounts of the 15 Local Government Councils and 12 Land Boards of the Republic of Botswana, and submit my Reports thereon together with the audited statements to the Chief Executive Officers, who shall cause them to be laid before their respective Councils or Land Boards, as the case may be.

3. Extent of Audits

The Statutory Audit is discharged by a programme of test checks and examinations which are applied, in conformity with standard audit practice, selectively over the year of account under review. The checks are intended to provide an overall assurance of the general accuracy and propriety of Government’s financial and accounting transactions and not to disclose each and every accounting error or financial irregularity. With the considerable growth in recent years in Government Revenues and Expenditures, the examination of the accounts is of necessity, increasingly executed by means of selective test checks and in-depth reviews which are designed to indicate possible areas of weaknesses in the systems of accounting and internal control.

4. Submission of the Accounts

The Annual Statements of Accounts were presented to me by the Accountant General for the purpose of auditing within the statutory period provided in the Finance and Audit Act.

. Auditor General’s Certificate

The Accounts and Financial Statements of the Botswana Government for the year ended 31 March, 2002 were examined under my direction in

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accordance with International Organisation of Supreme Audit Institutions (INTOSAI) auditing standards, and in a manner required by the Finance and Audit Act (CAP.54:01). Subject to the matters referred to in this Report, the Accounts and Financial Statements were in accordance with the books and records of Government, and the Audit Certificate was signed by me on 7th March 2003.

Submission of the Report

In terms of Section 35 of the Finance and Audit Act (CAP.54:01), I am required to submit my Report to the Minister responsible for Finance within twelve months after the end of the Financial Year to which the Accounts and Statements relate, for the purpose of laying the same before the National Assembly. In the year under review, I am pleased to report that I have been able to meet this statutory deadline.

Outstation Inspections

Most of the Ministries have regional offices in the towns and major villages, which were established to bring service closer to the people. For the purpose of auditing outstation offices, the country is sub-divided into 14 stations in order to facilitate effective audit coverage. The audit is done on rotational basis covering each station as far as possible once in every two year period.

In the year under review, six out of the eight planned out-station inspections were completed at Maun/Shakawe/Gumare,Orapa/Letlhakane,Lobatse/Goodhope/Ramatlabama, Tsabong/Ghanzi/Hukuntsi, Ramotswa, and Kanye/Moshupa/Jwaneng.For reasons of staff exigencies, it was not possible to cover the remaining two stations at Mahalapye and Mochudi. It is however planned to cover them in the ensuing year.

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Ministerial Name Changes

Despite observations in my previous report about the use of incorrect and out-dated Ministerial names in the Annual Statements of Accounts, the Accountant General had continued the use of these incorrect names in the year under review. I consider that correct names should be used at all times in official publications. Such instances of incorrect names as reflected in the accounts notably in Statements Nos. 14 and 15 are indicated below: Name Used Ministry Name

Home Affairs Labour & Home Affairs

Labour & Social Security Labour & Home Affairs Commerce & Industry Trade, Industry, Wildlife &

Tourism Local Government & Lands Local Government Mineral Resources & W/Affairs Minerals, Energy &

Water Affairs Lands & Housing Lands, Housing &

Environment Elections Office Independent Electoral

Commission External Affairs Foreign Affairs

II GENERAL

8. Audit Establishment

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The Office has an establishment of 147 posts. Out of this number, 133 posts are filled by local staff and 7 by expatriates, leaving 7 vacancies. Of the 140 posts, which are filled, 84 are occupied by female and 56 male officers. The table below shows this more clearly:-

Filled Posts

Staff Category

Establishment Male Female

Vacancy

Auditors Admin &Secretarial Staff General/Field Staff

103 21 23

46 2 8

52 17 15

5 2

Total

147

56

84

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As may be noted from the above table, the vacancy situation which I reported on last year has somewhat improved by reduction from 10% to 5% of the establishment. This has been achieved by the recruitment of newly qualified graduates who, because of their lack of the necessary experience, need to be trained before they become useful members of staff. As indicated elsewhere in this report, extensive training is being imparted to all members at all levels to equip them with the necessary skills and competencies which modern day audit entails, with the ever growing Government business and programmes, and the complexities involved. While these training schemes are being undertaken, of necessity concurrently with the performance of audit tasks, I am constrained by paucity of experienced staff to plan my audits to achieve the ideal coverage of all the audit areas involved, and therefore have to resort to in-depth test checks and rotational audit programmes. The Office had continued to be plagued by staff losses through resignations and deaths: nine

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officers resigned and two passed away, during the year under review.

. Staff Training and Development

The Office of the Auditor General’s training plan addresses the training needs which are necessary for the Office to achieve its statutory mandate as stipulated under the Constitution of the Republic of Botswana. The identified training needs enables the audit personnel at various levels to acquire the necessary proficiency in theory and practice in the fields of accounting and auditing. In the past, the training plans focussed on building capacity to enable staff to deliver results but currently emphasis is shifting towards interpersonal and motivational programmes which prepares ones mindset.

During the year under review some officers attended regional and international workshops covering various audit areas under the auspices of the Africa English speaking Supreme Audit Institutions (AFROSAI-E), Management and Training Services of the Commonwealth (MTSD) and Japan-Singapore Partnership Programme for the 21st Century (JSPP21). These workshops were intended to build capacity and bring uniformity in the application of the auditing standards, in our endeavour to “Promote Accountability in the Public Sector” as is one of the identified key result area in our Strategic Plan. The training programmes attended were as follows:

• In January 2002 one officer attended two-week Managing Change in the Public Service Seminar in Singapore. The goal of the seminar was to discuss the concepts and approaches for effective change management and develop strategies for

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leading the implementation of change within the Office.

• In March 2002, two officers attended a two-week AFROSAI-E Information Technology Auditing Workshop in South Africa. The workshop provided officers with knowledge and skills to enable them to perform basic IT audits in relation to performance or regularity audits. It also enables officers to identify situations where IT audit specialists should be involved in the audit.

• In June 2002, twenty-five senior auditors attended a two-week AFROSAI-E Regularity Auditing Workshop hosted by the Office. The goal of the workshop was to upgrade the knowledge and skills in planning, documentation, execution, review and reporting of regularity audits. The staff had acquired the key knowledge and skills in conducting regularity audits but because of the continuous developments in the auditing profession it is the duty of the Office to ensure that the staff are kept abreast with international developments and changes in order to continue producing quality audits. Therefore, the aim of the training programme is not aimed at introducing new concepts but to strengthen and upgrade the level of skills and knowledge of each audit staff in the Office.

• Between July 2002 and October 2002 four officers attended an AFROSAI-E Instructional Techniques Workshop held in Ethiopia, South Africa and Lesotho. The workshop was intended to equip auditors with classroom training as part of their functions and to develop them into effective trainers.

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• In October 2002 one officer attended a JSPP21 Productivity Management Workshop held in Singapore. The purpose of the workshop was to familiarise participants with productivity related concepts and relevant skills to quantitatively examine and assess productivity performances at national and organisational level.

The Office continue to send its audit staff for a variety of short-term courses ranging from information management to business management at local institutions in order to acquire knowledge and skills to become useful members of the audit cadre within a short period of time. In addition, officers are being sent on long-term courses of up to four years ranging from certificates to degrees in various relevant disciplines at either the University of Botswana or Botswana Institute of Administration and Commerce. Some officers have been sent to overseas Universities to pursue postgraduate studies. More officers are now enrolling with the Botswana Accountancy College to study for technician and professional qualifications in accountancy such as AAT, CIMA and ACCA. A number of administration staff had been sent for long-term courses in human resources management and secretarial studies at certificate and diploma level. This is an endeavour to ensure that in the not too distant future the Office would be manned by professionally trained support staff. The training interventions undertaken by the Office are geared towards building capacity and motivating staff to deliver expected results. The Office is committed to providing staff with opportunities to undergo professional development and training with particular focus on

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public sector trends and developments, and relevant audit and accounting issues. Our training efforts are undertaken with a realisation that in order for the Office of the Auditor General to be an impact making organisation and to be recognised as such, its future developmental strategy should focus at three levels; Individual, Organisational and Societal. The latter mentioned developmental strategies are summarised as follows:

Individual Level

At this level the OAG would concentrate on the training development of individual officers on new audit methodologies.

Organisational Level

At this level the OAG would concentrate on improving the following areas: Personnel, Quality Control, Documentation and Communication.

Societal Level

At this level the OAG would concentrate on improving interaction with appropriate external bodies; such as Public Accounts Committee, Local Authorities Public Accounts Committee, International Organisation of Supreme Audit Institution, Southern African Development Community Supreme Audit Institution, media and the respective audited bodies.

It is our believe that our training and development strategy would go a long way in addressing our vision and mission statements as set out in our four (4) year’s performance management strategy.

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10. Summary of Consolidated and Development Fund

Expenditures and Revenues The tables and graphs below provide an overview of the trend in Government revenues and expenditures over the eight years ending 31 March 2004 and the estimates for the two years, 2002/2003 and 2003/2004.

(a) Consolidated Fund and

Development Fund Expenditures – Table I

The expenditure of P21 737 million in the year under review exceeded the previous year expenditure of P15 064 million by an amount of P6 673 million or 44%. There have been significant increases in the Government spending over the years as is evident from the graph and table that follow covering the last eight financial years.

This has continued to impose added responsibility with which my Office has had to contend, while there had not been commensurate increases of experienced staff over the years to shoulder the increasing workload.

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SUMMARY OF CONSOLIDATED FUND AND DEVELOPMENT

FUND EXPENDITURES

TABLE 1

EXPENDITURE

ACTUAL EXPENDITURE

1996/97 P

Million

1997/98 P

Million

1998/99 P

Million

99/2000 P

Million

2000/200

1 P

Million

2001/200

Consolidated Fund

Expenditure Development Fund Expenditure

5 799

2 240

7 617

2 696

9 332

2 934

10 785

3 451

11 929

3 135

TOTALS 8 039 10 313 12 266 14 236 15 064

Increase/(Decrease) in Expenditure Compared to the Preceding Year

2 274

1 953

1 970

828

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Percentage Increase/(Decrease) in Expenditure Compared to the Preceding year

28.3% 18.9% 16% 5.8%

SUMMARY OF CONSOLIDATED FUND AND DEVELOPMENT FUND EXPENDITURES

5799

7617

9332

10785

11929

18039

22534

2240

26962934

34513135

3698

0

4000

8000

12000

16000

20000

24000

1996/97

Actual Expenditure

1997/98 1998/99 99/2000 2000/2001 2001/2002 2002/2003

Estimated

Expenditure

PU

LA

IN

MIL

LIO

NS

Consolidated fund

Development fund

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(b) Consolidated Fund and Development

Fund Revenues- Table II

It is equally appropriate to indicate the revenue growth in the Government sector covering a similar eight-year period ending 31 March 2004, as reflected in Table-II and the graph that follows. During the year under review, revenues recorded a total of P16 289 million compared to the budgeted figure of P 16 942 million, thus revealing a shortfall of P 653 million or 3.9%.

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SUMMARY OF CONSOLIDATED FUND AND DEVELOPMENT FUND REVENUES

TABLE 2

REVENUE

ACTUAL REVENUE

1996/97 P

Million

1997/98 P

Million

1998/99 P

Million

99/2000 P

Million

2000/200

1 P

Million

2001/2002

P Million

Consolidated Fund Revenue Development Fund Revenue

7 164

3 472

7 991

3 489

7 422

3 023

11 740

3 549

13 919

3 095

12 553

3 736

TOTALS

10 636 11 480 10 445 15 289 17 014 16 289

Increase/(Decrease) in Revenue Compared to the Preceding Year Percentage Increase/(Decrease) in Revenue Compared to the Preceding year

844 8%

(1 035)

(9%)

4 844

46.3%

1 725

11%

(725)

(4.3)

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SUMMARY OF CONSOLIDATED FUND AND DEVELOPMENT FUND REVENUES

7164

79917422

11740

13919

12553

14294

17253

3472 34893023

35493095

3736

4502 4431

0

3000

6000

9000

12000

15000

18000

21000

1996/97

Actual Revenue

1997/98 1998/99 1999/2000 2000/2001 2001/2002 2002/2003

Estimated Revenue

2003/2004

PU

LA

IN

MIL

LIO

N

Consolidated fund

Development fund

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III STATEMENT OF ASSETS AND LIABILITIES

11. Statement Of Assets And Liabilities – (Statement No. 1)

Travelling Imprests

The total of all outstanding imprests as at 31st March 2002 was P11 280 335, compared to P11 643 917 in the previous year, representing a decrease of P363 582 over the previous year’s figure. The make-up of the above figure, net of credits, is as follows –

P Standing Imprests 42 448 Travelling Imprests 9 847 396 District Imprests 1 374 570 Kgomokgwana 8 481 Francistown – Foot & Mouth 7 440

11 280 335 Although there is a reduction in the overall figure of outstanding imprets at year-end, the standard of accounting and monitoring of these accounts still left much to be desired: there are numerous old imprests which go back many years, and credit balances, which are the result of accounting errors, abound. Kgomokgwana imprests have still not been cleared – 5 years after the completion of the Contagious Bovine PleuroPneumonia project, to which they related. The imprests drawn at Francistown in connection with the Foot and Mouth Decease campaign have since gone out of control, as they reflected an incredible credit balance of P7 553 as at December 2002. The detailed age analyses of the outstanding imprests under each Ministry are shown under the Ministerial Accounts section of this Report.

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Advances (Below-the-Line) Accounts In the year of account, I carried out a review of the advances accounts in all the departments of a few selected Ministries to assess the efficacy of monitoring of these accounts in the Government Ministries. In all the three selected Ministries (Finance and Development Planning; Lands, Housing and Environment and Trade, Industry, Wildlife and Tourism), without exception, the results were a disappointment, in that there were rampant dormant and credit balances, on which no action had been taken to bring the accounts under any form of control. It was manifestly evident that there was need for attention to be paid to these accounts by all Accounting Officers to ensure that where advances had been granted or had occurred, due recoveries must be made. I addressed all the Accounting Officers concerned on the findings in their own Ministries in April/May 2002, and at the time of writing this Report – some ten to eleven months later, I had still not received their responses. The Accountant General had however replied in respect of the accounts of his own Department. He has largely admitted many cases of misallocation errors, and in some cases he had indicated that corrective action had since been taken, while in others he stated that investigations were under way. The list is a long one, and includes many officers who have long left the Service. I have no doubt that it is going to be some time before these accounts are brought under proper control, and a lot of effort will be required.

IV CONSOLIDATED FUND 12. Revenue Results (Statement No. 2)

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The recurrent revenues for the financial year 2001/2002 had been estimated at P13 398 013 880. The actual collections for the year amounted to P12 553 391 947, resulting in a shortfall of revenues for the year under review of P844 621 933.

13. Appropriation Act:

The Appropriation (2001/2002) Act No.2 of 2001 was passed by the National Assembly on the 27 March 2001, and assented to on 3rd April 2001. The sum appropriated from the Consolidated Fund by this Act was P14 153 994 940. The Supplementary Appropriation (2001/2002) Act No.2 of 2003 further charged the Consolidated Fund with P3 355 870 957 to meet expenditure incurred in excess of the amount already appropriated for the services for the year ended on 31st March 2002.

14. Supplementary Estimates

Three resolutions of the National Assembly approved supplementary estimates during the year under review as follows:

(I) Financial Paper No.1 of July, 2001 P131 147 740 Ministry P

Agriculture 12572 770 Works, Transport & Communication 81 600 000 Health 26 974 970 Independent Electoral Commission 10 000 000

131 149 740

(ii) Financial Paper No.2 of November2001 P281905190 Ministry P

Parliament 2 891 400 State President 19 974 260 Finance & Development Planning 5 913 840 Trade, Industry, Wildlife & Tourism 2 018 880 Works, Transport & Communications 781 100 Administration of Justice 1 450 000 Foreign Affairs & International Co-operation 3 515 980

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Appropriation from Revenue 2 700 000 000 2 813 905 190

(iii) Financial Paper No.3 of February 2002 P589 303 960 Ministry P

Parliament 200 000 State President 123 453 290 Financial & Development Planning 52 158 000 Labour and Home Affairs 14 410 000 Education 295 035 000 Local Government 55 877 060 Works, Transport & Communications 13 850 000 Health 27 676 670 Administration of Justice 2 198 920 Auditor General 1 076 860 Foreign Affairs & International Co-operation 3 368 160 589 303 960

V. DEVELOPMENT FUND

15. APPROPRIATION ACT

The Appropriation Act (2001/2002) Act No.2 of 2001 was passed by the National Assembly on the 27 March 2001 and assented to on the 3 April 2001. The sum appropriated from the Development Fund by this Act was P4 709 377 000.

VI OTHER STATEMENTS

16 Statement Of Recurrent Expenditure –

(Statement No. 3)

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The standard of control of expenditures in the Ministries and Departments had continued to be poor in the year under review, despite repeated adverse comments in previous years. The major weaknesses and shortcomings were evidenced by the following instances –

(a) A number of Ministries had overspent items of expenditure even

where there were savings under the subheads within which virements could have been made to avert those over-expenditures.

(b) In the case of the Ministry of Education, the whole provision of P2

764 409 240 under Head 60 had been overspent to the tune of P34 678 496 at year-end.

(c) In other cases, some Departments had overspent the whole

departmental provisions sub-warranted to them by their Accounting Officers.

The details of those Ministries that had been overspent on items of expenditure at year-end, and the extent of those over-expenditures, are given below-

Ministry No. of Items overspent Amount

P Parliament 9 180 736 State President 18 29 739 678 Labour & Home Affairs 54 6 000 675 Agriculture 18 5 512 603 Education 21 130 812 240 Trade, Industry, Wildlife & Tourism 19 2 295 695 Local Government 5 2 400 395 Works, Transport &

Communications. 6 644 742 Minerals, Energy & W/Affairs 4 77 748 Administration of Justice 14 2 450 950

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Attorney General 3 31 309 Foreign Affairs 36 2 149 631 Office of Ombudsman 1 1 653 Lands, Housing & Environment. 1 1 268 While, the following departments had overspent the entire provisions sub-warranted to them by their accounting officers Ministry Department Amount Overspent

State President Botswana Defence Force 23 424 418 Labour & Home Affairs National Archives 968 781 Education Student Placement 119 451 Local Government Ministry Headquarters 18 020 265 Foreign Affairs London Mission 365 493 I am concerned that the Ministries and Departments continued to fail to maintain effective control over the expenditures of funds warranted to them thereby violating Financial Instructions and Procedures Statement Of Investments And Loans Made From Special Fund(Statement

No.8).

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I have not been able to carry out a complete audit verification of the under-noted investments made from Special Funds as a result of non-production of the relative documents of title by the Accountant General: P Police Rewards and Fines Fund 1 253 705 Cattle Export Levy Fund 81 643 Tourism Industry Training Fund 700 000 Botswana Police Relief Fund 1 577 191 National Road Safety 600 514 Prisons Rewards and Fines Fund 759 Cash on Deposit (with Botswana Building Society) 12 045 715

Statement Of Special Funds – (Statement No. 10)

An audit examination of the accounts of the Special Funds disclosed the matters indicated below:- (a) Tourism Industry Training Fund

In terms of the Statutory Instrument setting up this Special Fund, the accounts of the Fund are to be audited by an independent auditor appointed by the Minister. However, in view of the low financial profile of the Fund, the Minister has requested me to carry out the audits until such time that the Fund reaches a level of sustainability to engage private auditors. Accordingly, I carried out the audit of the accounts of the Fund for the 3 financial years ended 31st March 2000, 2001 and 2002. In all the 3 years, it was apparent that there were numerous tourist enterprises that had not submitted the monthly returns in respect of the tourist levy fees which are required by the Tourism Regulations to be paid into the Fund. The failure to submit these returns had resulted in losses of revenue to the Fund. There has also been loss of revenue by the Accountant General’s failure to

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award interest to the Fund on the substantial cash balances held by him on behalf of the Fund. Furthermore, the income of the Fund for the financial year 2001/02 had been understated by P17 536, as a result of the figure being stated as P479 976 instead of P515 512 at the time of incorporation of these accounts into this Statement. I have addressed the above observations to the Accounting Officer in November and December 2002, but at the time of writing this report I had still not received his comments.

(b) Citizen Contractors’ Fund

In terms of the Fund Order, the Minister has appointed the National Development Bank to undertake the day-to-day activities of the Fund. In consequence of that appointment the accounts of the Fund for the year ended 31 March 2002 have been duly audited by the Bank’s auditors. As at that date the total advances made stood at P16 710 000, and a provision of P8 521 000, representing 51%, had been allowed for doubtful debts, leaving a balance of P8 189 000 reflected in the Balance Sheet.

(c) Revenue Stabilisation Fund

The investments of the above Fund by way of loans to parastatals and local authorities which had been made over the years, have all been fully repaid and the balance of the Fund, which stood at P1 692 306 814 at the time of writing this report, is totally un-invested. I have drawn the attention of the Permanent Secretary, Ministry of Finance and Development Planning to this fact so that he may advise the Minister regarding any future investments of the Fund.

(d) Public Debt Service Fund

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i) I have also drawn his attention to the situation of the Public Debt Service Fund in which the funds are substantially under-invested to the tune of P3 798 049 651 out of a Fund balance of P5 251 195 453, as at 31 March 2002.

ii) Botswana Cooperative Bank, under liquidation, has not

paid the repayment instalment for the year under review on the loan of P15 000 000 from the Fund. The o/s balance on this loan on 31 March 2002 was P5 325 649.

(e) National Petroleum Fund

The accounts of the Fund for the year ended 31st March 2002 have been duly audited by the independent auditors appointed by the Minister, in terms of the Special Fund Order. The audited accounts indicated that the assets of the Fund included an unsecured, interest free loan of P29 573 031 made to the Ministry of Foreign Affairs and International Cooperation in 2000/2001 financial year and repayable over 24 months.

(f) Sir Seretse Khama Memorial Fund for the Handicapped

In my report for last year I had stated that I had sought the Accounting Officer’s clarification on the application of this Fund Order in the provision of finance to disabled individuals towards their business projects, following the award of capital grants to certain individuals to the tune P80 900. In his reply he had stated that it had been realized that the terms of reference needed to be reviewed for the guidance of the Board of Trustees on this aspect of their work. In the year under review, however, the Board of Trustees had continued to consider and approved requests for assistance in the form of contributions to small-scale projects under the Financial Assistance Policy Scheme and for the purchase of office equipment, in the total amount of P161 724.

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I have written to the Accounting officer seeking his advice as to when the review is likely to be carried out for the guidance of all concerned.

(g) Agricultural Credit Guarrantee Scheme

The Accountant General has not calculated and awarded interest on the cash held by him on behalf of the Fund, which amounted to P916 376 as at 31st March 2002.

(h) Productive Employment Development Fund (FAP)

The Financial Assistance Policy Scheme which was administered by the National Development Bank on behalf of Government had been discontinued and replaced by Citizen Entrepreneurial Development Agency, as an autonomous institution – effective from 31st December 2001. At the time of writing this report, auditors had been engaged to carry out a due diligence review of the scheme for purposes of that hand-over.

(i) Other Funds

The detailed accounts of the following Funds which are listed under the Statement of Special Funds, No. 9, had not been included in this Statement, and consequently had not been audited.

Fund Balance Citizen Entrepreneur Mortgage Assistance Equity Fund 50 000 000 Pension Service Liability 3 20 000.000 Statement Of Public Debt – (Statement No.11)

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As a result of casting and other clerical errors, the grand summary total of outstanding Public Debts as at 31st March 2002 should read P2 922 305 206, and not P2 917 552 430 as reflected in the Statement.

Statement of Loans made by Government from Public

Revenues Statement No 13)

An examination of the above Statement elicited the following points: (a) The repayment instalments on the under-noted loans made to the

Francistown City Council, which were due in the year 2001/02 were not paid until the following financial year,

Loan Amount Redemption Date

25 093 03/06/02 12 579 01/01/02 9 130 10/08/03 31 801 10/08/03

(b) While the following loans made to the Lobatse Town Council and

Water Utilities Corporation were fully repaid well ahead of the due dates indicated below:

Lobatse Town Council]

Loan Redemption Amount Date

P 179 500 13/12/05

56 838 31/10/06

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34 400 01/04/06 49 000 01/04/06 61 900 01/04/06

Water Utilities Corporation]

Loan Amount Redemption Date P 983 107 06/06/06 674 966 31/03/04

(c) The issue of the six loans made to the Selibe-Phikwe Town Council amounting to P2 959 354 reported in the previous year had been resolved. Government had decided to convert these loans into grants, and arrangements were being made to refund the Council the repayments that had already been paid amounting to P2 802 900.

Statement Of Balances Of Other Deposits Accounts –

(Statement No. 14)

In my report for last year, I had indicated that almost all Accounting Officers had made attempts to submit to the Accountant General the analyses of the deposit accounts for which they were responsible, although the overall quality of the presentations had not shown much improvement from previous years. In the year under review, a number of Ministries had not submitted the year-end analyses in respect of both the retention and other deposits held by those Ministries. An audit review of the balances of these accounts had however revealed that the standard of accounting and monitoring in these accounts had left much to be desired, to say the least: there were many dormant balances, numerous debit balances and other types of errors, as illustrated by the following examples, selected on the basis of gravity.

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The debit balance of P277 340 had been outstanding under retention deposit accounts under Parliament for a considerable period of time. Up to the current year of account, and despite the Accounting Officer’s undertaking to the thirty-ninth meeting of the Public Accounts Committee that she would adjust, this balance remains uncleared, as the responsibility for its clearance now seems clouded halfway between the Accounting Officers in Parliament and in the Ministry of Works and Transport. The Ministry of Finance and Development Planning, which had a large number and a variety of deposit accounts, has virtually lost control over some of these accounts, as evidenced by the number of dormant balances, debit balances and other unsatisfactory features. The total debits amounted to P18 609 503 at year-end, and some of the balances in this figure are very old, and it is not even certain what they represent other than accounting errors. Some of the balances are very old and relate to long defunct institutions, such as Bank of Credit and Commerce and Botswana Cooperative Bank. The balance under the Old Age Pension accounts with the paying agents had not been reconciled or cleared in previous years, and the figure stood at P62 049 671 at the end of the year of account. In one glaring case, there had been failure to forward to the Boards of the Community Junior Secondary Schools, the remittances in respect of rental amounts deducted from teachers’ salaries by the Accountant General. In the whole year only one remittance was made in July 2001 in the amount of P4 768 283. As at year-end the balance under this account stood at P15 029 252, including an unidentified credit of P6 327 858, which had not been investigated. It would surely be helpful if these funds were released on a more regular and frequent basis, as that would assist these Boards with their cash flow budgets. The Accounting Officer in the Department of Administration of Justice had submitted the analysis of the retention deposits held by him as at 31st March 2002, but had only accounted for P1 157 845, while the balance of P917 166 was said to be still under investigation. He had

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not submitted any for the court deposits totalling P4 322 280. In his submission to the thirty-ninth meeting of the Public Accounts Committee, the Accounting Officer had stated that the failure to submit the analyses in previous years was attributable to staff shortages in all outstations and in headquarters. While this may be so, it is however of some concern that these accounts are evidently not being brought under proper control, as indicated by, at least, ten stations reflecting year-end debit balances amounting to P451 325 – which can only be the result of accounting errors. The total outstanding amount as at 31st March 2002 in respect of compensatory fines in the various customary courts, under the Ministry of Local Government, throughout the country was P1 774 685. The Accounting Officer’s explanation to the Public Accounts Committee, at the thirty-ninth meeting, was that the reason this figure is high was that the complainants do not come forward to claim these compensations after they have been paid into the customary courts by the respondents. While this may not been disputed, the preponderance of debit balances reflected under some of the customary courts would also suggest that there are significant numbers of accounting errors in these accounts. In the light of the foregoing examples, it is evident that the state of these accounts still remain a cause for concern, and that unless the Accounting Officers in the Ministries make concerted efforts to bring them under control they are likely to get worse.

Statement Of Advances Accounts – -(Statement No. 15)

In the year under review, the accounts in this Statement continued to show lack of proper monitoring by officers who are responsible for their maintenance throughout the whole spectrum of Government Ministries and Departments. The spectre of dormant, inexplicable credit balances and other types of errors remained a dominant feature in these accounts, clearly indicating that the concerns of the Public Accounts Committee on these matters are not being heeded by the Accounting Officers. The Accountant General had indicated

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to the Committee that he would be computerizing the government accounting systems in the near future, and that it was hoped that the accounting records would be accurate once the computerization has been achieved. With due respect, computerization alone will not achieve the objective no system will ever be better than the people who operate it – advances will still have to be recovered, accounts reconciled and errors corrected using human skills and diligence. It is my view that, even before computerization is fully operational, steps must be taken to bring these accounts under control. The following are example of some of the problems, which are encountered in these accounts:

In response to my earlier communication the Accountant General had stated that the balance of P2 391 437 (February 2002 figures) under the Emergency Advances (Permanent and Pensionable staff) accounts “…. may not represent the money owed to government. and the credit balances [totalling P389 876] are the result of misallocation.” He went on to explain that some of the balances in these accounts may not be recoverable as some of them are very old, and in other cases the officers concerned had passed away and others had left the Service. This unsatisfactory situation should not have prevailed to this extent, as emergency staff advances are immediately repayable in the month following that in which they are made.

I have commented elsewhere in this report on the large number of

dormant balances, as well as credit balances, under the Government Motor Vehicle and Residential Property scheme, on which very little action had been taken to recover the money from officers who have defaulted on these loans. The total amounts involved for both schemes are P7 306 571 (debits) and P1 349 553 (credits). There is no doubt that the majority of these loans will qualify for a write-off, as a loss to public funds.

The old accounts amounting to P888 028 relating to losses of cash prior to decentralization to the line Ministries was said to be “…still being investigated”. My present concern with these accounts is that it

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has taken far too long for the investigation to commence. The problem now does not lie with whether these accounts can be reconciled, but whether the recoveries will be possible, at this stage.

A similar concern applies to the spate of “Refer to Drawer” cheques which had been tendered to Government through the Treasury Cashier offices and the Departments of Customs and Excise and of Taxes, which have not been followed up for recovery of payments. These will most likely be written-off – representing yet another loss of public funds. The amounts involved are P1 230 014 for the Treasury Cashier offices and Department of Customs and Excise, and an untenable credit balance of P23 803 in the case of the Department of Taxes. Some of the items in these accounts are described by Accountant General as “… very old cheques accumulated over a period of time”.

There is also the matter of numerous cases of the surcharged amounts for motor vehicle accidents and for losses of cash which are not being recovered. In those cases, it is evident that the officers concerned do not carry the burden of the penalties of the offences for which they have been surcharged. The small amount of P282, under the Ministry of Works, Transport and Communications, was paid to a garage in the Republic of South Africa many years ago as a security deposit against petrol purchases, but has not been claimed from that garage even though, it is understood, this facility is no longer being used.

Although the Ministry of Education had taken steps to recruit staff into the finance and accounts unit of the Department of Students Placement and Welfare, there is still no evidence that the recoveries of students’ loans had been brought under proper control. As at 31

March 2002 there continued to be dormant accounts and some with credit balances. In addition, new recoveries accounts had been opened, and the credit amounts in these accounts, totalling P61 841, had not been matched to their corresponding debits. A concerted effort will need to be made to streamline these accounts so that the repayments can be effectively implemented.

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I am yet to be advised of the progress made with the computerization project, and informed when it is expected to be implemented as it is said to be so critical to the good state of these accounts. Statemement of Cash and Bank Balances – (Statement No.16)

A verification of the cash and bank balances in the above Statement revealed instances of discrepancies between the Ledger balances and the certified year-end balances as well as other unsatisfactory features in these accounts, as indicated below:

(a) The results of the Boards of Survey on year-end cash balances at

the Treasury Cashier offices revealed a number of minor differences between the Ledgers balances and the physical cash counts. The only major discrepancy noted was the difference of P45 631. The certified Cash Book balances at the Botswana Diplomatic Missions abroad differed significantly from the Ledger balances by a total of P242 339.

(b) The accounts controlling the remittances of cash from Gaborone to the Diplomatic Missions abroad in some instances had not shown any movement in the year-end balances for at least one year. In one case, the Mission had been closed from as back as 1997, and yet still carried a remittance-in-transit balance in the accounts of P592 769 as at 31st March 2002.

(c) A balance of P3 152 721 under a special grant account which

was provided to the Botswana Government towards the costs connected with the Year 2000 conversions, had still not been applied and cleared against the expenditures thereof, despite the lapse of 2 years since that event.

(d) A special account, which was opened to cater for the payments

of the Contagious Bovine PleuroPneumonia Project costs, had still not been closed in the accounts, despite the Project completion as far back as March 1998.

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(e) For the third year running, the remittance-in-transit account at the Gaborone Income Tax office reflects a credit balance, which is inappropriate for this type of account. This had the effect of distorting the figures in the final accounts. In the year under review, the balance under this account was P446 257 640, which contributed to a negative balance of P432 179 399 in the summary statement.

(f) I have addressed the Accountant General on the above matters, and at the time of writing this report I had not received his comments.

.Statement of Contingent Liabilities – (Statement No. 17)

The total contingent liabilities held by Government on account of borrowings and undertakings by the various parastatal bodies and by public officers under the motor vehicles and residential property loan schemes, as at 31st March 2002, was P1 249 940 260, compared to P1 161 907 488 in the previous year. The net increase of P88 032 772, representing 7.6% over the previous year, was mainly attributable to guarantees on the public officers loan schemes which had increased by 27% at the end of the year under review. As at that date the public officers’ borrowings from the various financial institutions under the Government loan schemes stood at P551 338 459, compared to P433 866 817 in the previous year. The most disconcerting feature in these loans is the high and increasing rate of defaults necessitating Government having to pay up on the guarantees, with very little or no prospects of recoveries from the default debtors. According to the accounts of the Accountant General, the outstanding amounts of default debtors stood at P7 307 171 (net of credits) as at 31st March 2002, compared to P5 080 975 last year, representing an increase of 43% on these accounts. A scrutiny of the balances revealed a high rate of

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dormancy and inexplicable credit balances. When I requested for status of recoveries, I had not been able to obtain from the Ministry of Finance and Development Planning a schedule indicating the recoveries made from, or any other action taken against, individual default debtors. The lack of due attention to the recoveries of these debts therefore still remains a matter for concern.

Statement of Assets held by Government in Commercial Undertakings,

Statutory Bodies and International Organisations (Statement No.18)

In July 2002, the African Export-Import Bank in Cairo advised the Ministry of Finance and Development Planning that the dividends for the fiscal year ended 31st December 2001 had been declared and that the Botswana Government share, which amounted to United States $10 885, would be paid into a deposit account with them. As I had not been aware of the existence of this account I requested the Accountant General to provide me with the details of the purpose of this account, the current balance, the rate of interest and also enquired why the balance was not included in the Statement of Cash Balances in the Annual Statements of Accounts. At the time of writing this report I had not received his advices on these matters.

I also drew the attention of the Accountant General to some discrepancies in the values of two assets appearing in this Statement. In one case, he explained that the difference between the figure in the Statement and the one confirmed by Botswana Postal Services represented assets, which were taken over from Government, which were not capitalized in their books of accounts. In the case of the Botswana Power Corporation, he stated that the Corporation had admitted the error in their figure. I have suggested that steps must be taken to reach agreements on these matters.

Statement of Arrears of Revenue – (Statement No. 19)

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In my report of last year, I had commented that the rate of collection of Government revenue debts was very poor and indicated that only 30% of the amount of P612 45 523 that had been outstanding at the beginning of that year had been collected during the course of the year; while 10% had been abandoned. In the year under review, the situation had not improved, despite my repeated concerns and those of the Public Accounts Committee over the years that the delays in the collection of Government debts very often led to losses of public funds through eventual write-offs. Out of the brought forward balance of P508 390 208 from the previous year, only P89 296 718, representing 18%, had been collected during this year, while P125 835 888, representing 24%, was abandoned.

Some of the debts in these accounts were very old, and there was no evidence that vigorous steps had been taken to ensure disposal of these debts by recovery or by write-off, as the case may be. For example, there was no good reason for the many outstanding debts owed by public officers for private usage of official telephones not being deducted from the salaries as required by the regulations. In other cases, it would be expected that timely action would be taken to recover the debts through the normal debt collection processes.

The performance of individual Ministries during the year under review where this situation was more prominently shown is indicated in the tabulation below:

Opening Collected Percentage Ministry/Item Balance 2001/2002 Collected P

P

Parliament - Service Charges Parliamentary Flats 31 174 12 289 39 - Rental Parliamentary Flats 8 000 - - State President

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- Private Telephone Charges (101) 131 69 52 - Private Telephone Charges (201) 304 16 5 - Private Telephone Charges (301)4 922 532 11 - Bond Defaulters 3 790 209 3 726 0.09 - Reimbursement Seconded Officers84 667 - - - Private Telephone Charges (501)16 238 536 3 - Advertising 650 - - - Private Telephone Charges (701) 1 468 199 14 - Private Telephone Charges (901) 218 770 152 828 69 - Private Telephone Charges (1001) 7 3512 967 40 Finance & Development Planning - Private Telephone Charges (301)4 700 3 006 63 - Assessed Tax 198 944 701 33 905 615 17 - Income Tax – Penalty Interest241 214 131 1 256372 0.52 - Private Telephone Charges (401)36 220 2 289 62

- Private Telephone Charges (501)1 921 327 17 - Licence Fees 4 560 2 400 53 Agriculture - Rent Nojane Ranches 7 265 300 4 - N.D.B. Recoveries 17 450 - - - Sundries 63 221 15 366 24 - Sale of Seeds 57 860 - - Education - Private Telephone Charges (101) 2 121 38 8 -Private Telephone Charges (501) 1 816 607 33 Private Telephone Charges (801) 1 194 116 10 Private Telephone Charges (901) 2 259 335 15 Trade, Industry, Wildlife & Tourism - Private Telephone Charges (201) 41 38 83 - Gaborone Industrial Estate 8 056 2 481 31 - Pilane Industrial Estate 9 898 3 872 39 - Sundries 9 276 3 387 37

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- Gaborone Construction Estate 5 433 - - - Gaborone Metalwork Estate 53 787 16 298 30 - Industrial Licences 169 800 5 800 3 Minerals, Energy and Water Affairs - Consumers’ Water Accounts22 068 09617 389 073 79 BRS – Maintenance & Repairs 1 115 708 97 409 9 - Private Telephone Charges (401)7 588 - Health - Private In-Patients Fees 310 950 4 554 1 - Other Fees & Charges 392 - - - Private Out-Patients Fees 12 769 453 4 - Other Fees & Charges 723 51 7 Administration of Justice - Judicial & Subordinate Fines1 389 299 12500 0.89 Independent Electoral Commission - Private Telephone Charges (101) 23 - Lands, Housing and Environment - Government Guest House 2 639 259 9 - Rent, Government Quarters 451 035 22 006 5

4 858 3 084 63 - Rent, State Land Farms 852 649 307 588 36 - Rent, Offices 227 265 68 205 30

In the explanatory note to this Statement six ministries were listed to have brought forward balances from the previous year which had been changed, and no reason had been given for this course of action. The corrected figures indicated that last year’s closing balance had been understated by P3 924 048. The number and extent of the changes in these accounts can only be a reflection of the standard of care which is applied by the Accounting Officers in the preparation and submission of the returns In his submission to the fortieth meeting of the Public Accounts Committee, the Accounting Officer had stated that the values

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of unallocated stores appearing in Statements Nos. 15 and 21 would be reconciled and brought into line, following computerization of the accounts of the Department of Supplies. Although he had informed the Committee that the discrepancy would be eliminated in the accounts of the year ended 31st March 2002, the figures in these two Statements revealed that a major discrepancy of P3 252 895 still existed at year-end. This discrepancy derived from the figures of P70 041 126 in Statement No. 15 and P66 788 231 in Statement No. 21. I am yet to be advised of the accounting treatment relating to the disposal of the balance of P47 276 975 under the Variances accounts, which had been accumulated over a long period of time.on these accounts to the Accountant General, resulting in the distortion of figures in the final Statements.

Losses Of Public Monies And Stores – (Statement No. 22)

(a) Losses of Cash

The comparative figures for losses of cash which had been reported to the Ministry of Finance and Development Planning during the last 4 years are as tabulated below –

Year No. Amount 1998/99 27 1 267 170 1999/00 18 234 691 2000/01 11 1 158 430 2001/02 10 430 014 Although the 10 cases pertaining to the financial year 2001/02 were reported in that year, 4 of these losses had occurred in the period between 1991 and 2000, while the remaining 6 had occurred in the year of reporting. Of all the losses, which were reported in the reporting year, the one which had occurred in 1991, amount to P450, was the only one,

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which was disposed of, quite logically, by write-off in the same year. The rest are stated to be still under investigation. The accumulated losses, which were still outstanding from previous years in all the Ministries at the end of the year under review, amounted to P5 700 227, involving 129 cases, compared to P4 543 528 with 118 cases, at the end of last year. As I reported last year, most of these cases are very old, going back to the 1980’s and 1990’s, and their disposal is extremely slow, as indicated in the table below - under each Ministry. Out of the 129 outstanding cases, only 6 are the subject of on-going recoveries, while the rest are stated to be under investigation.

No. of Loss

Ministry Cases Amount Recoveries Write-off

Parliament 1 74 660 - State President 14 286 359 97 311 1 960 Finance & Dev. Plg 17 931 466 124 332 22 693 Labour & Home Affairs7 898 201 687 - Agriculture 18 305 411 47 153 21 788 Education 26 642 120 78 436 30 722 Trade, Industry, W&T 4 85 147 4 047 36 440 Local Government 9843 248 431 427 617 Works & Transport 11 1 149 277 41 371 - Minerals, Energy & W/A 15 413 063 2 185 151 709 Health 2 26 108 - - Admin. of Justice 4 43 720 639 3 170 Foreign Affairs 1 1 1 446 - - 129 5 700 227 827 587 269 100 (b) Losses of Stores

A similar position with regard to losses of stores for the same 4-year period is tabulated below –

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Year No. Amount 1998/99 659 12 778 312 1999/00 669 1 208 063 2000/01 445 675 594 2001/02 328 346 465

Compared to the previous years, there is a significant decrease in both number and value of the stores reported lost in this year. Although there are instances of losses, which had occurred in the 1990’s but reported this year, these are very few. The majority of losses reported are recent. Of the losses pertaining to this year, a total of P12 382 (4.6%) was recovered and P158 949 (46%) was written-off.

With regard to the disposal of cases from previous years , there is also tardiness in the processing of these to finalisation. There are still many cases going back to the early and middle 1990’s. At year-end, there were a total of 1 074 cases outstanding from previous years, valued at P7 772 033, compared to 1 246 with a value of P7 907 787 at the end of last year, showing reduction in both number and value. Although there is a small reduction in these figures, the rate of disposal of these cases remained the same in this year compared to last year: a total of P124 798, representing 1.6%m was recovered, while P354 131 (4.5%) was written-off in this year.

VII MINISTERIAL IMPRESTS

PARLIAMENT

28. Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows: Year-end

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31st March No of cases Amount 2001 6 34 509 2002 22 192 826 28 227 335

Further, an amount of P1 96 million being imprest drawn by an officer of this Department from the Treasury Cashiers in the District was outstanding

. STATE PRESIDENT

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows:

Year-end 31st March No of cases Amount 1994 1 4 698 1998 3 4 990 1999 2 2 000 2000 13 15 110 2001 87 372 148 2002 220 1 727 982 326 2 126 928

The imprests which had been drawn by officers of the Ministry from the Treasury Cashier’s offices countrywide are reflected below

1998 1 (525) 2001 1 (181) 2002 21 24 078 23 23 372

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Audit Inspection – Directorate Of Public Service Management, Gaborone

An audit inspection carried out at the Directorate of Public Service Management in May 2002, revealed instances of disregard for proper and prudent use of public funds, which resulted in wasteful and nugatory expenditures. Such instances are indicated below. (a) Name Tags and Identity Cards

In June 1998, all Ministries and Departments were requested to issue nametags to their employees at their own costs. The Police, Botswana Defence Force and the private sector were engaged to produce the tags for all Government employees, but before long DPSM replaced the tags with the public service identity cards produced centrally by them. This has resulted in wasteful expenditure involved in producing nametags, which were abandoned thereafter.

Although it is not easy to compute the amount involved because of the decentralized spending at departmental level, the total amount involved is considered to be considerable, given the size of the civil service at roughly 45 000 employees.

In response the Accounting Officer stated that nametags were for departments, which dealt with the public on daily basis, and that their use was discontinued in April 1999 after it was realized that they served the same purpose as identity cards. It is my view that the wasteful expenditure would have been reduced substantially, had the nametags been purchased only for employees dealing with the public on daily basis.

(b) Courses

An agreement was entered into between Botswana Government and a consultant to place in-service trainees in tertiary institutions in the Republic of South Africa and SADCC countries. In this particular

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case twenty DPSM in-service trainees and 741 students sponsored by Ministry of Education, were placed at a University in South Africa. On the basis of the questionable status of the University, all the DPSM trainees were withdrawn after incurring a nugatory expenditure of P407 738.

In response the Accounting Officer conceded that the Director had wholly relied on the advice of the Consultant with regard to the placement of the trainees and that their subsequent withdrawal had been a regretable lesson to Government.

(c) Bond Defaulters – P196 787 This long standing matter has been the subject of progress reporting at the successive meetings of the Public Accounts Committee, the recent inspection has confirmed that there has not been any significant progress in recovering these outstanding amounts. In reply to my communication, the Accounting Officer had stated that he had taken steps to engage the services of a debt-collector and that he was awaiting the response from the Central Tender Board. At the time of writing this report, I am not aware of what progress had been made in collecting the outstanding amount under the new arrangement.

(d) Postal Charges

The total payments of P1 216 271 made to Botswana Telecommunications Corporation in respect of telephones covering the period April, 2000 to November, 2001 included an amount of P249 617 for telephone accounts that did not belong to the Department. The Departmental officers had not taken earlier action to recover the incorrect payments. The Accounting Officer has intimated that he has since requested a refund of the amount involved from Botswana Telecommunications Corporation.

Audit Inspection – Department Of Information And Broadcasting, Gaborone

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An audit inspection carried out at the Department of Information and Broadcasting in July 2002, brought to light the following unsatisfactory features (a) Advertising

The department had entered into an informal contract with some advertising agencies for preparation and placements on television and RB2, the commercial station of Radio Botswana. The agencies were also responsible for the collection of advertising revenues. It was however noted that the revenues collected by the agents had not been passed timeously to the department. At the time of the audit inspection, an amount of P2 067 266 was outstanding covering the period from September 2000 to May 2002.

(b) Surcharges – P77 825

It was noted that no action had been taken to recover the surcharges imposed on drivers who had caused damage costs to government vehicles through accidents, amounting to P77 825.

(c) Suspected Fraud

It was noted that two persons who claimed to be freelancers had successfully claimed a total amount of P50 661 on different dates between August 2000 and August 2001. It was also noted that their names did not appear in the list of freelancers who had registered with the department. On enquiry, Management confirmed that these were cases of fraud, which had been reported to the Police for further investigations. As authorized freelancers, it is not clear to me why their claims were paid by the officers of the department.

(d) Contract Agreement - Btv and Cellular Company

Botswana Television (Btv) entered into a verbal agreement with a local cellular company. According to the agreement the company

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provided 31 Nokia, 6150 cellular phones including free monthly airtime worth P250 per cellular phone, while Btv provided the cellular company with airtime for commercial slots worth P80 000. In addition, the cellular company charged P326 per line for the calls in excess of the monthly charge. It was noted in the majority of cases, that free monthly charge was exceeded resulting in Btv owing an amount of P37 587 to the cellular company; consequently the 22 cellular phones were disconnected pending payment of the outstanding amount. I am not sure whether this arrangement had been approved by Office of the President. In response the Accounting Officer conceded that the Director had wholly relied on the advice of the Consultant with regard to the placement of the trainees and that their subsequent withdrawal had been a regretable lesson to Government.

(e) Advertising and Publishing

Radio Botswana channel 2 (RB2) engaged a private company to supply frequency billboards at a cost of P194 183. The location and quantity of these billboards had not been indicated in the records. As a result it was not possible for me to confirm if the correct quantity and quality had been supplied.

(g) Stores

A test check of stores and stores records revealed the following departures from the requirements of Supplies Regulations and Procedures:

i) The loss of a television set and videotape, which occurred

as far back as October 2000, had not been reported as required, despite the considerable lapse of time.

ii) Twenty-three Television sets, valued at

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P30 777, which had been purchased in June 2000, had not been marked with Government identification serial numbers. These are attractive items, which should be suitably safeguarded at all times.

iii) Seven Video monitors brought in August 2000, had not

been used up to the time of audit. Although management indicated that they were to be used after the construction of a new studio, it was not known when the new studio was going to be operational.

These matters were brought to the attention of the Accounting Officer in September 2002 but in spite of several reminders sent, I have not received any response.

MINISTRY OF FINANCE AND DEVELOPMENT PLANNING

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows:

Year-end 31st March No of cases Amount 1995 1 7 560 1996 3 2 226 1997 1 1 741 1998 1 751 1999 2 5 385 2000 9 24 947 2001 14 45 011 2002 89 286 152 120 373 773

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Furthermore those imprests which had been drawn by officers of the Ministry from the Treasury Cashier’s offices in the Districts countrywide were outstanding as indicated below:

1999 2 239 2001 2 2 481 2002 34 77 192 38 79 912

Write-Off Of Dormant Balances – P8 048 750

In my previous reports, I drew attention to a number of balances, under the Statement of Advances (No. 15), which I considered had become dormant as they had not shown any movement over a number of years, and their rationale in the accounts had become inexplicable. In an effort to deal with this situation, the Accountant General undertook an exercise to clear them by aggregating the total of the debits and credits amounting to P24 406 905 and P16 358 155 and writing-off the net result of P8 048 750 to an expenditure vote – “Misallocations, Previous Years”, on the pretext of correcting errors of misallocation

I considered this course of action inappropriate as the dormancy of these balances had arisen from different sources and causes, and some of these causes were unknown because of unavailability of records and uncertainty about the state of the accounts. These causes, as far as can be ascertained, may be illustrated under the various accounts as follows:

a) Up to 1996/97, the accounts controlling the remittances of cash

from the Treasury Cashier offices to the Bank of Botswana for the credit of the Botswana Government Account had not been reconciled and cleared for a number of years, with the result that the balances in these accounts had become meaningless. Following my observation in that year, the balances, totalling P22 961 268 and credits P14 672 190, were transferred to Suspense Accounts with a view to investigation and clearance. I have not

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been advised of the outcome of that investigation, and the causes of the errors, which resulted in credit balances in these accounts, had not been explained.

(b) Bank debits, going as far back as the mid-1980’s totalling P310

663, had been passed through the Government bank accounts in Gaborone and at the Botswana Mission in Lusaka, and the sources of these entries had not been established as acceptable and proper charges to public funds. In the absence of such identification, they remain questionable charges in the accounts.

(c) In one instance, when the Government Motor Vehicle Scheme

insurance agency account was transferred from one company to another in 1992/93, a balance of P965 502 due to Government remained in the old account and no action had been taken to recover it. In the present exercise to clear the accounts, this balance is being attributed to accounting errors, ostensibly, to facilitate the write-off.

(d) There was also an amount of P36 843, which had been owed by

the old Post Office Savings Bank, now Botswana Savings Bank, as far back as 1982/83, which was said to be a misallocation error and could not be corrected because of unavailability of records.

(e) Deposit balances with Financial Institutions amounting to P1 685

965 had remained in the accounts without adjustment or explanation for a number of years. These had now being cleared to an expenditure vote on the ground that they were dormant without any explanation.

In view of the diverse causes of the dormancy of the balances in these accounts as illustrated above, and bearing in mind the rules of write-off, I have suggested to the Accountant General to seek the advice of his Permanent Secretary, in each case, on the course of

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action to be taken. I am of the view that some of these cases may very well represent losses through irrecoverable debts. Accidents To Government Motor Vehicles

The Permanent Secretary, Ministry of Finance and Development Planning has submitted a summary report of Government motor vehicle accidents that were reported to him during the year under review. According to that report a total of 1 361 accidents were reported with a damage cost of P5 239 252, compared to 854 with a damage cost of P3 663 069 in the previous year. Out of the number reported in the year under review, 689 were finalized and disposed of as follows- Driver Surcharges 1 054 242 Charged to Public Funds 1 483 574 Recoverable – Private Drivers 13 909 2 551 725

The balance of 672 accidents with a damage cost of P2 687 527 were still pending with the Ministry of Finance and Development and the Attorney General’s Chambers. Altogether there were 1 319 pending cases at year-end with a damage cost of P5 335 052, including those brought forward from previous years. Although the damage costs attributable to private driver faults is stated as P13 909, according to the analysis prepared by the General Manager, Central Transport Organisation a total of 13.42% of the accidents is indicated against this source, which suggests that the amount should be far in excess of that reported by the Ministry of Finance and Development Planning. I am yet to be advised of the recoveries from private drivers. A review of the accounts relating to surcharges for motor vehicle accidents which stood at P2 163 067 at year-end, has also

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indicated that the recoveries are not in all cases made, as evidenced by a number of non-moving accounts. Some accounts have credit balances – indicating accounting errors, which have not been corrected.

Suspected Fraud – Treasury Cashier, Shakawe – P65 815

In May 2002, the Accountant General carried out an internal investigation into a suspected case of fraud at the Treasury Cashier’s office in Shakawe at the instance of an inspection report from the Regional Office in Maun. The investigating officers reported a cash shortage amounting to P65 815 and indicated that a further investigation would be instituted, as the amount reported did not constitute the final figure of the shortage.

I addressed the Accountant General some six months later and requested him to advise me of any progress made into the matter. At the time of writing this report I had still not received any response from him. I am therefore not aware of the full extent of the loss involved, and advised whether a Loss Report had been submitted to the Ministry, in terms of the Financial Instruction and Procedure.

Burglary – Mahalapye Treasury Cashier’s Office, P376 617

The Treasury Cashier’s office at Mahalapye was broken into on the night of Thursday, the 18th April 2002, and amounts of P374 497 in cash and P2 121 in cheques were stolen. The incident was reported to the Police the following day. The perpetrators were able to gain entry into the building by taking off the corrugated iron roof sheets and broke through the ceiling into the office. After getting into the office, they broke the doors to the storeroom where the safe was mounted and made away with the cash and cheques, which were deposited in the safe. All these had happened despite the office’s close proximity to the Police Traffic Unit.

Investigation of the circumstances relating to this loss had indicated that the burglary had been facilitated by the following factors:

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(a) The physical security of the office was inadequate as

evidenced by the ease with which the thieves were able to gain entry into the building, and left through the main door which was not suitably burglar-proofed. Despite the enormous amount of cash handled through this office, a strong room had not been provided; only a storeroom had been used for the security of cash.

(b) The cash holding limit prescribed at P200 000 for this office had

been exceeded by a considerable amount through the bank withdrawal of P350 000 three days before the burglary, and this exacerbated the extent of the loss. I am not convinced on the justification for withdrawal of additional cash simply on the grounds of beginning of the financial year transactions, as the limit of cash payments over the counter was P3 000 in any one case, and any amounts over this limit were paid by cheque.

(c) The security system installed was inadequate, to say the least.

Even when the incident was reported to the contracted security company the response had been far from satisfactory. This was however to be expected as the contracted security company was located some 200 kilometres away in Gaborone. This necessitated the employment of a local security company to guard the premises over the weekend, at an additional expense.

I have addressed the above matters to the Accounting Officer in August 2002. A reply has since been received indicating that eight suspects had been apprehended by the Police and were scheduled to appear before the Magistrates Court in December, 2002, and that cash and other items of property worth P85 695 were being held by the Police as exhibition in this case. Although at the time of writing this report the prosecution date had passed, I have not been advised of the outcome of the case, nor of any recoveries made.

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Wasteful Expenditure On Unflown Tickets – Air Botswana

Following my review of the accounts of Air Botswana for the financial year ended 31st March 1997, I reported that Government had sustained losses of public funds to the tune of P2 795 000 through unused air tickets by officers of the various Ministries and Departments of Government. In the subsequent discussions in the meetings of the Public Accounts Committee the Accounting Officer informed the Committee that the Accountant General, who pays the air warrants on a direct billing basis, had taken the matter up with Air Botswana with a view to mitigating losses to Government through this account, and had, in addition, issued the necessary instructions to all Ministries and Departments regarding the periodic monitoring of unflown tickets. This submission was accepted by the Committee. My latest review of the accounts of the Airline for the year has however indicated that, even after the lapse of this 5-year period since then, the situation has not improved. In this year, the total amount credited to the revenue of the airline, in terms of the rules of IATA, on account of unflown tickets by Government officers stood at P5 517 000 inclusive of airport taxes amounting to P1 234 000. I am at a loss to understand how the Accounting Officers in all the Ministries and Departments of Government are not able to ensure that these wasteful and unnecessary losses of public funds are brought under control. It is manifestly clear that Government will continue to sustain these considerable losses unless and until the Permanent Secretary, Ministry of Finance and Development Planning takes steps to ensure that Government officers carry out their financial and accounting duties diligently to ensure that these type of losses do not occur.

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MINISTRY OF LABOUR AND HOME AFFAIRS

Travelling Imprests The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows Year-end 31st March No of cases Amount 1986 1 60 1988 1 (70) 1989 1 (441) 1993 2 284 1994 1 408 1995 4 4 241 1996 1 570 1997 7 5 276 1998 12 14 449 1999 21 48 561 2000 24 82 816 2001 52 96 076 2002 94 132 982

221 385 212

Furthermore, 26 imprests amounting to P29 631 which had been drawn by officers of this Ministry from Treasury Cashier’s offices in the Districts were still outstanding.

Revenue Accounts – Department Of National Museum And Art Gallery

An audit examination of revenue for National Museum, Monument and Art Gallery indicated that the following facilities had been leased out but rent had not been collected:

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(a) Curio-shop at the premises was rented out on a five year Lease at the rate of P1 000 per month plus an additional charge of P75 per month for service charges. As the lessee was not paying the monthly rental in terms of the lease, the lease was terminated with an amount of P34 822 outstanding.

(b) The cafeteria at the premises had also been leased at a

rental of P2 000 per month plus P300 per month to cover the service charges. Here also the lessee had defaulted on rental payments. The lease was terminated owing an amount of P15 416.

In both cases the matters had been referred to the Attorney General for the recovery of the outstanding amounts. I am yet to be advised of the outcome of this cause of action.

Construction Of Centre For Illegal Immigrants Francistown.

An audit examination of the above development project which was carried out in May 2002, brought to light the following adverse observations:

a) Time and Cost Over-runs

Although the contractor, who was awarded the above project had taken possession of the site and commenced work in June 1999, the contract had not been signed and the necessary infrastructural facilities (power, sewage, water reticulation systems) had not been provided. The delays in the provision of these facilities had resulted in subsequent completion delay of 15 months and cost over-run of P5.7 million. In addition, there were adverse reports from both the lead architect and the resident engineer regarding the worksmanship put out by the contractor, which had also contributed to the delay in the use of the centre, while the snag list items were being attended to.

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I am concerned that government contracts continue to suffer completion delays with resultant unnecessary additional costs to public funds. It is my view that in those instances where such delays have occurred the party responsible should be identified and held accountable.

b) Erroneous Payment

An erroneous payment of P127 426 was made to the contractor purportedly due to the mechanical sub-contractor while this was not the case. I have suggested that this incorrect payment should be recovered. At the time of writing this report, I am not aware whether this had been done.

c) Withholding Taxes

It was also noted that the withholding taxes, calculated at P110 624 and P12 056, had not been deducted from certain payments to the contractor and consultants, respectively. I have pointed this out to the Accounting Officer and suggested that these unpaid taxes should be recovered.

MINISTRY OF AGRICULTURE

Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows:

Year-end 31st March No of cases Amount 1985 2 3 015

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1986 3 2 747 1987 2 25 1988 6 3 505 1989 16 19 172 1990 15 6 869 1991 6 1 708 1992 10 7 269 1993 6 6 917 1994 17 12 549 1995 30 23 679 1996 46 38 025 1997 23 5 971

1998 47 22 473 1999 68 34 123

2000 32 8 789 2001 95 35 919 2002 573 780 790

997 1 013 545

Further, 307 imprests amounting to P193 611, which had been, drawn by officers of the Ministry from the Treasury Cashier’s Officers in the Districts countrywide were still outstanding.

Audit Inspection – Livestock Advisory Centres, Kanye And

Jwaneng

An Audit inspection carried out at the Livestock Advisory Centers at the above-mentioned places in October 2002, revealed that some amounts of P72 368 and P20 355 were due from National Development Bank since July 2000 and February 2001 respectively on account of drugs and vaccines supplied to the livestock farmers under the Financial Assistance Policy (FAP). Despite the considerable lapse of time, there was no evidence of follow up of these outstanding debts.

On enquiry as to how these debts arose, it was stated that under the FAP scheme, beneficiaries were supplied with drugs, vaccines and

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stock-feed which are paid for through the National Development Bank.

Burnt Gum Poles – P36 794 – Veterinary

Office, Ghanzi

In August 2002 the Permanent Secretary, Ministry of Agriculture submitted a loss report in respect of fencing materials that had been destroyed by fire from as far back as September 2000. The materials in question involved considerable quantities of gum poles and droppers valued at P36 794. Although the incident had been reported to the Police at the time of occurrence, it is not appreciated why it has taken so long for the Accounting Officer to submit a loss report with a recommendation for a free write-off.

This is yet another instance where the Accounting Officers have failed to carryout their duties as laid out in Financial and Stores Regulations. I am concerned about delays, which very often lead to these types of requests.

Audit Inspection District Administration Office, Tsabong

An audit inspection carried out in July 2002, at the above-mentioned office brought to light the following observations:

(a) In June 2002, the Accounting Officer authorized the destruction

of 272 bags of cement, worth P4 896, because they were past their expiry date. This destruction was occasioned by purchases of 500 bags in 1997, which were in excess of the requirements over this period.

(b) It was also noted that the storeroom in which the cement was

stored was in a bad state of repairs as indicated by unkempt floors and holes in the walls. In addition, the windows were not burglar-barred.

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In September 2002 I enquired as to why a disciplinary action could not be considered against the officer who authorized the excessive purchases of cement but as at the time of writing this report I had not received any response. Audit Of Expenditure On The Foot And Mouth Disease (FMD)

Campaign, Matsiloje

An audit examination of expenditure on the Foot and Mouth Disease Campaign carried out at Matsiloje in August revealed the following significant matters.

a) Three of thirteen crush registers examined during the audit

revealed instances where affidavits for ownership of cattle destroyed differed with registers of cattle in the kraals. This confusion in record keeping resulted in some farmers being paid twice for the same animal. The total amount of overpayment in respect of 66 cattle was P42 900.

As this was only a test check, I have suggested to the Accounting Officer that further investigations be carried out to ascertain the full extent of these overpayments. At the time of writing this report, I am not aware if this exercise was completed.

b) A test check of the Stores RecordS and related Government Purchase Orders indicated that a total of 9 100 treated gum poles had been purchased by the Francistown Regional Office. Out of this number, 302 had been transferred to Matsiloje in connection with the Foot and Mouth Disease Campaign, 86 were recorded in Stores records in Francistown leaving a balance of 8712 unaccounted for, and no satisfactory explanation was offered for this discrepant gumpoles.

c) Payments amounting to P71 398 in respect of normal and overtime

were paid to casual labourers, without obtaining signatures or thumbprints of payees as evidence that they had received their money. I am concerned that payments which are not supported by signatures of payees may result in improper payments, possibly fraud.

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d) Following representation by permanent and pensionable staff who

were deployed on the Foot Mouth Disease Campaign, Directorate of Public Service Management authorised the payment of accumulated overtime worked by the officers in the amount of P217 645. This was later turned down by the Ministry of Finance and Development Planning on the grounds that Directorate of Public Service Management did not have the authority to approve such expenditure. I am of the view that the two authorities should come to an agreement over this matter and save officers concerned the anxiety and inconvenience that the officers must be going through while this decision is pending.

Audit Inspection – Francistown And Lobatse Horticultural Projects

Government built two horticultural markets at Francistown and Lobatse, at a total cost of P4 056 554. Out of these total construction costs for farmers in the Southern region had contributed P12 000 plus land valued at P4 000 towards the Lobatse market.

The purpose of these markets was to help local horticultural farmers to have a place to sell and market their produce. It transpired on completion of the market that the farmers were not ready to run the markets. Consequently Government entered into agreement with the agents to run the markets on behalf of the farmers. The arrangement with the farmers was that Government would be paid 4% of turnover towards recoveries of its contribution to capital costs and the rest would be shared between the farmers and the agent at 90% and 6% respectively.

During the course of the audit the following unsatisfactory issues were noted:

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(a) Farmers did not use the market as they considered that they were not getting fair prices for their product. They preferred to sell directly to the public outside the market.

(b) The agents were using Government resources to operate the market.

(c) The agents were importing farm produce instead of buying

from local farmers.

(d) Loans amounting to P240 000 to the Lobatse agent and P60 000 to the Francistown could not be verified due to lack of records.

In my view the investment in this project has not met the full intent and purpose of assisting small scale citizen farmers.

MINISTRY OF EDUCATION

Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows

Year-end 31st March No of cases Amount

1989 10 180 1996 15 6 025 1997 12 14 419 1998 20 15 633 1999 24 25 807 2000 27 7 642

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2001 84 160 088 2002 261 801 310 453 1 031 104 Further, 189 imprests amounting to P288 522 which had been drawn by the officers of the Ministry from the Treasury Cashier’s offices in the Districts countrywide were still outstanding

Madiba Secondary School Upgrading – Development Project The quantity surveyor who evaluated tenders for upgrading of Madiba Secondary School advised Department of Architecture and Building Services that the lowest tender had no capacity to successfully perform the work and recommended the third lowest. Despite this recommendation, the Central Tender Board awarded the contract for the upgrading of Madiba Senior Secondary School to the lowest tenderer at a cost of P23 499 709. The Contractor commenced work in November 1999 and was scheduled to complete within seventy-eight weeks. It was however noted that the progress of work was slow and it was evident that the contractor could not complete the project within the scheduled period. There was sufficient evidence, in support of the client, to terminate the contract as early as October 2000 but did not exercise the option until October 2001. Following the termination, an arbitrator was appointed as the contractor had declared a dispute under the provision of the agreement. The contractor preferred a claim for P3 498 077 and the client made a counter claim against the contractor in the sum of. P7 694 077. Furthermore, it was also noted that, long after the termination of the contract, a payment of P378 454 was made in May 2002 to the nominated sub-contractors for materials that had not been delivered to site. An amount of P300 000 was still outstanding in respect of mobilization advance at the time of termination of the contract.

It is evident from the foregoing that the project was not well managed and that there was lack of consultation between the parties concerned.

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Gaborone Senior Secondary School Upgrading –

Development Project

The Central Tender Board awarded the contract for the upgrading of Gaborone Senior Secondary School to the lowest tenderer at a contract sum of P16 583 100, at the recommendation of the Department of Architecture and Building Services even though the Consultant Quantity Surveyor who evaluated the tenders had noted that none of the four short listed firms had completed projects in excess of P8 million. The Contractor commenced work in March 1999 and was scheduled to complete within a period of forty-eight weeks in February 2000. There was, however, a completion delay of thirty weeks which took up to October 2000 at a resultant cost of P20 726 768, involving a cost overrun of P4 143 668, representing 25% increase above the original contract sum. Although the contractor was already behind schedule by twenty-six weeks, it was not until September 2000 that the contractor requested the employer to approve a contract price increase on the grounds that the forecast expenditure would exceed the original contract sum by completion time.

While retrospective authority was granted, I am of the view, that both the cost and time overruns involved in this project were largely attributable to capacity limitation on the part of the contractor to handle this project size, as had been noted by the Consultant Quantity Surveyor in the tender evaluation report. Withholding Tax On Consultants’ Fees

An audit examination of payments made to Consultants, revealed instances where the Ministry had not deducted withholding tax from those payments as required by the income Tax Act. The amount involved on fourteen such payment vouchers was P17 921. I had drawn the attention of the Accounting Officer to this omission and at the time of writing this report, I had not been advised of corrective action.

Francistown Senior Secondary School

(Phase II)-Development Project

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Following an audit examination of the accounts and records of the above project, I addressed the Accounting Officer in December 2002 on the following unsatisfactory features:

a) Contractor’s performance

In September 1998 the Consultant Quantity Surveyor evaluated eight tender bids of 100 percent citizen owned contractors and observed that none of the tenderers had previously completed a project of this magnitude. The Consultant, nevertheless, recommended the third lowest tender bid at P24 395 516 but the Department of Architecture and Building Services did not accept the tender as the construction period was far too short and the tender bid was P1.8 million less than the pre-tender estimate of P26.8 million. In January 2000, on the basis of negotiation regarding tender price and duration of the project, the Central Tender Board awarded the project to the lowest tenderer at a price of P24 793 603 with a construction period of 82 calendar weeks.

The contractor commenced work at the site on the 3 April 2001. It was noted at scheduled site meetings that the contractor had lagged behind the programme of work. The project also experienced shortage of materials such as cement, bricks, roof sheets, window frames and doorframes. The contract was subsequently terminated on the 15th October 2001 due to failure to complete the project. Following termination, the contractor opted for settlement under the conditions of the contract through arbitration. At the time of audit the Arbitrator had already been appointed to undertake arbitration proceedings and the hearing was in progress.

(b) Audit site inspection

During the audit inspection of the project in October 2002 a year since termination of work, it was noted that not a single building

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block or external works were completed during the entire period the contract. The civil, structural and building works too, had deteriorated following the abandonment of the project. Despite the termination of the contract on the 15th October 2001, the contractor had still not handed over the site by October 2002. It was also noted that no security was provided at the site.

(c) Mobilisation Advance

The contractor was paid a mobilisation advance of P3 500 000 representing 13.9 percent of the contract price and a balance of P1 541 667 remained outstanding at the time of inspection.

I drew the attention of the Accounting Officer to these and other matters but at the time of writing this report, I had not received his response.

Audit Inspection – Seepapitso Senior Secondary School,Kanye

An audit inspection carried out at this Senior Secondary School in November 2002 brought to light the following weaknesses:

(a) School Fees – P72 000

An examination of the school fees register revealed a number of foreign students who had not paid school fees amounting to P72 000 ever since the inception of the policy introducing the payment of school fees for foreign students in 2001. Some of the students had completed their studies and left the school.

(b) Electricity – P2 909

An amount of P2 909 owed by members of staff, some of it, outstanding as far back as April 1999 on account of electricity and had not been paid at the time of audit.

(c) Telephone Bills – P2 611

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An amount of P2 611 in respect of telephone calls made by members of staff was outstanding at the time of audit.

The above observations were intimated to the Accounting Officer in November 2002, and at the time of writing this report he had not advised me of steps taken to recover these debts

MINISTRY TRADE, INDUSTRY, WILDLIFE AND TOURISM

Travelling Imprests

: The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows

Year-end 31st March No of cases Amount 1994 1 306 2001 12 5 752 2002 63 139 579 76 145 637

Further, some 64 imprests amounting to P62 926 which had been drawn by the officers of the Ministry from the Treasury Cashier’s offices in the Districts countrywide were still outstanding.

Audit Inspection – Integrated Field Services, Lobatse

An audit inspection carried out at the above office in May 2002 revealed a number of instances where entrepreneurs who had been granted assistance for small-scale projects under the Financial Assistance Policy Scheme to the tune of P803 068 had abandoned the projects. In some cases, the whereabouts of those entrepreneurs were unknown and the projects sites could not be identified. In my view, the inability of the field officers to identify projects sites raises

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questions of their effectiveness in assessing and recommending projects requests to the Ministry.

I addressed the above concerns to the Accounting Officer in August 2002, but at the time of writing this report I had not received any response advising me of any action taken to salvage the projects assets with a view to minimize Government losses.

Audit Inspection – Integrated Field Services, Ghanzi

During a recent audit inspection, in August 2002, conducted at the office of the Integrated Field Services in Ghanzi it came to light that projects for forty-one entrepreneurs who had been granted assistance for small-scale projects under the Financial Assistance Policy Scheme to the tune of P1 884 534 had become non-operational for a variety of reasons which, though differing in details, may be summarized as follows:

(a) Entrepreneurs had deserted the projects and were engaged in

full-time activities elsewhere – employment, studies, Village Development Committees;

(b) Entrepreneurs had passed away relatives were unable or

unwilling to operate the projects;

(c) Group projects members were not committed sufficiently enough;

(d) There was not enough demand for the products. (e) Machineries had broken down and needed to be repaired,

additional funds required were unavailable.

(f) Project entrepreneurs had absconded and could not be found.

In all the above cases the objectives of citizen empowerment and employment creation had not been achieved. Although some of the

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attendant problems might have been beyond the control of field officers, it is my considered view that concerted efforts should be made to safeguard the interest of Government and the purposes of the scheme by taking possession of the project assets for re-sale.

MINISTRY OF LOCAL GOVERNMENT

Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows

Year-end 31st March No of cases Amount 1995 1 1 000 2000 3 (970) 2001 13 31 790

2002 82 238 416 100.99 270 236

Sepopa-Ikoga Rural Village Water Supply Project

An audit examination carried out on the accounts and records of the above project in November 2002 revealed the following observations:

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1) Professional Indemnity Insurance: The Engineer, who supervised the above project with a contract sum of P15.7 million, did not take out a professional indemnity insurance to cover any liability, which may arise therefrom. At the time of writing this report the post-completion liability period had some 30 months to run in which Government was exposed to possible risk of loss. I consider it of utmost importance that officers should ensure that insurance policies are taken out to safeguard the interest of the Government.

2) Withholding Tax:

The examination of payment vouchers revealed that withholding tax amounting to P215 737 had not been deducted from interim payments made to three companies in the period between July 2001 and September 2002. In the circumstances the Accounting Officer should take steps to recover the money.

Accountaning For Old Age Pension

In my report for last year, I had commented that accounting for the payments of old age pensions was not satisfactory, to say the least, as a number of accounts related to these payments had not been periodically reconciled and cleared. This resulted in accumulated balances, which could not be explained. In year under review, the situation had not shown any improvement. According to the records of the Accountant General the balance of cash advanced to Botswana Postal Services for the payment of pensions was P50 685 985 as at 31 March 2002, (equivalent to seven times the monthly payments through this agency) whereas the unpaid balance reflected in the accounts of Botswana Postal Services on that date was P3 581 535 which included P1 038 474 from the previous year. The records of the Accountant General also indicated that a total of P60 105 055 was outstanding with individual Post Office, and that some Post Offices had overdrawn the agency accounts to the tune of P1 835 698.

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The Treasury Cashiers and District Commissioners were shown as being accountable for certain balances arising from the payments of these pensions through their offices, as follows:

Credit Total Total Debts P P Treasury Cashiers 498 624 1 673 313 District Commissioners 7 575 212 10 180 837 These balances are spurious as these offices make payments from lists supplied by the Old Age Pension Office, using the Treasury Cashiers’ cash resources. It is therefore not possible to overdraw these accounts, as the above debit balances would suggest. Furthermore, the expenditure vote for these pension payments was over-spent by P24 888 297 at year-end. I am concerned that despite the long-standing unsatisfactory situation of these accounts and the Accountant General’s undertaking to the Public Accounts Committee to assist the Accounting Officer in this matter, no action had been taken to bring these accounts under proper control.

MINISTRY OF WORKS, TRANSPORT AND COMMUNICATIONS

Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows Year-end 31st March No of cases Amount 1998 1 1 000 2000 2 792

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2001 28 53 722 2002 97 227 109 128 282 623

Further, some 118 imprests amounting to P196 820, which had been drawn from the Treasury Cashier’s offices in the Districts countrywide, were still outstanding. Misappropriation Of Public Funds – Department Of Road Transport And

Safety

In December 2002, the Permanent Secretary, Ministry of Works and Transport reported a case of misappropriation of public funds involving revenue collections amounting to P47 623 at the Department Headquarters in Gaborone by an officer who was also responsible for revenue collection at Ramotswa. Revenue amounting to P48 323 collected from April 1996 to September 1997 had not been deposited in the Government account. Out of this amount P700 was said to have been recovered. Although the Accounting Officer maintained that regular cash inspections were carried out, I am of the view that supervision of this officer was weak; as a result misappropriations occurred and continued undetected over a period of eighteen months, until it was finally discovered by Internal Auditors. The case was handed over to the Police in November 1997, and had not made the desired progress. In August 2002, Officer Commanding Serious Crime Squad wrote to the Attorney General’s Chambers expressing the difficulties involved in obtaining primary evidence from the vehicle owners. He mentioned that further attempts to trace them would cause further delay. He therefore, sought the advice of the Chambers if secondary evidence could be used for the processing of this case. I addressed the Accounting Officer in January 2003 to ascertain the measure of control exercised by the Treasury Cashier over the revenue collections processed through the computer, and if a reply had been received from the Attorney General’s Chambers regarding the loss. I am also concerned that it has taken almost three years for the loss report to be submitted in violation of Financial Instructions and Procedures.

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Khumaga–Motopi Road Construction Development Project

An audit examination of the accounts and records of the above project in June 2002 revealed a number of unsatisfactory features, the most significant of which are given below:

a) Poor workmanship

The Central Tender Board awarded a contract for the construction of the above-mentioned road at a cost of P40 496 030. The construction work commenced in January, 1999 and scheduled dated of completion was September, 2000, but the project was completed on March 2001 resulting in a time overrun of six and half months. The Director of Roads reported that the engineer issued a certificate of practical completion without undertaking a joint site inspection. It later transpired that the Director did not agree with the snag list that had been prepared by the engineer in March 2001. Subsequent inspection revealed that the engineer had failed to carryout checks to ensure that materials that had been used complied with contract specifications. As a result of these weaknesses the Director obtained Central Tender Board approval to engage a technical auditor. The technical auditor found that the contractor had not complied with the relevant technical standards and specifications and that the engineer did not provide the necessary supervisory and supporting staff that had originally been proposed by him. He further recommended that “both the Engineer and the Contractor failed to meet their obligations under the contract to a significant extent. As a result the Employer did not receive what was paid for and there is a risk that the road will not fulfill its design life expectations”. He therefore recommended that the employer could either require the contractor to reconstruct the road using the correct

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materials at his own expense or require the engineer to supervise the reconstruction at his cost due to his failure to control the quality of the work. I am not aware how the dispute over this project was being resolved.

b) Withholding Tax on Consultant’s fee

In August 2001 the engineer was paid P70 022 but no withholding of P2 100 was deducted by the Roads Department on the fee paid to the consultant as required by the Income Tax Act. I advised the Accounting Officer to recover the money.

Audit Inspection – Department Of Roads Headquarters

An audit examination of the accounts and records of Headquarters of the Department of Roads carried out in July 2001, revealed instances of late submission of casualty returns in respect of officers who had been dismissed from the service resulting in overpayments of salary and commuted allowances in the amount of P8 010 and P6 434 respectively. In addition P2 270 was outstanding on account of imprest, telephones and advances With regard to telephone accounts, it was, noted that in 1998, a Micro BX-telephone Billing System was installed to monitor the recovery of charges of private calls made by officers, but none of the officers had been issued with any bills to date. On enquiry, it was explained that the system did not function as intended since it was installed. It is my view that other arrangements could have been made to levy and recover moneys for private telephone calls made by officers and to repair the machine. Misappropriation Of Public Funds – Sir Seretse Khama Airport

It was brought to my attention in February 2002 through a copy of the loss report by the Accounting Officer of the Ministry of Works, Transport and communications that there had been a misappropriation of public funds amounting to P6 830 at Sir Seretse Khama Airport involving three revenue

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collectors at the Department of Civil Aviation. In this case a receipt book issued to one revenue collector in the Department was used to collect revenue by three different revenue collectors interchangeably without handing over.

This resulted in a situation in which none of the three revenue collectors could be held responsible for the loss. On enquiry, the two revenue collectors to whom the receipt book had not been officially issued stated that they had handed over all their collections to the revenue collector who had been officially issued with the receipt book. However, the revenue collector concerned denied having received any collections from them. The Accounting Officer was of the view that since three revenue collectors were involved in this case, it would be difficult to secure a conviction against anyone of them. He would therefore, consider a surcharge against the revenue collector who was officially issued with the particular receipt book for negligence. I am still waiting for the outcome of the proposed surcharge action taken by the Accounting Officer.

Audit Inspection – Department Of Electrical and Mechanical Services

Headquarters An audit examination carried out at the above Department in Gaborone in August 2002, revealed that two officers who left the service through dismissal and resignation, respectively, continued to be paid salaries after termination due to the late submission of casualty returns. The total amount of the overpayment involved was P6 792. In one case, the officer owed an additional amount of P13 265 on an outstanding training bond. The total amount recoverable from the two officers was therefore P20 057. I await to hear the outcome of any efforts made by the Accounting Officer to recover the above mentioned outstanding amounts.

MINISTRY OF MINERALS, ENERGY AND WATER AFFAIRS

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Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows Year-end 31st March No of cases Amount P 1999 1 477 2000 16 2 084 2001 58 57 776 2002 108 79 457 183 139 794

While those outstanding imprests which had been drawn by the officers of the Ministry from the Treasury Cashier offices in the Districts countrywide numbered 62 amounting to P65 163. Audit Inspection – Ministry Headquarters

Following an audit inspection, which was conducted at the Ministry Headquarters in August 2002, I addressed the Accounting Officer drawing his attention to the following matter, which I considered merited mention in this report: Since 1982, the Ministry had signed a series of contracts with a non-resident company from whose fees the withholding tax was not deducted, as required by the Income Tax Act. Consequently, the company had never paid the tax for the whole period from 1982 to 1997. Although the amount involved had not been computed, it is likely to be quite significant. When this irregularity came to light, the Commissioner of Taxes requested the Accounting Officer to pay the tax. In response the Accounting Officer raised an objection against the Commissioner’s request on the grounds that

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the relevant records were no longer available and that the matter should be considered time barred. The issue has since been referred to the Attorney General for advice and I await to be advised of the outcome of this dispute. Loss Of Public Funds – Department Of Water Affairs, Molepolole An audit inspection carried out at the above station by the Internal Audit Unit of the Ministry of Finance and Development Planning in August 2001 revealed that revenue collector had misappropriated a total of P99 030 between October 1999 and August 2001. This amount was what had so far been established by audit. The final figure was expected to be more by the time police complete their investigations since some of the receipt books, which had been used during this period, had gone missing and the police were still to establish their whereabouts. It had been noted that throughout this period the revenue collector had not been remitting some of the cash collections she had made to the Treasury Cashier and had either destroyed or hidden the relevant documents in order to conceal evidence. The matter was reported to the police for further investigations and I am still to be advised of the outcome of their investigations. Misappropriation Of Public FundsMaun Water Affairs - P127 680

An audit investigation carried out in November 2001 at the above station by the Internal audit Division of the Ministry of Finance and Development Planning revealed that cash amounting to P127 680 had been misappropriated by two revenue collectors at this station within a period of eighteen months. Details of the two cases were as follows: (a) In one case, the revenue collector had not accounted for his

revenue collections amounting to P125 553, covering the period

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from June 2000 to August 2000. At the time of the investigation,only P4 414 cash and P22 249 in cheques were on hand leaving a balance of P98 890 which could not be accounted for.

(b) In the other case, the revenue collector had not accounted for

some of the revenue collections amounting to P28 790, which he had made between January and October 2001, to the Treasury Cashier. The relevant receipt books through which monies were receipted were destroyed in an effort to conceal evidence.

The two cases were reported to the police and I await to hear further progress from the Accounting Officer. In my view these losses had been facilitated to a large extent by lack of supervision on the part of both the Station Manager and the Treasury Cashier in that Station Manager did not exercise vigilance to realize that the revenue collectors were not remitting collections to the Treasury Cashier while the Treasury Cashier failed to ensure that the receipt books which had been issued to the revenue collectors had been accounted for regularly in compliance with Financial instructions and procedures.

Audit Inspection – Department Of Water Affairs, Headquarters

An audit examination of the consumer water accounts of the Department of Water Affairs for the year ended 31 March 2001 was carried out in July 2001 and a number of observations were made, the main ones of which were the following: Irregular Water Connections A test check of the water consumer accounts at the villages of Tlokweng and Mogoditshane revealed that there were instances where consumers whose water supplies had been disconnected for non-payment had applied for and been provided fresh connections on the same premises, even though they had not cleared the outstanding arrears. Apart from any possible considerations of illegality that may be involved in this irregular

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behaviour, it is clear that the practice is motivated by dishonesty on the part of the consumers involved and the officers who provide the connections, which has the effect of providing water to defaulting consumers free of charge, while their obligations to the Department remained unfulfilled. It has not been possible to compute the loss of revenue to the Department through this practice, but is most likely to be very high. I have addressed the Accounting Officer on the above findings, and suggested an investigation should be instituted into the whole matter to assess the full scale of improper behaviour. Furthermore, in addition to any action that may be taken on my above suggestion, a vigorous follow-up action should be taken to collect the outstanding arrears: a limited test check had indicated that an upwards of P15 532 597 was outstanding in arrears in the above two villages.

MINISTRY OF HEALTH

Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows

Year-end 31st March No of cases Amount 1996 1 1 934 1999 2 6 162 2000 14 19 208 2001 93 215 358 2002 186 487 184

296729 846

Further, some 134 imprests amounting to P151 574, which had been drawn by officers of the Ministry from the Treasury Cashier’s offices in the Districts countrywide, were still outstanding.

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Audit Inspection – Department Of Technical Support

Services, Gaborone Central Medical Stores in the Department of Technical Support Services is responsible for the provision of medical supplies to the various medical institutions in the country. An audit inspection carried out at these stores in August 2002 revealed that there was no proper system of monitoring of debtors, in those instances where sales to the institutions are on credit. The revenue collector, who was also responsible for the collection of debts, was not advised of the invoices issued to these debtors. Consequently, there was no follow up of the debtors who did not pay their debts. In the circumstances, it was only fortuitous that out of a total invoiced amount of P18 551 332 in the year under review, only P7 433 541 (representing 40%) had been collected, and it remains to be seen whether the balance of P11 117 791 will be successfully collected.

New Gaborone Dental Clinic Building Development Project

In the previous year, I had reported that the contractor who had been engaged to construct the Dental Clinic in Gaborone had abandoned the project due to inability to complete the works. Subsequent information revealed that the contractor was served with a final letter of termination in October 2001. Despite this letter of termination the contractor refused to vacate the premises until he was ordered to do so by a High Court Order on the 30th October 2002. While the contractor remained in possession of the site, cases of theft of government materials, air conditioners, door grills, fans etc had taken place. Following the termination of contract, the contractor opted for settlement under the Articles of Agreement. The arbitrator was appointed to hear the dispute between the contractor and Government. Subsequent to the arbitration proceedings, the contractor submitted a claim amounting to P2 646 555 while the government issued a counter claim amounting to P2 139 095. At the time of writing this report the arbitration proceedings were still in progress.

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Audit Inspection – Princess Marina Hospital, Gaborone

An audit inspection carried out in January 2002 at the above institution, revealed the following observations: (a) It was noted that in less than three weeks following the

approval of new tenders in August 2001, price increases for some of the suppliers who had won the new tender were approved. It was not clear to me why these suppliers had applied for price increases immediately after winning tender applications. Besides, some of the price increases were so high, as much as 67% but were approved all the same.

(b) It was noted that the hospital had purchased nutritional

supplements for patients from a supplier without CTB authority. On enquiry it was explained that the supplier was the cheapest even though there was no evidence to that effect.

(c) A scrutiny of records maintained for advances of wages

revealed that the paying officer at the hospital had embezzled public funds amounting to P19 000. This was achieved by altering the amount on each and every industrial class advance application, which had been approved such that the advances were always P1 000 more than the amount applied for. He then cashed the payment vouchers on behalf of the applicants, gave them the correct amounts they had applied for and pocketed P1 000 in each case. Correct recoveries were made from the employees for the advances they had applied for but in each case the P1 000 remained outstanding. There after the officer destroyed all relevant records at the hospital in order to conceal the evidence.

I drew the attention of the Accounting Officer to these matters in April 2002 but at the time of writing this report his response had not been received.

ADMINISTRATION OF JUSTICE

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Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows

Year-end 31st March No of cases Amount 1997 2 4 404 1998 3 14 104 1999 1 6 569 2000 1 8 840 2001 17 147 279 2002 62 131 179

86 312 375 While those outstanding imprests which had been drawn by officers of the Department from the Treasury Cashier offices in the Districts countrywide numbered 35 and amounted to P113 756. Audit Inspection, High Court, Lobatse

An audit inspection of the High Court at Lobatse carried out in May 2002, revealed the following weaknesses:

(a) Cheques amounting to P4 864 080, some dating to October 2001 belonging to depositors under the Guardian Fund were on hand, but receipts had not been issued to bring them to accounts. Some of the cheques held were already stale and others were about to become so. This was a blatant disregard for Financial Instructions and Procedures which require that cash revenue collections be receipted immediately on receipt and that they should be remitted to the Treasury Cashier’s Office at frequent and regular intervals. It is of some concern that junior officers who are entrusted with these onerous duties involving large sums

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of money are not properly trained and supervised to ensure compliance with the relevant regulations. Apart from the difficulties of following-up drawers of stale cheques there may be loss of interest to the depositors as well.

(b) Maintenance and reconciliation of accounts records were not

performed to a satisfactory standard, with the result that, at least, fourteen items of expenditure were overspent to the tune of P2 450 950.

(c) It was noted that a number of computers had been bought for the

various magisterial offices, and that these were not taken on ledger charge on receipt nor the distribution to the different centres evidenced by proper documentation as required by Supplies Regulations and Procedures. These are attractive items of stores, and should therefore be properly accounted for at all times.

I conveyed my observations to the Registrar and Master of the High Court in May, 2002, and at the time of writing this report no reply had been received from him.

ATTORNEY GENERAL’S CHAMBERS

Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows Year-end 31st March No of cases Amount 2002 20 115 468 Further, some two imprests amounting to P10 684 which had been drawn by the officers of the Chambers from the Treasury Cashier’s offices in the District countrywide were still outstanding

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MINISTRY OF FOREIGN AFFAIRS

Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows Year-end 31st March No of cases Amount 1993 1 2 990 1997 1 17 272 1998 1 10 1999 3 1 476 2000 18 62 417 2001 36 52 599 2002 119 1 101 076

179 1237 840

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Plus one outstanding imprest of P6 266 which was drawn by a member of Mission staff away from duty station.

INDEPENDENT ELECTORAL COMMISSION

Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows Year-end 31st March No of cases Amount 2001 1 1 411 2002 8 25 549

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9 26 960

While those outstanding imprests, which were drawn by officers of the Commission from the Treasury Cashier, offices in the Districts countrywide numbered 6 and amounted to P5 931.

OFFICE OF THE OMBUDSMAN

Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows

Year-end 31st March No of cases Amount 2000 1 1 390 2001 2 4 205 2002 5 10 006

8 15 601

MINISTRY OF LANDS, HOUSING AND ENVIRONMENT

Travelling Imprests

The age analysis position of the outstanding travelling imprests under this Ministry as at 31st March 2002, as reported by the Accountant General was as follows Year-end 31st March No of cases Amount 2002 20 130 741

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Audit Inspection – District Administration, Jwaneng

An audit inspection carried out in October 2002 at the Office of the District Officer in Jwaneng gave rise to the following observations:

(a) A test check of the rental payments by the officers of the Departments of Tribal Administration and of Animal Health and Production revealed instances of incorrect rental payments between July 2002 and October 2002, which had resulted in rental arrears of P5 308. Based on these findings, I have suggested that an in-depth check be undertaken to ascertain the extent of the arrears with a view to recovering all arrears.

(b) In another case, an officer who had requested to purchase a

Government Pool house had also offered the same house for sale to a private company, which he had allowed to occupy as a private sub-tenant, contrary to General Orders. When this private deal became known, his request to purchase the house was rejected. I have enquired from the Accounting Officer if any disciplinary action was taken against the officer for this behaviour.

I have addressed the above concerns to the Accounting Officer in December 2002, and at the time of writing this report I had still not received any responses.

Vehicle Testing Station, Gaborone - Development Project

An audit examination of the development expenditure on the above project, carried out in July 2002,revealed the following unsatisfactory features.

(a) Contract for the entire work was awarded to a contractor for P4

821 539, but subsequently the portion relating to Specialist

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Mechanical Equipment, which constituted 36% of the contract sum, was withdrawn and allocated to another contractor. The original contractor was paid P23 135 on account of loss of profit as a result of the withdrawal. Despite repeated requests I had not been able to obtain from the Accounting Officer the justification for the split up of contract, which resulted in Government having to pay these penalties.

(b) According to the contract agreement which had not been

signed the work was expected to be completed within 42 weeks failing which a sum of P1 320.97 per day or part thereof would be paid as liquidated even exceeded the authorized extended period of 44 weeks by 49 days but the Accounting Officer failed to recover the liquidated damages of P64 728. On the contrary the contractor was paid an additional amount of P277 612 in respect of expenses incurred for the extended period of 44 weeks. Furthermore an amount of P126 777 in contractual claims for which there was no supporting documentation was paid.

I addressed the Accounting Officer on the above observations but at the time of writing this report no response was received.

VIII – LOCAL GOVERNMENT AUTHORITIES

In terms of the Local Government (District Councils) (Amendment) Act No. 10 of 1999, the Town Council (Amendments) Regulations 1999, and tribal Land (Amendment) Regulations 1999 each District Council, Town/City Council and LandBoard is required to submit to me the accounts for audit within three months after the end of the financial year i.e. 30 June of every year.

The submission of financial statements to me for audit had not shown any significant improvements over the previous years as some of the Local Authorities had still lagged behind in clearing the backlog of accounts. Even more serious was the fact that none of the local authorities were able to submit the accounts for the year 2001-02 by the due date i.e. 30 June 2002, thus violating the Local Authorities

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Acts. The following nine (9) Local Authorities and Land Board did not submit any accounts for audit during the year under review:

North East District Council Chobe Land Board Ghanzi District Council Jwaneng Town Council Tati Land Board Tawana Land Board Central District Council Kalahari District Council Kweneng District Council

Results of the Audit

The audit of the accounts for various accounting periods submitted by 18 Local Authorities/Land Boards during the year under review had resulted with all accounts being qualified (not given a clean certificate) for various reasons.

From the foregoing it is evident that the standard of accounting prevailing in the Local Authorities leave much to be desired.

Local Authority Public Accounts Committee (Lapac)

During the year LAPAC which is constituted in terms of the Local Government (District Councils) (Amendment) Act No 10 of 1999 was able to issue its first report to the Honourable Minister of Local Government and Land on the examination of audited accounts of 15 councils and 12 land boards

IX. PERFORMANCE AUDIT

The Office of the Auditor General established Performance Audit Division in order to enhance accountability process in the public sector. The purpose of introducing performance audit is to become responsive to the needs of rapidly changing socio-economic environment within which our government is operating. Performance auditing attempts to provide a comprehensive, objective, and analytical feed back to the stakeholders; like legislators, policy makers, top managers, and tax-payers on

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performance of the public sectors programs. It is a mechanism, which reviews performance of public programs, projects, operations, and entities within broader framework of their ability and capacity to deliver and achieve the intended goals and objectives through efficient and economic means. The main objective of performance auditing is to satisfy myself that public resources are used economically, efficiently, and effectively and applied for purposes intended by the public sector authorities. The government is also becoming more focused on the issue of performance of public managers and in this regard it has undertaken a major initiative by introducing Performance Management System (PMS). Introduction of PMS attempt to make the public managers more responsive to their duties and responsibilities by identifying yardsticks e.g. laying down orgainisational goals, objectives, strategies, and procedures. In the backdrop of PMS the role of performance auditing has gained more significance.

X PARASTATALS

Air Botswana

The accounts of Air Botswana for the year ended 31st March 2002 were audited by Messrs PricewaterhouseCoopers, Certified Public Accountants, who were appointed by me in terms of Section 22 (2) of Air Botswana Act No. 4 of 1988. 2.1 Accounts.

Audit Opinion

The Corporation has kept proper books of account with which the financial statements are in agreement.

2.2 Operating Results

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The audited accounts for the year showed an operating profit of P5.67 million as against an operating loss of P13.30 million in the previous year. This improved result was mainly due to the increased passenger revenue from P82.47 million in the previous year to P96.25 million this year and to the reduction in the aircraft leases from P20.06 million last year, to P11.14 million, consequent upon the purchase of two of the three aircrafts previously leased from the manufacturer. The income for the year, after taking into account the non-operating income and net interest income was P12.39 million compared to P8.30 million in the previous year. Included in the operating income for the year was an amount of P5.52 million being the value of unflown tickets transferred to revenue. The amount similarly transferred in the previous year was P4.65 million.

3 General 3.1 Financial Restructuring and Privatisation

The Ministry of Works, Transport and Communications approved the privatization plan in April 2000 and the project has been in progress. The International Finance Corporation, whose mandate to lead the privatization programme was suspended pending the recovery of the aviation market which suffered a setback as a result of the post-September 11, 2001 effects on the civil aviation market, has since presented a revised timetable to conclude the transaction. It is expected that the transaction will be concluded by May 2003.

3.2 Aircraft Fleet

The Corporation purchased two of the three ATR 42-500 aircraft that were leased from ATR in September 2001. Subsequent to the year-end, the remaining aircraft was also purchased from ATR. The Corporation also leases a passenger Fokker 28 on a ‘wet’ lease basis, as and when required. Other aircrafts were ‘wet’ leased on an adhoc basis to meet the demand for cargo capacity.

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The Bae 146 is still on the market for sale and was not used in operations during the year. The aircraft was included in current assets as an asset held for disposal. Subsequent to the year-end, pending the identification of a suitable buyer, this aircraft has been brought back into service.

4 Management Letter

The following were significant matters raised and the responses of the management thereto:

4.1 Long Outstanding Lodgments in Bank Reconciliation Statements There were still outstanding items amounting to P21 197 (reduced from P57 528 last year) to be followed up and cleared. In response management stated that they were continuing to work closely with the banks with a view to clearing the remaining unresolved lodgments.

4.2 Dishonoured Cheques The Auditors had reported that the value of dishonoured cheques, which was P 169 166 as at the end of the last financial year had increased to P187 458 as at end of the current financial year. They recommended that consideration should be given to reviewing the policy of acceptance of cheques from customers and follow up procedures performed on returned cheques. In response management stated that out of the. P187 458 that was outstanding, P10 331 has been collected subsequent to the year-end adding that some of the amounts recorded as dishonoured cheques date back to 1997 and hence the amount had accumulated over a long period of time. It would appear that consideration should be given to the write-off of the long outstanding dishonoured cheques.

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4.3 Accounts Receivable

The Corporation had outstanding staff loans of P72 150 due from employees who are no longer with the Corporation and the auditors recommended that necessary action should be taken to resolve these loans as soon as practical. Management responded by stating that loans were given long time ago when staff were given loans without adequate security. Staff loans have since been abolished and replaced with appropriate facilities arranged with banks. The Corporation has instituted legal action against these former employees and it is hoped that part of the money will be recovered.

4.4 Commission Agreements A review of the commission agreements entered into by the Corporation revealed that the agreements were not finalized and signed at the commencement dates, for example, the agreement with British Airways was signed on 21 September 2001, six months after commencement; and the agreement with South African Airways was signed on the 31 March 2002, twenty three months after commencement. In response management explained that the signing of these agreements depend on the effort of the airline and the co-operation of the other carriers with whom the agreement is being entered into. It has been stated that some degree of success has since been achieved as agreements with other carriers have now been concluded covering the period up to March 2003. It is my view that in future management should ensure that agreements of this nature are signed before such agreements are enforced. This will go a long way in avoiding repercussions in the event of disputes.

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.Botswana Telecommunications Authority The accounts of the Botswana Telecommunications Authority for the year ended 31st March 2002 were audited by Messrs KPMG, Certified Public Accountants, who were appointed by the Board in terms of Section 14 (2) of the Telecommunications Act No. 15 of 1996. 2. Accounts

2.1 Audit Opinion The Authority had kept proper books of account with which the financial statements were in agreement and had complied with the financial provisions of the Telecommunications Act, 1996.

2.2 Operating Results

The operations of the Authority resulted in a surplus for the year of P36.45 million as compared to a surplus of P20.86 million in the preceding year, as shown below:

2002 2001 000 000

Total revenue 47 866 31 728 Total operating expenditure 17 048 13 129 Operating Surplus 30 818 18 599 Total other income 5 637 2 261 Surplus for the year 36 455 20 860 The improved performance was mainly due to the increase in revenue income from service and system licence fee, which had increased during the year to P43.80 million. from P26.73 million in the previous year

2.3 Contingent Liability

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As stated in the notes to the accounts, a major operator had requested a refund of P3 820 980 from the Authority relating to an overpayment of service fees for the year ended 31 March 2001. The operator had initially requested a refund of P998 367 and later revised the amount to P3 820 980. Consultants were being commissioned to investigate the discrepancy arising from the two different amounts by the service provider, the outcome of which was not yet established, at the time of writing this report.

3. Management Letters 3.1 Readiness for Audit

The only significant observation raised by the auditors was that a list of schedules and information required for the audit was sent to the authority prior to the commencement of the audit but the information provided was incomplete with a number of schedules and information not furnished. For example, the amounts provided in the schedule had not been reconciled to the trial balance properly. As a result, many audit adjustments had to be processed which inadvertently led to a lot of time being spent on the audit and preparation of financial statements. Management noted the comment and stated that they would comply with the requirements in the future.

Botswana Export Development and Investment Authority (BEDIA)

The accounts of the Authority for the year ended March 31, 2002 were audited by Messrs Deloitte & Touche, Certified Public Accountants (Botswana) who were appointed by the Authority in terms of the Botswana Export Development and Investment Authority Act No.23 of 1997.

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2. Accounts

2.1 Audit Opinion

The Authority had kept proper books of account with which the financial statements were in agreement.

2.2 Operating Results

The surplus for the year, including the capital grant of P10.25 million was P15.46 million compared to the previous year surplus of P22.54 million, after taking into account the capital grant of P13.90 million for the year due to the change in the basis of accounting for the grant.

The expenditure increased from P6.09 million in the previous year to P10.13 million during the year and consisted of the following:

2002 2001 ‘000 ‘000 Staff expenses 3 525 2 149 Investment promotion expenses 2 050 1 759 Export promotion expenses 1 154 391 Administrative expenses 994 474 Depreciation 618 175 Other expenditure 1 791 1 147 -------- ------- Total expenditure 10 132 6 095

3. Management Letter

The following are significant matters raised and the responses of the management thereto:

3.1 Investments

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At the balance sheet date the Authority had significant cash balances totaling P40.77 million, out of this P39 million was a credit risk since it was deposited with one financial institution. The Auditors recommended that management should institute some guidelines for the investment of cash resources to ensure that the returns are maximized and risks reduced. In response management stated that they had concurred with the recommendations of the auditors and had invested surplus funds in Bank of Botswana certificates and P15 million was invested in fixed deposits with two other financial institutions.

3.2 Procurement Policy and Procedures The Authority’s financial regulations give guidance on procedures to be followed in the procurement of goods and services. However, it had been noted that with regard to the appointment of consultants and representatives there is no proper guidelines as to the minimum number of comparative quotations and value to be taken into consideration, in deciding whether tender procedures should be followed. It had been recommended that management should consider instituting a register of consultants for the various services that may be required from time to time to facilitate sourcing comparative quotations or inviting potential consultants to tender.

Management stated that the Authority had put on hold entering into long term contracts with consultants and external representatives, until a policy on how best this could be done is finalised. At the moment the Authority has one external representative based in India.

Although a register of consultants is accepted for general management consultancies, management pointed out that external representations are more specific to a particular market. Management had noted the concern expressed and stated that a standard would be proposed as a basis for negotiating and

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ensuring that the Authority’s representatives are comparable for respective markets. Botswana Savings Bank

The accounts for Botswana Savings Bank for the financial year ended 31 March 1999 were audited by Messrs Pricewaterhouse Coopers Certified Public Accountants and were submitted to me together with the Management Letter. The audited accounts for the three consecutive years up to 31 March 2002 had not been submitted to me for review. 2. Accounts

2.1 Audit Opinion

The Bank has kept proper books of accounts with which the financial statements were in agreement and has complied with the financial provisions of the Botswana Savings Bank Act No. 8 of 1992.

2.2 Operating Results

The operations of the Bank for the year under review resulted in the operating income increasing by 13% from P10.55 million in 1997/98 to P11.97 million in 1998/99. However operating expenses increased by 33% from P5.33 million to P7.12 million in the same period. This resulted in the decrease in the net income for the year to P4.71 million compared with P5.08 million in the preceding period. 3. Management Letter

3.1 Orphan Accounts During the process of inputting transactions to the new software several accounts had lost their association with the customer detail and had been classified as orphan accounts. At the time of the audit there were 14 812 accounts amounting to P449 992 in this category. It

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was recommended that Management should investigate and resolve the problem. Management agreed with the recommendation to continue with the exercise of matching the accounts to the customers.

3.2 Deposit Accounts

There were substantial debit balances in customer accounts in the new system, which had been netted off against the credit balances. In 1998/99 there were 8946 such accounts totalling P1 350 388. Some of the balances may be as a result of the orphan transactions but it is also possible that they may be the result of fraudulent activities. Management were urged to investigate these balances. A provision of approximately P1 million had been made against these balances until such time that they are cleared. The management stated that a dedicated team had been appointed on a full time basis to investigate and resolve the balances and that the corrections were being made as necessary. They also indicated that the debit balances had resulted from, among other reasons, closed accounts that had not been cleared from the system, mispostings and omissions of previous balances when importing to the new system. They had also discovered fraudulent entries of deposits, which were currently being investigated by the Internal Audit Section.

3.3 Internal Audit It was noted that the Internal Audit Department had been involved in

the process of getting the bank records up to date. As a result they have not been performing the duties that would normally be required of them. It was recommended that they should prepare a risk assessment of the bank and an audit plan. The plan and the results of the work performed should then be reported to the Audit Committee. In response Management stated that the Internal Auditor was still significantly involved in the project, but would assume full

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responsibilities of his portfolio when the project ends. They had also indicated that additional staff had recently joined the department.

3.3 Title Deeds The Bank had not been able to obtain the title deeds for the Head Office from Government. It was recommended that the title deeds be obtained in order to regularise the Bank’s title to its property. The Management stated that they were following up the matter with the Government.

3.4 Rent The lease agreement provided that the rent shall remain fixed for an initial two-year period and shall thereafter be subjected to review in accordance with the open market rates. The rentals charged by the Bank to Government and Parastatal Tenants were not revised upon expiry of the two year leases in January 1997 for the Parastatal and in March 1997 for Government departments. It was recommended that the rent charged should be reviewed periodically as provided in the lease agreement. The Management noted the recommendation. .

3.6 The following matters which were raised in the previous auditors management letter had still not been resolved in the year under review.

a) Agency Agreement

The draft agency agreement between the Bank and Botswana Postal Services had still not been finalised. Management agreed with the observation.

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(b) Agency Transactions

The Bank continued to rely on Botswana Postal Services to specify the number of transactions that occur in each period for purposes of determining agency fees. At the end of the period under review the Bank had recorded 492 123 transactions against 505 706 initially recorded by Botswana Post. This difference may be due to manual errors made by Botswana Postal Services. During the audit it was revealed that Botswana Postal Services had overstated by 15 721 transactions in July 1998, resulting in the Bank being overcharged by P23 581.The figures had been restated following the audit finding, and the number of transactions recorded by Botswana Postal Services were adjusted to 489 985. It was recommended that the number of transactions must be reconciled and agreed between the two parties. As in the previous year the Management stated that the differences were being investigated and Botswana Post would be contacted to finalise the reconciliation.

(c) Dormant Accounts

In my last report, I had indicated that no dormant accounts had been transferred to the dormant account reserve since 1990 in contravention of Section 18 of the Botswana Savings Bank Act.

Management had indicated that they would review the savings ledgers for dormant accounts after conversion to the new software. They had also stated that there would be no merit in publishing the names of dormant account holders in the Gazette at this point in time when there is likelihood that some of these accounts may have been re-activated already before the system is live. The situation remains the same this year and the management have provided the same justification for not transferring the dormant accounts to a reserve. They also indicated that the

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matter had been discussed and agreed with the Bank of Botswana.

(d) Fraud

I reported that there were fraud cases totaling P55 055 as at 31 March 2000. The cases had increased to P62 803 as at January 2002. Although these cases had been reported to the Police, I am not aware of any recoveries.

In response management stated that instances of fraud were discovered when savings books were brought in for audit and that a call centre staffed by a dedicated project resource team had been set up to assist the Post Office in resolving any suspicious transactions timeously. They once again indicated that once the new system goes live accounts which go into debit would immediately be investigated and corrective action taken.

3.1 Botswana Railways

The audit of the accounts of Botswana Railways for the year ended 31 March 2002 was carried out by me in pursuance of Section 21(2) and (3) of the Botswana Railways Act No. 22 of 1986 (Cap 70:01). My report on the audit of these accounts was submitted to the Minister of Works and Transport and the Botswana Railways on 12 September 2002 in accordance with Section 21 (4) of the Act.

2.1 Accounts

2. Audit Opinion

Botswana Railways has kept proper books of accounts with which the financial statements are in agreement and has complied with all the financial provisions of the Botswana Railways Act (Cap 70:01)

2.1 Operating Results

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The operations during the year resulted in a loss of P1.59 million compared to a loss of P11.05 million in the preceding year. After taking into account other income including interest income and interest expense on government loans, the net profit for the year was P19.34 million compared to P12.77 million in the previous year. The management had appointed marketing consultants to advise the organization on a marketing strategy, in the context of the present adverse business conditions faced by the organisation.

3 Management Letter

The following are the most significant observations arising from the audit of the accounts of the organization and management responses thereto:

3.1 Botswana Railways Land The Botswana Railways has a number of boreholes along the railway line some of which have been leased to farmers. On enquiry I have not been provided with the details of the locations of the full complement of these boreholes and the tenancies together with the particulars of the rentals payable by the tenants, as these were not readily available from management. As a result I could not complete my audit verification of these assets and income in the accounts. Further as part of normal audit verification I had not been able to obtain details of locations of parcels of lands reflected in the balance sheet at a valuation of P19 882. I have however been informed that as consultant had been engaged to identify all the lands in question, and come up with proposals for use on a commercially sound basis It has been pointed out that such use would not be in line with the mandate of the organization as laid out in the Act.

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The management had accepted this point and had taken steps to ensure that any such proposed land use would be in line with the Act.

3.2 Estate Management

It was noted that the Organization had been without an estate officer for a long time and the situation has deteriorated to the extent that lease agreements were not entered into in respect of properties such as houses and boreholes.

The management responded by saying that mandates of the project manager includes estate management matters and that the post of the estate officer had been advertised.

3.3 National Railways of Zimbabwe: Account Current P3 512 854.71

The financial records of Botswana Railways indicated that the National Railways of Zimbabwe (NRZ) had not made any payments since October 2000 and the balance due from them had accumulated to P3.51 million as on 31 March 2002. It was also noted that it had not been possible to remit these funds from the country. Under the circumstances, Botswana Railways had taken a number of steps to prevent further accumulation of funds in Zimbabwe, such as the advance payments to be made in Botswana currency for freight traffic by Botswana Railways to Zimbabwe. In response the management stated that NRZ deposited the sum of Z$ 20 000 000 (approximately P2.3m) on the 3 October 2002 into BR bank account held in Zimbabwe. It is hoped that this arrangement will continue to reduce BR money owed by NRZ.

3.4 Demurrage The examination of the truck book maintained at the area office in Gaborone, revealed that there were delays in placing the wagons for offloading. This delay, which at times runs into more than a week,

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result in the organization having reduced number of wagons available for use, resulting in loss of revenue. Management stated that the reason for the delay in placing the wagons for offloading is that customers do not have adequate storage capacities to cater for the goods sent by their suppliers. On the other hand suppliers prefer to send consignments in large batches at the same time. It is difficult for BR to refuse acceptance of such consignments at the interchange point. Such an action will have a negative impact on BR’s business, as customers would immediately resort to road transport. Some customers do not have adequate offloading facilities and this tends to delay the turn around of wagons placed at their sidings. In a bid to address this problem, BR has a standing arrangement with its customers whereby they increase their shifts whenever they receive large volumes of commodities. The companies are encouraged to reconsign their goods to other depots in Botswana whenever their storage facilities are full.

3.5 Guidelines For Emergency Situations

There are no defined guidelines or contingency plans to deal with emergency situations such as the need to transport passengers by road at a time of derailment. It was observed that ad hoc arrangements were being made at considerable cost. It is desirable to have, established contingency plans, to cope with situations arising from derailments and other unforeseen situations. In response the management stated that Botswana Railways recently developed guidelines on actions to be taken in cases of emergency. The guidelines categorize different incidents and relevant officials of service departments to be notified.

3.6 Control over Locomotives Fuel Consumption

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It was observed that there is a procedure in place to prepare consumption reports, recording the kilometers and the tonnage done by each loco and the fuel consumed by them so as to ascertain the fuel consumption of each locomotive per ton/km. However, the tonnage particulars had not been entered in this report, thereby the control to be exercised over the fuel consumption had not been exercised. Compiling the fuel consumption reports and regularly monitoring the fuel consumed by each locomotive will go a long way in controlling the cost and avoiding unnecessary wastage. In response the management stated that the Assistant General Manager Finance and the Management Accountant, in consultation with the Chief Engineer – Motive Power will agree on how best to prepare the locomotive fuel consumption report.

Botswana Power Corporation (BPC)

The accounts of the Botswana Power Corporation for the year ended 31st March 2002 were audited by Messrs PricewaterhouseCoopers, Certified Public Accountants, who were appointed as auditors by the Corporation in terms of Botswana Power Corporation Act (Cap 74:01). 2. Accounts.

2.1 Audit Opinion

The Corporation had kept proper books of accounts with which the financial statements were in agreement and had complied with all the financial provisions of the Botswana Power Corporation Act (Cap 74:01).

2.2 Operating Results

The profit from operations during the year declined from P87.80 million in the previous year to P56.10 million, representing a decrease of 37%.

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2002 2001 % P‘000 P’000 Increase Total Operating Income 445 025 421 188 6% Total Operating Expenses 388 926 333 384 17% Profit from Operations 56 099 87 804 36%

The decline in the profit from operations was mainly due to disproportionate increase in the generation transmission and distribution expenses during the year. The more significant items of expenditure included in the generation, transmission and distribution expenses occurred as indicated below: Generation, Transmission & Distribution Expenses: 2002 2001 P‘000 P‘000 Fuel, water and chemicals 24 360 22 262 Purchased power 72 463 66 292 Staff costs - generation 26 709 21 196 - transmission & distribution 50 832 39 040 Depreciation generation 50 828 39 723

- transmission & distribution 44 828 37 465

Administration & other expenses: Staff costs 50 169 38 527 Other expenses 37 614 30 051

3. Management Letter

The following are significant matters raised and the responses of the management thereto:

3.1 Deferred Repayment Schemes Credit Balances

Receipts from the scheme consumers amounting to P16 million at the year end (P8 million on 31 March 2001) contained in a clearing account represented cash received from customers which had not

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yet been allocated to specific customer accounts, but had been set off against the scheme debtors balance. Some receipts from customers had been in this account since 2000. The existence of unallocated cash receipts indicated that management did not have proper control over customer balances. The unallocated amount had almost doubled during the year thus adversely affecting management’s ability to monitor scheme debtors and to follow up customers with long outstanding balances. Management responded by stating that cash receipts were captured in two separate systems. On occasions cash receipts for schemes had been made into the Harris system’s clearing account. This clearing account was then analysed every month and the payments correctly allocated. The accumulation of unallocated account was due to teething problems on the system. The accessibility to the system has since been improved to reduce the need to receipt payments into the Harris system and the resources for following up the backlog had been increased. It was anticipated that the backlog would be cleared by the end of September 2002 and only items that are less than two months old will be in this account.

3.2 Line Service Charge

A credit balance of P3 849 000 relating to line service charges had been included in the consumer financed project account. It was not clear what this balance represented and how it will eventually be cleared. The nature of the accounting entries passed was such that the balance would continue to grow as long as the Corporation continues to install service lines to customers who are unable to raise the required initial costs on a timely basis. It has been recommended that the management should review the nature of the accounting transactions in this account and determine whether the balance requires to be adjusted. In response management stated that when the scheme was introduced, it was intended to offset this credit balance against the

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costs incurred in setting up the distribution network, once the predetermined number of customers had connection in each area. Management agreed with the recommendations and stated that they would conduct an extensive study of all schemes to determine the validity of the outstanding credit balance.

3.3 Consumer Financed Project Accounts.

A review of the listing of consumer-financed projects indicated that some customers had long outstanding credit balances, which implied that installation work had either not been done, or that the cost of materials used had been misallocated to other account codes. In this regard it was recommended that management should make a thorough review to determine the cause of these credit balances and action taken accordingly. In response management stated that these large credits are a result of misallocation of expenditure and that they were in the process of conducting an investigation to determine the cause of the balances.

3.4 Standard Cost Recovery – Under Recoveries Not Written Off

A debit balance of P24 848 000 relating to standard cost recovery had been set off against the consumer financed projects balance. This balance is the difference between actual costs of installing transmission lines and the total amount contributed by customers sharing these lines. A net surplus in the cost of installation over the recoveries from the customers indicated that the customers had been paying lower amounts than the actual costs incurred by the Corporation, arising from under estimation of costs or fewer customers than the number expected to have been connected. This was a potential loss to the Corporation, as it may not recover the costs incurred on consumer-financed projects. In response, management stated that they were revisiting the standard cost policy with a view to ensuring that over a period of time, the under recoveries and over recoveries in each of the villages result in a

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nil balance. In the event it becomes apparent that it will not be possible to achieve a nil balance, then the shortfall will be capitalised and the economic value be reassessed.

3.5 Delays in Raising Customer Bills

In some instances monthly bills were not raised for some months for customers whose meters were not read. The Corporation’s policy of estimating consumption when meters were not read was not followed in these instances. The unbilled amounts were, however, included in subsequent bills. It was recommended that a thorough review of exception reports should be made to determine those customers whose monthly bills were not raised. In response management stated that the system was unable to estimate and that they were working on the upgrade of the Route Master System to ensure that the unread and no access meters reports were monitored. Additional supervisory resources were being introduced that should prevent this happening in future.

3.6 Delays by the Government in Paying for Ghanzi Losses

An amount of P16 million receivable from the Government for the losses incurred by the Ghanzi Agency was included in the trade and other receivables at the end of the financial year. As of 30 June 2002, the Government had paid only P5.4 million for the 2001 balance. According to the agreement between the Corporation and the Government, the latter should pay the full amount of the loss incurred in Ghanzi upon submission of the audited financial statements of the Agency. In response management stated that they had complained to Government on a number of occasions about the delay in their making payments, which resulted in the Corporation financing the deficit at Ghanzi, and that was never the intention when the Corporation took over the operations from Department of Electrical and Mechanical Services (DEMS). On the other hand, Government

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claimed that they had under estimated the deficit each year and therefore there were insufficient funds available to pay the deficit. The Corporation therefore had to wait until the New Year’s budget was available to pay for the shortfall in the previous year. Management claimed that they had always submitted what it felt were accurate estimates but the load growth had averaged 30 % a year in Ghanzi, whereas in the rest of the country it was only 7 % over the same period.

Water Utilities Corporation.

The accounts of Water Utilities Corporation were audited by Messrs PriceWaterhouseCoopers, Certified Public Accountants who were appointed by the Corporation with the approval of the Minister in terms of Section 25 (2) of the Water Utilities Act (Cap.74:02).

2 Accounts

2.1 Audit Opinion

The Corporation had kept proper books of accounts with which the financial statements were in agreement and had complied with the financial provisions of the Water Utilities Corporation Act (Cap. 74:02).

2.2 Operating Results

The operations of the Corporation for the year ended 31 March 2002 showed a decline in the net profits over the last three years as follows: Year Pula

(Million)

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2000 98.45 2001 94.41 2002 56.69

The water sales revenue increased by 27% from P233.95 million in 2001 to P297.30 million in the current year, while total expenditure increased by 42.5% from P116.88 million to P166.60 million in the same period. This was mainly due to an increase in administrative and depreciation expenses occasioned by the take-on and capitalisation of the North South Carrier Water Project. 3. Management Letter

The following are the most significant matters which arose from the audit and the management responses thereto:

3.1 Billing Procedures

The revenue system generates a number of exception reports, which enable management to determine the overall accuracy of the billing process. There was no evidence to indicate that senior members of staff reviewed the reports periodically and that action had been taken in instances where exceptions were noted. Failure to review and action exception reports could affect the efficiency of the billing cycle and increase customer complaints and queries. In addition revenue could be misstated. It was recommended that the exception reports generated by the system be identified and formalised procedures introduced for the review process. It was also recommended that Internal Audit should perform reviews to confirm that reports are dealt with appropriately. Management responded by stating that exception reports were printed and actioned on a monthly basis before the next billing cycle

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started. However they agreed that a formalised procedure was necessary in order to produce evidence that action was taken.

3.2 Tswasa Water Scheme

In the course of the audit, the auditors had found that the liability for the cost of water purchased from Tswasa and the capital repayment had not been calculated correctly in terms of the Agreement. In the current year there was an overprovision of P1.6 million as a result of inaccurate accrual for operational and maintenance costs. They also discovered that an amount of P19 million had been brought forward from prior years as total liability to Tswasa. This amount included capital cost and cost of water purchased under the Agreement. The Corporation had stopped the repayment of this liability to Tswasa several years ago since it was not clear which Government Department in South Africa was responsible for servicing the loan granted to the scheme. The auditors had recommended that the liability to Tswasa should be recalculated and reviewed to ensure compliance with the agreement. The Corporation was also advised to take proactive action to follow up the Department of Water Affairs in South Africa. In response the Corporation stated that they had compiled a spreadsheet to analyse the accrued figure and will ensure that payments are matched with the accrued amounts. They also stated that a separate accruals account would be maintained to monitor Tswasa accruals.

3.3 Consumer Debtors During the systems upgrade in February 2002, transactions amounting to P359 000 were posted to the subsidiary ledger whilst the general ledger was not simultaneously updated. A manual exercise to match certain credit balances to consumer debtors also revealed a difference of P551 000. The net effect was a difference of P192 000 between the total consumer debtors in the general ledger and the

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detailed list in the subsidiary ledger. The consumer and other debtors clearing accounts were also similarly misstated.

It was recommended that a detailed reconciliation be prepared each month explaining the differences between the general and subsidiary ledger. Management were also urged to provide adequate supervision to ensure that all adjustments were processed appropriately. Management agreed with the recommendation and stated that there was a report, which dealt with part of the difference.

3.4 Property, Plant and Equipment

There was a difference of P1.9 million both in the opening cost and accumulated depreciation between the amounts recorded in the financial statements and the general ledger. This difference arose as a result of migrating from the old system to SAP system when assets which were fully depreciated were not recorded in the SAP system. Management concurred with the findings and the recommendation to identify the fully depreciated assets still in use and account for them through the asset register in the new SAP system.

3.5 Translation of Foreign Currency Balances It was noted that at year end all foreign currency balances had been converted at the mid exchange rate instead of the buying/selling rate as applicable. This had led to net exchange gains amounting to P1 834 523 in respect of loans.

Management accepted the recommendation to translate foreign currency assets and liabilities at the year-end buying/selling rates.

3.6 Payroll The payroll system did not generate an exception report that compares the basic pay to that of the previous month in order to identify changes that may have been made. In the absence of such

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a report any unauthorised changes to standing data may not be detected on time and the Corporation is exposed to the risk of errors and fraud. It was recommended that a payroll exception report should be generated by the system with the assistance of the systems consultants. Management accepted the recommendation.

3.7 Statutory Financial Statements

The preparation of the financial statements for the year ended 31 March 2002 had been delayed, and the accounts were only provided in early July. This had disrupted the timetable for submission of the year-end accounts to the Board. Management was urged to ensure that the year-end financial statements are completed within 30 days of year-end since the new SAP system had the capacity to meet the deadline. They were also requested to ensure that consolidated accounts are prepared from the general ledger by the system and not through spreadsheets. Management agreed with the findings and recommendations.

3.8 Internal Audit Department

The staffing complement in the department had continued to be inadequate as previously reported. The department could not perform all the work planned during the year and only limited reviews were carried out. The size and volume of the business of the Corporation make it susceptible to numerous risks. It is important that regular reviews are conducted, especially in revenue and other risk related areas. It was also noted that the Internal Audit team did not have access to certain modules within the SAP system making it difficult for them to perform reviews effectively.

It was recommended that the Internal Audit Department be fully staffed as soon as possible and a detailed risk based plan be prepared and followed. It was also recommended that Internal Audit

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be allowed access to all modules to enable them to carry out the necessary reviews. In response management stated that extended training and the lack of suitable responses to advertisements for positions in the section had affected the staffing. The Corporation was considering applications from expatriates for the position of Internal Audit Manager, and interviews would be conducted in due course.

Botswana Agricultural Marketing Board

The accounts of the Botswana Agricultural Marketing Board for the year ended 31 March, 2002 were audited by Messrs Deloitte and Touche, Certified Public Accountants who were appointed as auditors by the Board with the approval of the Minister in terms of section 16 (3) of the Botswana Agricultural Marketing Board Act (Cap 74:06).

2. Accounts

2.1 Audit Opinion

The accounts of the Botswana Agricultural Marketing Board (BAMB) had been qualified to the effect that the Board had incurred a trading loss of P1 073 888 which included unexplained stock losses of P480 552. In view of the accumulated deficits of P8 467 498 at 31 March 2002, the Board had not complied with the financial provision of Section 14 of the Botswana Agricultural Marketing Board Act which requires the Board inter-alia to ensure that its revenues are sufficient to enable it to meet the expenditure of the Board properly chargeable to its revenue accounts.

2.2 Financial Restructuring The Board had a financial restructuring in 2000, in which interest and other liabilities payable to Government amounting to P41.08 million were written off and the Government converted debt of P26.45 million

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to equity. It was expected that the financial position and the performance of the Board would improve following these reforms. However, the annual loss of the Board had increased despite the reduction in interest charges, as a result of the restructuring exercise.

3. Management Letter The following are the most significant observations, which arose from the audit and the management responses thereto:

3.1 Operating Results The Board had made a net loss for the year of P1 073 888 compared to a loss of P388 154 in the previous year despite the reforms referred to in the preceding paragraph. The accumulated loss to date stood at P8 467 498 and major contributors to the loss were stock losses which amounted to P480 552 and the provision for bad debt of P587 732. Under the circumstances, it is uncertain as to whether the Board will continue as a going concern without Government financial support.

3.2 Stock Losses

An amount of P480 552 was written off as stock losses during the current year. These stock losses could be as a result of problems associated with physically measuring the silo stock and fraud or collusion between suppliers, customers and members of staff. The auditors recommended that management should find more accurate methods of determining quantities in silos and also improve internal control measures over recording of stock and sales.

In response, the management indicated that visits would be undertaken to South Africa and possibly Zimbabwe to study their systems and depot computerisation, which should assist in reducing

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stock losses. They also stated that stock controllers and storekeepers would be recruited to improve both record keeping and monitoring of stock movements.

3.3 Debtors Ledger

During the cause of audit it was noted that the debtors ledger was poorly maintained in the following regard:

• Records were generally not updated or sufficiently accurate. • The ageing of debtors was found to be incorrect on a large

number of balances as at 31 March 2002.

• Payments were not applied against relevant debtors accounts.

• Outstanding debtors were not being followed up timeously to ensure prompt payment.

• There were a number of instances where customers had not

signed sales invoices as proof of delivery.

• Debtors statements were not being sent to customers regularly.

As a result of the above, the incidence of long outstanding amounts had resulted in a provision for doubtful debts of P1 002 047. Management concurred with the observations and stated that the shift to ACCPAC as well as the separation of the functions of debtors and stock sections and debtors from creditors would facilitate the proper maintenance of the ledger.

3.4 Fixed Asset Register The following weaknesses were noted in the maintenance of the fixed asset register:-

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• There was no breakdown of the various categories of assets

allocated to the various depots thereby making physical verification of assets difficult.

• BAMB held title to certain plots of land, which were carried at

nil value in the register, thus understating the value of the assets.

It was recommend that the assets should be physically identified and clearly labelled and the depot at which they are held also identified. Furthermore the carrying value of the land to which BAMB holds title should be established and brought into the books. Management stated that that they had started recording the fixed assets by depot at the beginning of 2002/2003, and that the land would be valued in urban and peri-urban areas where it is feasible to verify market values.

3.5 Rental Income There were a number of lease agreements for which rental income had either not been recorded or recorded incorrectly, thereby resulting in an understatement of rental income. It was recommended that a master file should be created noting the lease agreement dates and rental income due, and that the schedule should be updated monthly to enable tracking and recording of all rental income. Management has since confirmed that invoices were now being sent to tenants timeously since the beginning of 2002/2003.

3.6 Strategic Grain Reserve (SRG)

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The auditors noted that there was no written agreement on minimum balance of stocks to be held by BAMB on behalf of the Government as a strategic grain reserve. According to management there is an oral agreement for BAMB to keep a maximum of 10 000 tonnes of maize and 10 000 tonnes of sorghum. At year end there were no stocks held in this reserve thereby the Board failed to honour its commitment to Government who had advanced funds to it for this purpose. In their response the management stated that the draft Agency Agreement had been prepared and would be sent to Government in September 2002, and possibly finalised by the end of December 2002.

4. Special Audit of the Strategic Grain Reserve

I was requested to carry out a special audit of the SGR under Presidential Directive CAB MEMO 20 (a)/2002 dated 21 June 2002. In addition to the issue already raised above the following matters were pertinent. a) Accounting for SGR transactions

Grains received in the form of donations were not credited to the SGR current account but were treated as purchases for SGR thereby BAMB appropriating for itself the donations received.

b) Pricing Policy

The Board was expected to use the cash provided by Government to purchase SGR stocks from the open market on its behalf. Instead they bought from the market at producer prices and sold to the Government at release prices making a profit. On rotating the stock the Board again bought from the Government at producer prices and sold it on the open market at release prices, resulting in profit and unfairly prejudicing the Government financially. The Government could have reaped some benefits of the economies of scale from the bulk purchases

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and bought more stocks from its fund. Whenever the Board requested to rotate stocks, the Ministry of Finance and Development Planning instructed that the sale should be to the highest bidders in the open market but this instruction was never carried out.

Although the Board was paid agency fees for managing and

handling SGR stocks, it unduly benefited from buying stocks at producer prices and selling to Government at open market prices.

(c) Rotation of stocks

The Board’s failure to rotate the stocks on time resulted in the large amounts of grains getting spoiled and having to be disposed of as stock feed at very low prices.

Botswana Meat Commission

The accounts of the Botswana Meat Commission for the year ended 31 December 2001 were audited by Messrs KPMG, Certified Public Accountants, who were appointed as auditors of the Commission in terms of Section 20 (2) of the Botswana Meat Commission Act (Cap 74:04).

2. Accounts

2.1 Audit Opinion

The Commission had kept proper books of accounts with which the financial statements were in agreement and had complied with the Botswana Meat Commission Act, (Cap74:04) as amended.

2.2 Operating Results

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The Commission had a favourable year, with increased throughput, resulting in a commendable profit for the year and positive cash flows. The net sales of the group for the year were P451.91 million compared to P410.31 million in the 15-month period ended 31 December 2000.The group had an after tax surplus of P41.18 million against a deficit of P21 58 million in the preceding 15-month period.

2.3 Appropriation of Surplus

Commission Group

P’000 P’000

Surplus for the year after taxation 38,064 41,186.

Retained Surplus at the beginning of the year 8,834

Transfer to Capital Reserves (6,038) 50,020

Transfer to Stabilisation Reserves (14,811) (14,811)

Surplus Available for distribution 17,215 28,223

Bonus Payable 17,215 17,215 Retained Income at the end of the year 11,008

3. Management Letter

The following are significant matters raised by the auditors and management responses thereto:

3.1 Stores Control-Lobatse

Test counts performed during the audit of stores revealed that in a number of instances, issues had been made from stores without supporting documentation, or the stores module being updated. For example it was noted that the chemical stores issues had not been properly recorded and that the gas meter has been broken since last year. This could result in the stocks being mis-stated. Management agreed with the recommendation that all issues must be properly documented.

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3.2 Reconciliation of Cartons- Francistown

A reconciliation of the physical balance of frozen and chilled boneless beef to the computer balance revealed a discrepancy of 29,563 kilograms valued at P413 882. Management were requested to investigate and follow up the variations to avoid stock losses.

In response management indicated that the figures represented

cumulative differences since take-on. They also stated that the weight had to be estimated thereby making it difficult to compare records with the results of a physical count.

Although -management-had-not-specifically addressed the recommendations of the auditors, I concur with the auditors viewpoint that all relevant records relating to these stocks should be reconciled and brought into line.

3.3 Unidentified Debits-Francistown

Unidentified items amounting to P102 577 were debited to two of the Commissions bank accounts. The auditors recommended that the matter be taken up with the management of the banks with a view of having these items cleared. Management stated that they had communicated with the banks on numerous occasions on this issue but had not received any response and they were now planning to meet with the management of the banks to discuss this matter.

3.4 Transfer of Ownership

It was noted that three fire tender trucks had been purchased in an auction in April 2001 but ownership had not yet transferred to the Commission. Although these assets were registered in a third party’s name, they were in the balance sheet of the Commission. Management stated that the trucks would be registered in the name of the Commission.

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Botswana National Productivity Centre

The accounts of the Botswana National Productivity Centre (BNPC) for the year ended 31st March 2002 were audited by Messrs Price Waterhouse Coopers, Certified Public Accountants, who were appointed by the Board of Directors in terms of section 16(2) of the Botswana National Productivity Centre Act No. 19 of 1993.

2. Accounts

2.1 Auditors Opinion

The accounts and related records of the center have been properly kept and the Centre has complied with all the financial provisions of the Act with which it is the duty of the Centre to comply.

2.2 Operating Results

The operations of the Centre resulted in a surplus of P2.06 million for the year as against a deficit of P0.58 million in the previous year. The surplus was mainly due to an increase in consultancy fees income, from P2.49 million to P3.99 million and Government grants received from P8.38 million in the previous year to P10.78 million.

3. Management Letter

The following were the matters raised in the management letter and the responses of the management thereto:

3.1 Accommodation Income As reported last year, details of course participants using hostel accommodation were not always recorded in the register and cancellations of previously made reservations were not effected. As a result, it was difficult to verify that the figure of accommodation income appearing in the income statement represented all the amounts that were due and receivable.

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It has been suggested that the register being maintained to record all bookings and cancellations should fully reflect all transactions relating to accommodation and it should be updated.

In their response, the management indicated that they had taken steps to improve the situation and had admitted that there remained room for further improvements. I am concerned that the improvement alluded to by management had not reached satisfactory level.

3.2 Fixed Assets Register

The fixed assets register maintained by the Centre did not reflect identification codes and locations of the respective assets. As a result, fixed assets could not be related to records in the fixed assets register.

Management acknowledged the weakness that was identified in the fixed assets register and stated that steps had already been taken to address the problem.

Botswana Housing Corporation I reported last year that the Corporation’s accounts were one year in arrears. I am glad to report that the Corporation had cleared the arrears and submitted the audited accounts for the years ended 31 March 2001 and 31 March 2002, respectively.

2. Accounts

2.1 Audit Opinion

The auditors gave an unqualified report that the financial statements and related records of the Corporation have been properly kept and the Corporation had complied with the financial provisions of the Botswana Housing Corporation Act (chapter 74:03).

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2.2 Operating Results

The total income for the year increased by P11.40 million from P177.98 million to P189.38 million and the total expenditure increased by 7.24 million from P134.94 million to P142.18 million. Taking into account the adjustments for capitalization of Development costs and Borrowing costs, the Operating surplus during the year was P48.26 million as against an operating surplus of P48.07 million in the previous year.

2.3 Housing properties

The Government of Botswana allocated land to the Corporation for housing development. It had been stated at note 6 to the financial statements that the Government had not, as at 31 March 2002, provided the Corporation with title deeds evidencing ownership for certain land on which housing developments have been constructed. The Corporation anticipates that in the fullness of time such title deeds will be forthcoming.

3. Management Letter

The following are some of the matters raised and the response of the management thereto:

3.1 Accounting System

The general ledger and the subsidiary accounting records have been maintained in different systems and certain accounting records were maintained on spreadsheets. As a result extensive manual work had to be done to identify differences, incorporate adjustments and perform reconciliations of the records generated by the different systems. It was recommended that an integrated accounting and management information system should be put in place as soon as possible to record all transactions correctly on a real time basis. In response management stated that they had long recognised the need for an integrated accounting and management information system and were

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searching for a suitable system. As a result they had succeeded in signing an agreement in this regard recently with the preferred supplier.

3.2 Compliance with BHC Act

It had been noted that during the year, the Corporation invested P635 000 in a joint venture partnership with a private company without the approval from the Minister. According to the financial regulations of the Botswana Housing Corporation Act, the Corporation can invest such part of its funds as is not required for the purposes of its functions, subject to the approval of the Minister. In response management stated that they were in the process of seeking the Minister’s approval for the P635 000 invested in the joint venture.

3.3 Bank Reconciliations

The bank reconciliations of certain bank accounts included reconciling items that pertained to entries in the bank statements, which were carried forward from prior years as well as those, which arose during the current year. The entries totaled P203 677. It was recommended that all reconciling items should be followed up and cleared timeously. It was also pointed out that the bank reconciliations were not verified and approved by any person independent of that preparing the reconciliations. In response the management stated that despite repeated requests the bank had not been able to provide the Corporation with proper explanations, resulting in the Corporation’s inability to account for these transactions in their books of accounts. Management stated that they were still making follow ups with the bank. The Senior Accountant in the Corporate Section, who does not prepare any of the bank reconciliations, is said to be reviewing the bank reconciliations monthly.

3.4 Liability for land acquired

The Corporation made adjustments of approximately P2million to account for additional liability for land acquired in previous years. It transpired from discussions with the property department that there could be certain land

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allocations by Government for which the full liability may not have been accounted. Consequently assets and liabilities might be misstated. Management in response stated that the Internal Audit Department will carry out a comprehensive review as recommended by the external auditors.

3.5 Recovery procedures for Tenant Purchase Scheme (TPS) and Step Ownership Scheme (SOS)

The Corporation did not have any formal procedures in place for taking action against defaulted TPS and SOS loans. It was recommended that the Corporation should formalize the procedures to be followed and action to be taken once TPS and SOS loans have been defaulted. In response management stated that the credit control procedures for TPS and SOS have been drafted and the TPS section has already started sending out demand letters to customers in arrears.

Botswana Postal Services

The accounts of the Botswana Postal Services for the year ended 31 March 2002 were audited by me in pursuance of section 21 (2) and (3) of the Botswana Postal Services Act No.22 of 1989.

2. Accounts 2.1 Audit Opinion

The Botswana Postal Services had kept proper books of accounts with which the financial statements were in agreement and had complied with all the financial provisions of the Botswana Postal Services Act.

2.2 Operating Results

The Organisation reported an operating profit of P1.49 million as against P2.36 million in the preceding year. This decline of P0.87 million Pula is mainly attributed to maintenance costs and, which increased by 50% from P1 605 011 in the past year to P2 409 482.

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The net profit for the year after taking into account the investment income, finance costs and restructuring consultancy costs was P2.97 million compared to P2.53 million in the preceding year.

During the year the Botswana Post invested in Botswana Couriers Ltd and holds 100% of the share capital. Botswana Couriers incurred a loss of P 713 587, which was fully absorbed by the Organisation.

2.3 Management Letter 2.4 Internal Control System

The Botswana Post has been plagued for a number of years by a poor internal control system, which included failure to carry out reconciliations and lack of supervision and internal checks. The situation had been compounded by the termination of the Financial Accountants’ contract and the departure of the Assistant Director General (ADG), Finance whose post remained vacant for some time.

The draft accounts furnished for audit were found to be inaccurate. Consequently several journal entries had to be passed to correct significant errors and mispostings, which materially changed the accounts. It is apparent that management would have made decisions based on these accounts even though they did not reflect an accurate state of affairs and financial position of the Organisation.

Management noted the observations and stated that the Corporation had appointed an Internal Auditor and had also filled the post of ADG Finance. The two officers had undertaken to streamline the financial operations and Internal Audit would also ensure the adequacy of the internal control mechanism.

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3.2 Fixed Assets Register

As indicated in the last report the Organisation did not maintain a fixed asset register making it difficult to validate the existence of the assets. This situation could result in the Organisation losing assets and carrying non-existent assets in the balance sheet.

Management stated that they had given the matter priority and were in the process of compiling a register.

3.3 Botswana Couriers (Pty) Ltd

Botswana Couriers (Pty) Ltd is a 100% owned subsidiary of Botswana Post which was incorporated on 4 May 2001.During year the Botswana Post had made disbursements amounting to P2 422 355 to finance the working capital of the subsidiary. This amount was recorded as an advance pending a decision on its status.

Section 12 (2)(h) of the Botswana Postal Services Act requires the obtaining of the Ministers approval for investing funds. However it had been noted that the written approval of the Minister had not been obtained for the investment as required under section 12 of the Botswana Postal Services Act.

Management stated that they would submit a proposal for the consideration of the Board at its meeting of March 2003, to treat the grant as an interest free loan. They also indicated that they would request the Minister to ratify the investment in Botswana Couriers.

3.4 Investment in African Alliance

As at 31 March 2002, the investment in African Alliance stood at P7 080 984 and comprised of investment in Pula Funds and United States Dollars of P6 475 862 and P605 122 respectively. The Board

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had initially approved a sum of P5 million for investment in African Alliance and advised Management to look for other investment opportunities. There was no evidence that Management had explored other options in this regard. By placing all the funds in a single investment the Organisation exposed itself to a higher degree of loss and other failures.

Management was advised to review the portfolio and to consider diversifying to hedge against possible loss, especially in times of volatile market activity.

3.5 Western Union Agency Services

Botswana Postal Services had entered into an agreement with Western Union Financial Services to offer money transfer services. It was noted that a basis had not been formulated by which to account for direct costs and an apportionment of the indirect costs, even though Botswana Post had incurred substantial expenses on provision of the service. In view of the nature of the services provided, separate records of income and expenditure would facilitate the provision of management information. To this effect it was recommended that the agency should be treated as a profit centre.

In response Management stated that the agency would operate as a profit centre from 2003-2004.They also stated that the computer package that was being implemented was designed to recognize each product and each post office as a profit centre.

3.6 Financial Guidelines and Procedures

The Organisation did not have a working Financial Guidelines and Procedures manual. A draft manual was produced and submitted to the Finance and Audit Committee .The Committee had deferred recommending the manual to the Board for approval, pending amendments to be made to the draft.

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The Organisation was advised to introduce the manual without delay to provide much needed guidance to the staff and also to strengthen the internal control system.

Management stated that they were revising the draft manual and would implement it in 2003-2004 after approval from the Board.

Botswana Telecommunications Corporation

The accounts of the Botswana Telecommunications Corporation for the

year ended 31st March 2002 were audited by Messrs Deloitte and Touche,

Certified Public Accountants (Botswana), who were appointed by me in

terms of Section 31 of the Finance and Audit Act (Cap 54:01).

2. Accounts

2.1 Audit Opinion

The Corporation had kept proper books of accounts with which the financial statements were in agreement and has complied with all the financial provisions of the Botswana Telecommunications Corporation Act (Cap 72:02).

2.2 Operating Results

The Corporation’s net loss and revenue for the year as compared to the previous two years are given below:

2001/02 2000/01 1999/00 P’000 P‘000 P‘000

Net Profit / (Loss) (24 221) 2 151 40 040 Revenue 605 001 610 683 556 880

The major items of cost incurred in arriving at the loss of P24.22 million, in comparison to the corresponding costs in the preceding two years, were as follows:

2001/02 2000/01 1999/00 P‘000 P‘000 P’ 000

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Total employee costs 134 932 122775 116 348 Payments to Carriers & Other Operators: 147 236 171 106 130 495 Licence fee – BTA 19 682 13 352 5 766 Other operating expenses 132 007 112 238 94 126 Provision for losses incurred by subsidiary 3 229 `2 913 - Consultancies and legal costs 12 530 2 042 2 151 Net financing costs 52 183 53 635 47 435

3. Management Letter

The following are the more significant matters raised in the management letter and the response of the management thereto:

3.1 Telephone Revenue Write-Offs

A review of the telephone revenue account revealed that P7.30 million was reversed as a result of incorrect billing and P3.50 million of this related to revenue recognized in the prior year.

There was no evidence that this account was analysed and reviewed by management to ensure that only authorised write offs had been posted to the account.

3.2 Unbilled Revenue Prior to March 2002

The reconciliation between the debtor’s age analysis and the general ledger revealed an amount of P1 million relating to unbilled usage from periods prior to March 2002. The unbilled usage arose due to billing system problems, which had prevented the usage from being billed. While at year-end there was a 100% provision against this balance, there is a concern that when this usage is finally billed, the Corporation is likely to face collection problems due to the time delay in billing the amounts. It had been recommended that the problem with processing the unbilled revenue be investigated and necessary steps taken to avoid similar problems recurring in the future.

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Management responded by stating that the Corporation would endeavour to ensure that the billing problems would be minimized. It was further reported that the unbilled revenue had gone down to below P100 000 by July 2002.

3.3 Revenue Proof of Concept Review

A revenue proof of concept exercise was carried out during the year as a result of the following:

(a) There were common concerns that there may be

inconsistencies within the process of making, recording and billing calls, which could be losing BTC valuable revenue;

(b) There was a need to independently evaluate exactly how

the network and the billing systems record calls of all types, in and across all geographical zones;

(c) It was noted that there had been an apparent substantial

increase in network traffic over a significant period of time and that this increase was not congruent with a noticeable decrease in billing revenue.

One of the more significant findings from the sample data tested was that there was a potential 2.8% under-billing of GSM calls, and that since the Corporation retains 10% of the revenues generated from these calls and pays out the 90% to mobile operators, there is a risk that the Corporation is paying out revenues that it had not actually collected. Another finding was that there were a number of calls, which were not terminated, indicating a possible deterioration in the quality of the network system.

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It was recommended that the above problem areas be investigated further to ensure that the Corporation is not exposed to revenue losses.

In response the management expressed confidence that the process of recording calls is robust and reliable. However, they conceded that there have been problems in relation to billing and these are investigated on an ongoing basis. It was stated that the relation between traffic and revenue still remained a problem to the Corporation and management was considering ways to further investigate these to prevent revenue losses.

3.4 Debtors Reconciliation

A review of the trade debtor’s reconciliation statements revealed that there were unexplained differences between the debtors’ age analysis and the balance in the general ledger in the last three years. Despite the management statement in the previous year that they had taken steps to resolve this problem, there was no evidence that this exercise had been commenced at the time of audit. In their response, the management agreed with the auditors’ comment and explained that the exercise of integrating journals into the computer program had been kept on hold due to other priorities. They have however not indicated when the exercise would be undertaken.

3.5 Bad and Doubtful Debts Provision As at year-end the estimated provision for bad and doubtful debts of P175 419 011 was approximately 77% of the total outstanding trade debts of P227 437 315. This high percentage of doubtful debts was mainly due to the effects of the billing problems that were experienced with the introduction of the new billing system in the

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1999/2000 financial year. Various initiatives had been implemented to improve the recovery of debtors, the easy loan payment scheme and some accounts had been handed over to lawyers for collection. However, these initiatives had not had a significant impact on the Corporation’s cash flows from collections. In the current year P1 089 619 had been paid in debt collection charges to lawyers. Given the current prevailing conditions and recovery rate of old balances and the perception that customers had about the Corporation, it had been recommended that serious consideration should be given to writing off some of the debts relating to customers who are unable to pay. It was also pointed out that the bad debt expense in the income statement at the end of the year exceeded the increase in bad debt provision for the year by an amount of P2.30 million and that there was no detailed reconciliation to support the difference. Management accepted that an exercise to write off some of the doubtful debts would be carried out to streamline the debtor’s portfolio and reduce administration costs in following up debts that are clearly unrecoverable. Management stated that they would investigate the P2.30 million difference.

3.6 Auditors’ Summary

In addition to matters raised in the management letter, the following are a summary of the issues, which were considered by the auditors to be critical: a) Status of accounting records

In general the auditors were disappointed with the standard of accounting records and reconciliations. A number of key reconciliations were either not prepared or had unresolved differences. In addition, many of the year-end schedules had errors, which indicated that the levels of supervision needed to be strengthened.

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b) Staff Changes

During the year there were resignations of key staff members in the Finance department before and during the audit, and at the date of the report they had not been replaced.

c) Quality of staff and accountability

It was apparent during the year-end audit that staff did not always have a clear understanding of their responsibilities and their role within the Corporation. This was evidenced by instances where information was requested from the person responsible and unsatisfactory, inconsistent and at times incorrect explanations were given. It is essential that all staff be trained adequately and informed of their responsibilities. Accountability should be enforced within the Corporation.

Botswana Motor Vehicle Accident Fund

The accounts of the Motor Vehicle Accident Fund for the year ended 31 December 2001 were audited by Ernst and Young, Certified Public Accountants, who were appointed by the Board in terms of the Motor Vehicle Accident Fund Act No.6 of 1998.

2. Accounts

2.1 Audit Opinion

The Fund has kept proper books of accounts with which the financial statements were in agreement, and has complied with the financial provisions of the Motor Vehicle Accident Fund Act, No.6 of 1998.

3.1 Performance of the Fund

The net surplus of the Fund increased by 140% over last year to

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P38 227 112. The total assets had grown by 50% from P 386 724 413 in 2000 to P578 730 115 in 2001. The good results are attributed to the performance of the local stock market and the effect of the 30% decline in the value of the Pula against the United States dollar.

3. Management Letter 3.1 Return on Investments

The overall average rate of return on investments improved by 0.075% from last year to 10.04 % in the current year. The return would have been significantly higher had it not been for the performance of the offshore investments which declined by 8.23% over last year. The market value of the offshore investments declined by $1 185 874, over two years (2001- P5.87 million), including a net loss of P2 159 627 on equity trading. This was mainly attributed to the poor management of the fund. However the asset managers’ whose remuneration is not based on performance, were paid a commission of P502 000 ($74 000) despite the heavy losses, on account of the equity trading. The auditors’ had recommended to management to revisit the policy on offshore investments with a view to getting expert advise on securing the services of investment managers who would maximise the value of the investments and also ensure that the investment managers fees are linked to performance of the investments. Furthermore it was recommended that the script be registered in the name of the Fund to reduce the risk of loss in the event of the asset managers becoming insolvent.

3.2 Financial Instruments

In order to improve risk management of financial instruments, the Fund was advised to develop risk management policies and guidelines that would set out its overall business strategies, its tolerance for risk and its general risk management philosophy.

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Management stated that a formal risk assessment would be carried out with a view to establishing policy guidelines, whose outcome will be tabled before the Board for ratification.

3.3 Trust Monies

Trust monies in respect of settlements mainly to minors for loss of support/earnings and general damages were invested in bank accounts in the name of the beneficiaries. The balance of these monies had not been quantified and was estimated at P20 million. It has been recommended that management should either create a structure to administer these funds or outsource the function in order to have this pool of funds invested more effectively in better financial instruments. Management stated that they were in the process of reconciling these trust accounts to prepare for administering them from the Fund.

3.4 Payment Instructions

A payment instruction was made to the bank for P2 000 000 for Botswana Telecommunications Corporation’s commercial paper and the bank erroneously failed to charge the Funds accounts. At the time of audit the payment had not been recorded in the books although the investment had been made.

3.5 Oracle Accounting Software

It was noted that the Fund used Oracle for the claims database while the financial records were on the old DOS based Accpac. Payments were entered in both systems and differences between the two were not identified and investigated. It was also observed that there was a large degree of manual reporting using spreadsheets, which were open to error and could result in duplicate payments and inaccurate data being used for calculating provisions.

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It has been recommended that Management should consider migrating the financial records to Oracle in order to simplify and automate the financial accounting system.

Management indicated that they were in the process of changing to a new system as reflected in their budget for 2002.

3.6 Payroll

It was noted that salary payments were made based on verbal information obtained from the employees, and deductions payable to third parties were not made timeously and receipted. In some cases PAYE withheld from salaries had not been correctly computed. These lapses in controls could result in disputes between the employees and the Income Tax Department in the event of incorrect PAYE withheld by the Fund, or disputes with the employer where deductions are not paid to third parties. The Fund could also be exposed to fraud and error in the event of incorrect bank account numbers being used for salary payments. Management noted the recommendations to correct the irregularities.

XI. CONCLUSION

I would like to acknowledge efforts of my staff at all levels who have been working under often difficult conditions. The ready co-operation and assistance of the Accountant General and other Heads of Departments and their staff is also acknowledged.

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I also extend my thanks to the Government Printer and his staff for their efforts in assisting in the printing and production of this report.

30 April 2003 M. B. MASISI AUDITOR GENERAL