Auditor General and his team spent months going through government books; expenditure payment control, procurement & contract management, the opening of bank accounts, tax exemptions etc. What did they find… gaps. Read through…
By TSI Writer
Early this month, the Auditor General of Somalia H.E. Mohamed M. Ali “Afgoi” released ‘The Compliance Report for Year Ended 31st December 2020’. The objective of the audit was to obtain sufficient and appropriate audit evidence to enable the Auditor General to provide reasonable assurance on the compliance by selected ministries, departments, agencies.
The office of the Auditor-General prioritized 25 key ministries, departments, and agencies and 3 embassies, with the aim of providing reasonable assurance that there is accountability and transparency in the management of resources through strict adherence to the laws and regulations that the government has put in place to manage these resources.
The scope of the compliance audit covered activities of the named institutions from 1st January 2020 to 31st December 2020; put them through appropriate tests of controls and substantive procedures.
In his speech during the release of the report, the Auditor General explained that the report highlights the main audit findings which include: weak expenditure controls, poor controls over the management of assets, weak procurement and contract management, poor placement of mission staff in foreign embassies, use of embassy revenues at source, some donor funds & donations not channeled through the country system (i.e. national budget and SFMIS), poor accountability and the issue of licenses for weapons, arms and private security companies among others. All these are clear indicators of lapses in internal controls in the audited ministries, departments, agencies, and embassies.
“The effective implementation of the laws, regulations and applicable best practices governing the management of public resources will not only bring about the effective and efficient use of the scarce resources but will also contribute to the realization of the Sustainable Development Goals,” said H.E. Mohamed M. Ali “Afgoi”, Auditor General, Federal Republic of Somalia.
How was the audit done?
To get to the bottom of whether the departments, ministries, agencies, and embassies operate in compliance with government regulations and requirements, the office of the Auditor-General reached out to, interacted, and communicated with management and key staff of the institutions audited.
This was done in order to give the management of the various organizations’ room to offer clarification, and undertake, where necessary, corrective and remedial steps at addressing the transparency and compliance problems that the said organization was afflicted with as revealed in the audit findings. This was done through the management letters which were issued during the audit.
The auditing process focused on compliance with laws, regulations, and best practices in the following ten key subject matters: Expenditure payment control; procurement and contract management; the opening of bank accounts; use of the country system for external support; registration and licenses of weapons, arms, and private security companies; personnel management and services provided in embassies; revenue management and accountability; asset management; management of tax exemptions; and payroll management.
Reflected below are audit findings for those issues that could not be resolved during the audit process, and require action by management and authorities of the ministries, departments, agencies, and embassies audited.
What exactly did the audit reveal?
Expenditure payment control & unsupported expenditure
It was revealed that expenditure payments amounting to US $9,173,213.58were not adequately supported by a number of ministries, departments, and agencies. These expenditure payments without supporting documents were identified in 22 entities out of the 25 entities and one 1 embassy audited for the year ended 31st December 2020.
Procurement & contract management
Three items stood out on this front: It was observed during the audit that all the 25 audited entities and 3 embassies audited did not prepare annual procurement plans based on their approved National budgets.
Secondly, the Authorizing Officers of the number of audited entities did not establish procurement units to conduct procurements of the entities. Third, a number of the audited organizations did not keep all procurement documents contrary to the provisions of the Procurement Act. The documents listed in the Procurement Act could not be made available for audit in respect of goods and services procured during the year worth a total of US $11,042,178.76. And, procurement contracts worth US $31,715,921.22 were not registered with the Office of the Auditor-General.
Opening of bank accounts
During the audit, it was noted that 11 ministries, departments, agencies, and 3 embassies operated bank accounts outside the Treasury Single Account (TSA) without the explicit approval of either the Accountant General and authorization of the Minister of Finance, contrary the Public Financial Management Act (PFM). At the year-end, a total amount of US $5,076,149.82was deposited in several bank accounts outside the Treasury Single Account.
Use of the country system for external support
During the year under review, 8 of the audited ministries, departments, agencies 1 embassy had a total of the budgeted amount of US $17,978,413.15as external assistance from various countries and development partners for the implementation of various projects and programs. This was not on the budget. Out of the budgeted amount, the entities received US $12,042,096.92.
However, the amount of US $12,042,096.92received was neither included in the approved national budget nor channeled through the TSA, the country system.
Revenue management and accountability
During the period under review, it was noted that there was no regulation for revenue collection by Somali embassies in South Africa, Turkey, and Uganda. Revenue amounting to US $277,925.46was collected and used at source by the above Embassies without any accountability to the Accountant General and the Minister of Finance.
During the audit, differences between salary reports in the Somalia Financial Management Information System (SFMIS) for the Somali Police Force (SPF) as managed by the Ministry of Finance, and the database of the SPF under the management of the Commander of the Police Force. There were discrepancies in names and codes between the databases maintained by the Ministry of Finance and that of the Special Force.
Management of tax exemptions
The Ministry of Finance gave tax exemption to various firms. However, the companies that were granted exemptions were not published by the Ministry contrary to the PFMA Act.
It was observed that the Ministry of Finance didn’t prepare and submit to both Houses of Parliament a tax exemption report as required by the law. Equally, auditors observed that the Ministry of Finance did not properly record the tax exemptions, the reasons for which they were made, and did not publish them in the Official Bulletin in accordance with the law
This document has been adapted from: The Compliance Report for Year Ended 31st December 2020; released in November 2021.
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