Slapping the Oranjemund Town Council with an adverse audit opinion for a myriad of accounting shortcomings, Auditor General (AG) Junias Kandjeke also found some unrecorded assets belonging to the entity.

The information is contained in Oranjemund’s AG report for the 2021/2022 financial year which was released late last year.

“The financial statements do not present fairly, in all material respects, the financial position of the Oranjemund Town Council and its financial performance and cash flows,” he said, effectively cementing his adverse opinion.

An adverse opinion indicates that a given entity’s financial statements are misrepresented, misstated, and do not accurately reflect its financial performance and health.

Chiefly, Kandjeke said: “The audit noted that items of property, plant and equipment with the net book value of N$425 million donated in 2018 by Namdeb to the town council were not recorded in the council’s fixed asset register neither recognised in the statement of financial position.”

Property, plant, and equipment, or PP&E as they are known in the accounting world refers to long-term assets vital to business operations and the long-term financial health of a company. Equipment, machinery, buildings, and vehicles are all types of PP&E assets.

The auditors also observed a difference of N$16.2 million between the reconciliation of the PP&E closing balance of N$76.67 million in 2021 and the reconciliation of the PP&E opening balance of N$60.4 million in 2022.

“It is recommended that the council ensures that closing balances are correctly brought forward. In addition, it is recommended that the council record all donated assets in the fixed asset register as well as in the statement of financial position,” Kandjeke recommended.

A recurring issue at the local authority according to the audit is its failure to make provision for a dumping site.

“This matter is a recurring matter from previous years where the council did not make provision for a dumping site for its rehabilitation and restoration after its useful life,” Kandjeke said.

This, according to the AG, flies in the face of the International Public Sector Accounting Standards (IPSAS).

“It is only those obligations arising from past events existing independently of an entity’s future actions (that is, the future conduct of its activities) that are recognised as provisions. Examples of such obligations are penalties or clean-up costs for unlawful environmental damage imposed by legislation on a public sector entity. Both obligations would lead to an outflow of resources embodying economic benefits or service potential in settlement regardless of the future actions of that public sector entity. Similarly, a public sector entity would recognise a provision for the decommissioning costs of a defence installation or a government-owned nuclear power station, to the extent that the public sector entity is obliged to rectify damage already caused,” Kandjeke noted.

He recommended that: “It is recommended that the council make provision for dumpsites as required.”

The auditors furthermore observed that the cash flow statement does not comply with the presentation and disclosure requirements as outlined in IPSAS.

“A difference amounting to N$140.27 million was noted on the figures presented by the town council. Areas affected are reconciliation of cash generated by operating activities and additions to property, plant, and equipment,” the auditor said.

He continued: “It is recommended that the council ensure that the cash flow statement complies with the presentation and disclosure requirements.”

Status quo

During the period under review, the council spent N$2.7 million to remunerate key management personnel [three managers and the CEO].

“No other transaction took place on close family members of the family of key management personnel. No loan or other advances to key management personnel and close members of the key management personnel,” Kandjeke further said.

In addition, council allowances during the financial year ended 2022 amounted to N$477 919. There are seven councillors.

Oranjemund was previously a mining town owned by Namdeb, hence management classified “Namdeb related party because there are still transactions taking place between Namdeb and Oranjemund town council during the year.”

During the period in question, sales of water to Namdeb amounted to N$1.93 million while purchases of electricity from Namdeb stood at N$26.74 million.

Meanwhile, total income from occupational rent was N$56.52 million while the authority’s outstanding Namdeb bill stood at N$11.8 million.

The total amount owed to Namdeb N$3 317 690 for electricity consumption for June 2022.

“In terms of the Local Authority Act 23 of 1992, there should be funds to be paid for the benefits of the regional council. An amount totalling N$4.34 million accrue for the benefits of the regional council,” it was further found.

- emumbuu@nepc.com.na