Sierra Leone Telegraph: 25 October 2020:
Sierra Leone’s 2019 Auditor General Report will soon be tabled in parliament for debate. And like all previous audit reports of successive governments, the 2019 Report is replete with evidence of massive misappropriation or mismanagement of public funds.
According to a leaked copy of the 2019 Auditor General Report seen by the Sierra Leone Telegraph, over one hundred million dollars in government revenue are unaccounted for or missing.
When the auditor general’s office published its 2018 Report last year, there was consternation over its findings which included evidence of missing Billions of Leones. But the current government led by President Julius Maada Bio took little responsibility and instead blamed the previous APC government for the missing funds.
The Bio – led government has been in power since May 2018 and cannot now deny responsibility for, nor refuse ownership of the 2019 Auditor General Report into the financial state of affairs of the country and the government’s stewardship.
And from the leaked 2019 Report, it is obvious there has been little change – if at all, in the way Sierra Leone is governed since president Bio took office in 2018. Corruption is still rife.
According to the yet to be published Auditor General Report 2019, “Government revenue for 2019 increased by 23% from Le 4.6 trillion to Le5.6 trillion; an increase of Le1.0 trillion. But perhaps the main areas of concerns are the significant issues that continue to be identified in the assessment, collection, recording and reporting of government revenue:
Assessment of Revenue
Several revenue streams are operated on a self-assessment system, with individuals and businesses completing their returns. Consequently, there is a risk that deliberate or accidental inaccuracies in self-assessments may occur which may lead to under-collection of taxes. The main issues are as follows:
A Comparison between the Automated System for Customs Data (ASYCUDA) World and the VIPS, in respect of import GST revealed import GST (VAT 2)transactions totalling Le1.6 billion reported in the VIPS could not be traced to the ASYCUDA World. In addition, variances totalling Le21.8 billion were identified between the records posted in the ASYCUDA World and the VIPS in respect of import GST.
Leadway Trading SL Ltd., the sole exporter of timber was using containers rather than cubic meters as a unit of measurement as required by section 3 of the Finance (Amendment) Act of 2018. As a result, timber exported was undervalued by billions of Leones.
Several taxpayers’ files in respect of Foreign Travel Tax (FTT) and Corporation Taxes were not submitted to the auditors; therefore, we cannot ascertain the amount assessed and payment made by the respective taxpayers.
Collection and Banking of Revenue
Taxpayers are required to make payment into the various transit banks or the Bank of Sierra Leone within the due date. However, significant issues were identified in relation to the collection and banking of revenue. These include the following:
From the sample selected, we noted that there were taxpayers with tax liabilities totalling Le45.88 billion who failed to make payments in the year 2019. We also noted that the majority of these taxpayers are State-Owned Enterprises (SOEs). In addition, some taxpayers did not make complete payments of their GST tax liabilities, resulting in a net variance of Le34.76 billion as underpayment in the VIPs.
Upon review of financial statements and tax files submitted, we observed a difference of Le6.8 billion between tax paid and taxes computed on the chargeable income reported in the financial statements submitted without any evidence of additional taxes (5th instalments) been paid by the taxpayers.
Fraud investigation instituted by the management of the NRA on Foreign Travel Tax (FTT) revealed that revenue totalling Le 3.2 billion was not paid into the bank for the year 2019. We also observed that revenue totalling Le13.6 billion was in the accounts at the Bank of Sierra Leone (BSL) for which no supporting documents were submitted to the auditors to determine completeness and accuracy of the amount in the bank account.
Furthermore, penalties totalling Le3.6 billion were levied on defaulting taxpayers; however, no evidence was submitted to ascertain that the NRA has taken further actions to collect these funds.
Revenue totalling Le2.1 billion collected from timber transactions for the year 2019 were not paid into the bank account at the BSL.
The Ministry of Trade and Industry outsourced the assessment, collection and banking of revenue relating to price verification and destination inspection to contractors. During the year 2019, revenue totalling Le15 billion was paid into the General Revenue account at the BSL.
However, relevant documents to support the completeness and accuracy of the revenue deposited into the account were not submitted to the auditors.
A comparison between revenue generated as per the Sierra Leone Maritime Administration (SLMA)cashbook and bank statement revealed that revenue totalling Le27.2 billion was not banked.
During the review of the payment plan at the debt management unit at the customs department, we identified debtors with an indebtedness of Le5.7 billion who have been long overdue for payment since the years 2011 to 2018. In addition, upon review of a report done by the unit, we observed that debts amounting to Le351.72 million for which debtors cannot be identified or located in the country.
Reporting of Revenue
Monies collected by the transit banks should be transferred to the Bank of Sierra Leone within 24 hours, and later recorded in the IFMIS accordingly. In some instances, taxpayers such as oil companies and timber exporter make payment directly into the Bank of Sierra Leone. However, we noted the following anomalies in the reporting processes of revenue collection:
Reconciliation between money received by the transit banks and the NRA records is still not being performed for the year 2019 (except for custom transactions). Furthermore, our reconciliations revealed that GST transfers made by transit banks for 2019 were not deposited into the Bank of Sierra Leone (BSL). The total amount not deposited into the BSL was Le236 million.
Reconciliation for non-tax revenue between the NRA and MDAs are not done adequately. As a result, reconciliation carried out between the NRA records and the National Telecommunications Company Limited (NATCOM), we observed variance of Le86.82 billion above that recorded in the NRA cashbook.
Revenue arrears valued at Le300 billion disclosed in the General Purpose Financial Statements (GPFS) for the year 2019 may be misstated as third party confirmations from selected taxpayers were not submitted to the auditors. We observed that some MDAs failed to submit or submitted the wrong arrears information to the NRA.
We recommend that the Commissioner-General of the NRA introduce a compliance risk management process that will enable the NRA to focus on the underlying drivers (not symptoms) of the inaccuracies in the self-assessment system, rather than the adoption of a ‘one size fits all’ approach.
The Commissioner-General of the NRA should ensure that taxes due are collected and banked promptly. Without proper reconciliations (at the assessment, collection, recording and reporting stages), government revenue will remain relatively uncontrolled, funds are likely to be misused, and it will prove impossible to ascertain whether revenue disclosed in the GPFSs is free from material misstatement.
As part of our audit, we reviewed some of the expenditure on goods and services for selected MDAs to assess whether it was spent for the intended purpose and in accordance with the Public Financial Management (PFM) Act, 2016. Transactions totalling Le21 billion were not supported by the relevant documentary evidence like payment vouchers, contract agreements, receipts, delivery notes, etc. In addition, we observed that withholding taxes amounting to Le35 million was not paid over to the NRA.
This may create suspicion that the government’s much-needed funds have been misappropriated. The Accountant General should in future ensure that all payments made out of the Consolidated Fund are supported by regulations, government policies or other legal instruments.
A comparison between Disbursed Outstanding Debts (DoD) for 2018 and 2019 revealed that closing balances in the CS-DRMS502 report disclosed in the General Purpose Financial Statements for the year ended 31st December, 2019 was overstated by Le93.48 billion, and a loan transaction with a closing balance of Le231 billion was not captured in the report.
Outstanding debt balance totalling Le13.5 trillion was also not confirmed by external creditors and variances were identified between confirmation letters sent by external creditors and closing balances reported in the CS-DRMS502 report.
The Director of the Public Debt Management Unit should reflect the accurate picture of the current debt position of the Government of Sierra Leone in the General Purpose Financial Statements, as the information is very useful to users of the financial statements.
Total amounts spent on wages, salaries and employees’ benefits were Le2.4 trillion in FY2019, which is 26% increase in the total amount spent in FY2018. The government wage bill, however, remains at 6% of GDP.
Allowances amounting to Le9.2 billion were paid to employees without adequate supporting documents; like arrears processing forms, approved salary amendment letters, request letters, recalculation sheets etc.
We also observed that taxes amounting to Le1.3 billion were not deducted from rent allowances paid to employees and consultant as a consequent of wrong tax rates applied on rent allowances. This could mean that due diligence was ignored in the payment of allowances to employees and consultants, leading to the loss of much-needed government funds.
The Accountant General should in future ensure that appropriate procedures and financial controls are implemented to enable the department to demonstrate that payments made in respect of allowances are supported by appropriate documentation, and correct taxes are deducted from rent allowances of employees and consultants and paid to the NRA in accordance with the Finance Act and other regulations.
Cash and Bank
We reviewed a minute paper dated 16th June, 2020 done by the Principal Deputy Financial Secretary to the Financial Secretary, requesting for the Minister’s approval for the cancellation of obsolete cheques amounting to Le 207 billion. We noted that the necessary adjustments are yet to be made to the draft General Purpose Financial Statements.
Procurement of Goods and Services
We examined a sample of some Ministry’s procurement on goods, works and services in accordance with the Public Procurement Act, 2016 and the Regulations, 2008. We observed that procurement activities totalling Le21 billion were not captured in the procurement plan.
In addition, we observed that contracts were not advertised, and letters of regret not sent to unsuccessful bidders for procurement activities undertaken, using an open competitive bidding method for the period under review. We also observed that conditions/clauses in the contracts were not followed for the supply of electricity in Bo and Kenema cities.
Because of the significance of sections identified in the report where non-compliance was observed, we conclude that the procurement of goods and services in these ministries was not in full compliance with the Public Procurement Act of 2016.”
The Sierra Leone Telegraph awaits the publication of the full report by the Auditor General before publishing further details of the 2019 Report which exposes very serious lapses in the management of public funds by the Bio-led government.