• October 1st, 2020

New Era CFO reflects on the company’s finances

New Era Publication Corporation (NEPC) Chief Financial Officer Beatus Amadhila provides clarity on the company’s finances and operational issues, while putting to sleep some misconceptions often directed at the company.

New Era (NE): The Auditor-General this week tabled NEPC’s audit report for the year ended March 2017. Despite the adverse opinion, what are some positives in the report?

Beatus Amadhila (BA): As long as I don’t get a clean or an unqualified audit report, I will never be content as CFO. And despite the disclaimers and qualified audit opinions we received in prior years, an adverse opinion is still terrible. When you are dealing with taxpayers’ money and you are entrusted with a responsibility of accountability in terms of ensuring prudent financial management and reporting, one should ensure that they achieve nothing but the acceptable audit opinion which is unqualified audit opinion. This is important in the world where the taxpayers’ confidence is at an all-time low when it comes to public entities and the perception of rife financial mismanagements. 

However, it is not all red at NEPC and having assumed the role during 2016 financial year and having been summoned to appear before the Parliamentary Standing Committee on Public Accounts just one month into my job, specifically for the 2011 and 2012 financial year reports, it was literally baptism of fire for me. That is when I realised that I have to hit the ground running. The report had serious findings and to draw you to that report, the auditors noted, correctly so, non-compliance in terms of PAYE (pay as you earn) and VAT, non-accounting of full PAYE liabilities, lack of supporting documents and so forth. This non-compliance would comeback to haunt us to this day.

In 2017 our target was to address the prior years’ issues, including those I stated above, whereby we had to make sure that our balance sheet is a true reflection of our financial position, be it as it may, in terms of negative equity displayed, which is a result of accumulated loses and adjustments done in the 2017 financial year, to ensure that the Receiver of Revenue liabilities - which were understated in prior years - are indeed fully disclosed.    

Of course the consequence is that by bringing in this items, correctly so, resulted further into our liabilities exceeding our assets – thereby putting us into further technical insolvency position.

So the only positive to draw from the 2017 financials is the fact that we have managed to provide 100 percent disclosure in terms of our liabilities to the Receiver of Revenue and all suppliers and that our compliance in terms of tax returns submissions was 100 percent. Also, we have managed to 100 percent account for all our expenditure and revenue items by providing all required supporting documents to the auditors. Another success is that we significantly addressed prior years’ audit recommendations and reduced the findings to around seven items of which two have been contested with the Auditor General’s office - so technically I would say we have five items which led to an adverse opinion and that is a milestone given the long list of findings we had in prior years.

NE: How is NEPC handling issues that led to the adverse opinion in the 2017 report and do you anticipate improvements in subsequent audit reports (2018 and 2019)?
BA: In terms of issues that led to adverse opinion, measures have already been put in place to ensure similar findings do not occur going forward. The five findings were a result of really schoolboy errors which should not have slipped through and should have been detected during the audit process.

NE: What exact issues does NEPC have with the Receiver of Revenue and how did those issues come about?
BA: As explained earlier and to refer you to 2011 and 2012 audit reports, we were non-compliant in terms of filing of our returns, our liabilities to the Receiver of Revenue were not fully disclosed and payments not done - which attracted high penalties and interest charges. This is what basically put us in the technical insolvency situation. 

NE: How did the Receiver of Revenue issue affect business and the overall financial position of NEPC?
BA: When you owe the Receiver of Revenue, you will not be issued with a good standing certificate - simply because you are not in good standing. What this means to NEPC, the publishers of the New Era  and Kundana newspapers, is that its Commercial department will not be able to raise the much needed revenue through advertising. Remember, advertisers, especially the public sector, require good standing certificate for them to place advertisement with you. If you are not able to raise revenue, then you won’t be able to honour your financial commitments to your suppliers and creditors, including the Receiver of Revenue. Furthermore the high amount owed to the Receiver of Revenue contributed single-handedly to our liabilities exceeding our assets, which technically put us in an insolvency position.

NE: How is the issue with the Receiver of Revenue being handled?
BA: First, timely filing and submission of tax returns to avoid penalties. Secondly, a monthly payment plan has been developed and is in place. There is thus a payment plan arranged, which is to be honoured by NEPC as agreed.

NE: Does NEPC rely on government bailouts as is often suggested? Give us a breakdown of how much the company generated on its own in recent years and how much subsidy it has received from the shareholder.
BA: It depends on one’s definition of government bailout.  We currently get allocated an annual subsidy by the shareholder to help with operational costs, specifically printing and distribution costs. The allocation, although not sufficient at present, comes in handy and we appreciate the support from our government, amid fiscal consolidation to curb government spending during this period of a contracting economy.

Our revenue ratio in 2016 was around 74 percent own revenue compared to 26 percent government subsidy (totaling N$49million altogether). In the year under review (2017) it was 69 percent own revenue to 31 percent government subsidy  - totaling N$43.8million. 

It is our long-term goal to move away from government subsidy reliance, however the reality on the ground at present calls for adequate support from the shareholder and empowerment to create an environment in which we can compete with others in our industry without compromising on the mandate as set out in the NEPC Act.

NE: What needs to happen in order for NEPC’s financial situation to improve? In other words, what is holding the company back at the moment?

BA: I should say the past is obviously still haunting us and the Receiver of Revenue situation shall continue to erode our cashflow for some time until fully resolved. The economic situation affect us all, as evidenced by the fact that our revenue has been declining over the past three or so years. We are on a serious cost containment exercise and a possible business realignment exercise is on the cards to ensure that the Corporation is able to spend within its means. One thing worth mentioning is the fact that our printing costs, which were at some point at N$18.1 million per annum (2016) have been put under control without compromising on the print-run and quality of the product. We are currently saving close to N$8million per annum on this expenditure.

NE: What has the Corporation done - in terms of processes and systems -  to ensure that every cent is accounted for in audit processes?

BA: I was lucky since I found a newly-completed internal audit report by Ernst & Young when I joined, which somehow made it easier for me to introduce basic internal control measures as short-term fix to some of the risky processes which were not adequately covered with policies. The past external audit reports - and being hauled before the Parliamentary Standing Committee on Public Accounts - helped us a big deal in straightening all areas concerning financial management. We have since have around 30 policies formally approved by the Board of Directors and we have also put in place checks and balances and filling systems to ensure 100 percent accountability in terms of expenditure and revenue accounting.

NE: The Ministry of Public Enterprises classifies NEPC as a non-commercial entity. What kind of shareholder support is necessary for an entity classified as such?

BA: When you are a non-commercial entity, you are given a mandate by your shareholder to execute. In order for you to execute that mandate you need finances. Some non-commercial entities are able to raise a certain percentage of funds by themselves and shall require the shareholder to still assist in the form of a subsidy for the shortfall. However some entities are not able to raise any funds on their own hence they will require 100 percent government assistance. So basically the shareholder support in both scenarios is required by realistically funding these entities if they are to fulfill their mandates. The board and management of these entities also need to be accountable in how funds are spent to ensure that shareholder confidence and trust is maintained.

Staff Reporter
2019-03-15 09:49:52 | 1 years ago

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