More concerns of the Auditor General
Continued from: From The Auditor General’s Report 1.
INLAND REVENUE DEPARTMENT
Revenue. The audit of the accounts of the Inland Revenue Department for the period April 1, 2013, to March 31, 2014 was conducted and the following observations made:
Revenue reporting. There were no statements of revenue, receipts, refunds, waivers and remittances provided to the Audit Office for verification as required by Section 22 (3) (c) of the Financial Management And Audit Act, 2007-11, in respect of the Inland Revenue Department. Such statements were not presented to the Audit Office for the last four years.
This is unacceptable as these statements are required to assist in the verification of the figures reported by the department and, by extension, the figures in the Government’s Financial Statements.
The revenue reported to the Treasury by the department was in respect of cash collections rather than revenue on an accrual basis as required by International Public Sector Accounting Standards (IPSAS). Therefore, the figures in the consolidated financial statements at March 31, 2014, were misstated.
It is recommended that the department should have complied with Section 22 (3) (c) of the Financial Management And Audit Act, 2007-11 and submitted approved statements of receipts, revenue, receivables, refunds, waivers and remittances to the Auditor General for audit verification; and ensured that revenue was recorded on the accrual basis.
Accounts receivable. No accounts receivable statements were presented to the audit for the financial year ended March 31, 2014, as is required by the Financial Management And Audit Act. Personnel from the department indicated that the information in the electronic tax system was unreliable.
Therefore the Inland Revenue Department’s accounts receivable reported as $244 million in Government’s Financial Statements could not be verified.
These figures are required for inclusion in the opening balance sheet of the Barbados Revenue Authority which has taken over the responsibility of collecting income and corporation taxes. [BRA] will therefore have to undertake a review of the receivables with a view to having them more accurately stated.
It is recommended that the Inland Revenue Department should have ensured that accurate and reliable figures were made available for inclusion in the consolidated financial statements of the Crown.
Bank reconciliations. The bank balance as at March 31, 2014, was $17,948,071.93. No bank reconciliation statements were presented for audit inspection. This is a continuing problem which was not addressed by the department. The lack of bank reconciliations can lead to fraud or errors going undetected.
Total refunds issued. The department recorded $144 million as total refunds issued for the period under review. However, the consolidated financial statements showed that $136,177,629 was disbursed for the same period. This has resulted in an unexplained difference of $8,711,874.
The absence of explanations for unreconciled differences in disbursements by the Treasury and refunds issued has been a recurrent problem within this department that needs to be properly explained.
Return of overpaid refunds by taxpayers. Taxpayers returned a total of $747,908.98 in refunds that were overpaid during the financial year 2013-2014 . . . . These instances in which persons voluntarily returned overpaid refunds to the department reveal serious deficiencies in internal controls.
It is unlikely that all overpayments will be returned; therefore, a significant loss could have occurred from this lapse in controls. This has been an ongoing problem for the department which needs to be urgently addressed.
It is recommended that the Inland Revenue Department ensure controls are in place to prevent the overpayment of refunds to taxpayers.
Request for information. Requests were made for reports and other documentation needed to perform the audit. The first request was made in February, 2014. Follow-up requests were made over a period of seven months before the information was provided.
The Audit Office was therefore unable to complete a thorough audit, especially relating to some of the major issues recorded in past audit reports.
The absence of documentation in a timely manner impedes the audit and is in breach of Section 39 of the Financial Management And Audit Act, 2007-11, and those responsible should be required to provide an adequate explanation.
It is recommended that the Inland Revenue Department provide all documents requested by the Barbados Audit Office in a timely manner.
MINISTRY OF TRANSPORT AND WORKS
Overpayment to a supplier/0517 –– General maintenance. A supplier was paid twice for work related to electrical renovations at the Country Road branch of the School Meals Department, resulting in an overpayment of $65,671.92.
At the time of the audit the monies had not been recovered.
It is recommended that the ministry’s approving and certifying officers review all supporting documentation to avoid overpayment. Appropriate action should be taken to recover the outstanding amount.
Absence of supporting documentation. Supporting documentation relevant to a number of payments was not provided for audit inspection by the ministry. This is in breach of Section 39 (1) of the Financial Management And Audit Act. These documents were requested on several occasions.
It is recommended that the ministry needs to ensure that all information and documentation are available for its own internal checks and for audit verification.
Asset management. During the audit the following deficiencies were noted in respect of fixed assets records.
Incorrect classification of expenditures.
(1) Amounts totalling $500,000 and representing a subsidy paid to the Transport Board for capital expenditure was incorrectly recorded as an asset. This resulted in an overstatement of fixed assets and an understatement of expenses.
(2) An amount of $16,500 was paid to a firm for cleaning services provided. This amount was recorded as an asset during the period under review, but should have been charged to Item 211 –– Maintenance of property.
(3) An amount of $75,512.19 was paid to a company as a part payment for a generator. This amount was incorrectly charged to Item 211 –– Maintenance of property, but should have been added to the cost of the existing asset. This resulted in maintenance expense being overstated and the asset account being understated.
To date the Ministry has not provided documentation to verify that the required adjustments were made.
It is recommended that the ministry’s accounting personnel should ensure that all amounts are correctly classified so that the correct figures can be recorded in the financial statement.
UNRESOLVED AUDIT ISSUE FROM PRIOR YEAR
Overpayments to suppliers. In the previous financial year, overpayments totalling $1.3 million were made to suppliers. To date the ministry has not provided the Audit Office with any evidence indicating that the overpaid amounts are being pursued, or if any have been recovered.
Such occurrences are in breach of Rule 178 (3) (c) of the Financial Management And Audit (Financial) Rule, 2011 and must be addressed with urgency by the ministry.
Ministry of Transport and Works Response:
Overpayment to suppliers. “The Ministry will investigate this overpayment and will seek to recover the funds that were overpaid. Certifying/approving officers have been reminded that they must review all documentation carefully.”
Asset management. “The ministry will comply with the Financial Rules and ensure that all fixed assets for which it is responsible are accounted for. The process of compiling a fixed asset register commenced during 2014.”
Preparation of financial statements. “Due to personnel changes in the accounts section at the end of the financial year, the statement of financial performance and schedule of capital assets, as well as other statements necessary to fairly reflect the financial operations of the ministry were not submitted.
The ministry apologizes for the non-submission of these reports and will ensure that they are submitted as required by the Financial Management And Audit Act.”
Unpaid Declarations. The Customs Department implemented a new computerized automated system, Automated System For Customs Data (ASYCUDA++), during the month of May, 2005. Imports are recorded within the ASYCUDA system by declarants, and other persons or businesses purchasing items from overseas. Taxes are charged on these declarations.
A report was extracted from this system for the period May 1, 2005, to March 31, 2014, indicating there were 1,951 unpaid declarations in the system for the port of entries Bridgetown Port and Grantley Adams Airport. These unpaid declarations represent $18,572,131 in unpaid taxes.
Please see the table above for the age analysis of these amounts.
Action should be taken by the department to verify the validity of these outstanding transactions, and where necessary, items held for prolonged periods should be auctioned.
Pool betting and gaming. No funds were collected for pool betting revenue. It was stated by the enforcement officer that the matter was undergoing investigation.
Revenue collected from these licences for the financial year totalled $1,020,000. As at December 31, 2013, there were 840 registered gaming machines which should result in an approximate receipt of $12,600,000 when the applicable rates, as set out in S.I 2008 No. 88 are applied. However, revenue has not been collected from some companies since March 31, 2011.
It was indicated that certain companies were granted a moratorium by the Ministry of Finance. To date, this authority has not been provided for audit inspection.
Variances in the accounts receivable recorded. A subsidiary listing in support of the accounts receivable balance of $1,355,124.14 shown for the Customs Department in the Treasury’s general ledger as at March 31, 2014, was requested. No listing was provided for this period.
As a result the accounts receivable balance could not be verified. It should be noted that the figure submitted to the Audit Office was $1,888,502, which was $533,377.86 greater than the figure reported in the Government’s Financial Statements.
Tourism sector waivers. A number of companies received exemptions due to the construction of tourism projects. There was no evidence provided to show that these projects were adequately monitored, or to ensure that the imports were utilized for the intended purpose. These exemptions are in excess of $20 million.
Industrial/manufacturing concessions. The Approved Undertakings Division of the department is responsible for monitoring companies which receive industrial/manufacturing concessions. This division conducts inspections of these entities. The companies are required to submit documentation such as a list of raw materials utilized, list of products manufactured, their manufacturing process and presumptive yield.
Of the 60 files reviewed it was noted that 34 of the companies did not submit the requested information, but continued to receive the concessions. The department needs to carry out the relevant inspections to ensure that waivers are used as intended.
Dates for cessation of concessions not recorded. Some of the waivers granted by the Ministry of Finance are for specific periods. However, within the computerized system ASYCUDA, the concluding dates were not recorded for some concessions. As a result this increases the risk of importers continuing to receive waivers that are not authorized.
To be continued.