Trevor Jenkins Johnston and Abdul Rashid Thomas: Sierra Leone Telegraph: 15 January 2019:
Sierra Leone’s Auditor General has published her report into the country’s public finances and how it was managed by the previous Koroma-led APC government in 2017, before they lost the general and presidential elections in March 2018.
The 2017 report, like all previous years’ reports, makes for an interesting reading, though discouraging that after almost eleven years in power, very little had changed or improved in terms of governance. Little lessons – if at all, it seems, had been learned by the previous government.
The 2015 and 2016 Auditor General Reports for example, are replete with evidence of massive corruption, mismanagement of public funds, abuse of office, lack of transparency and poor governance. So, how different is the 2017 Auditor General Report?
An adverse opinion is generally considered the worst opinion that can be attached to a set of accounts by an auditor. For this 2017 report, the opinion is unqualified.
This means the accounts are true and fair, and free from material misstatements.
The Auditor General (Photo: Mrs Lara Taylor-Pearce) gave an unqualified opinion on the 2017 Accounts.
This is great news. However, our attention is drawn to several key issues of concern across the various entities that were audited.
According to the report, there was an 8% increase in government revenue – year on year.
But this increase in revenue was offset completely by an increase in expenditure – year on year, of 27%, which then placed government finances into huge deficit, that had to be paid for through other means. Revenue from mining had declined significantly.
The government had also failed to diversify the country’s single-track economy and broaden its taxation base.
At the same time, year on year receipt of grants from donors declined by 55%. So, the government then resorted to borrowing more money to pay for its increased cost of running its affairs.
As a result of this, government borrowing from outside of the country – external borrowing, went up by a whopping 71% to Le531 Billion (equivalent to $73.8m).
Putting this in context, by 2007, when president Koroma came to power, government debt had been wiped out by the international community to almost zero. And by 2018 when he left office, the country’s debt had gone up to about $3 Billion.
In 2017, Sierra Leone government spending deficit had gone up to Le1.9 Trillion (equivalent to $264 million).
This deficit represented a 138% jump on the deficit incurred by the Koroma-led APC government in 2016 – in just twelve months.
The government’s huge appetite for cash spending resulted in an adverse budget variance of Le1.1 Trillion ($153 million), which in essence, meant a whopping 55% over budget; and a 43% hike on the 2016 variance.
In 2017, government borrowing from local banks through bank overdraft, stood at Le1.5 Trillion ($209 million).
This represents a 400% increase on 2016 borrowing from local banks, adding further pressure on the slowing down of economic growth, by driving interest rates up for businesses and consumers.
Business need low interest rates, so they can borrow to grow, create jobs and pay taxes. But with interest rates at 23%, few businesses can afford to borrow to expand because of the government’s very high borrowing requirements.
This is the main reason why unemployment is very high in Sierra Leone today, standing at over 70% of the adult population. Government is ‘crowding out’ the private sector.
Of the 232 recommendations put forward to the government in the 2016 Auditor General Report, only 79 had been implemented by the end of 2017; with 14 of those classed as ‘work in progress’.
This represents an implementation rate of 34%. It effectively takes about three years after the Auditor’s report, for implementation of recommendations to be fully completed.
Embedded in these recommendations are, included but not limited to, very sensible financial control solutions to ensure all expenditures are robustly evidenced; regular reconciliation of bank and cash records; asset monitoring and control; adequate training of personnel; separation of duties; improved record keeping; and timely management reporting.
Across various government departments and agencies in 2017, the Auditor General found numerous evidence of the lack of controls. For example – 74% of local councils did not submit their accounts on time.
Burning Issues – Reasons why the country is classed as one of the poorest in the world?
The 2017 Auditor General Report found that Le75.3 Billion ($10.5 million) in government debt repayment could not be reconciled with the Debt Register.
Simply put, it appears the payments received by the Creditors are less than is being shown on the 2017 Accounts.
The report recorded over Le37 Billion ($5.2 million) of cash losses that simply could not be accounted for. These are by and large expenditure across several entities for which paperwork was light or non-existent.
Are the control recommendations (in progress or unimplemented), that govern the lapses leading to these cash losses now being given top priority billing?
There was Le9.1 Billion ($1.3 million) in uncollected top-up allowance taxes for some government employees, not authorised by law. Will these be recovered or offset against the various entities’ expenditure budgets in future years?
Le1.1 Billion ($157,000) was recorded in 2017 as uncollected foreign travel tax. Will these be collected in the future?
Le16 Billion ($2.3 million) was recorded in 2017 as uncollected customs duty and domestic tax. Will these be collected in the future?
Le2.3 Billion ($328,000) was classed in the report as “dis allowable” expenditure that could not be verified. These relate to funeral expenditure for senior government officials, for which documentary evidence was non-existent.
To summarise, there was approximately Le140 Billion in “cash losses” recorded in the 2017 Auditor General Report, which the previous government could not account for.
Whether it is uncollected revenues or inexplicable, unverifiable expenditure, leave room for questions to be asked. Will these questions now be asked and by whom?
Will the Commission of Inquiry be asking those public officials bearing the most responsibility in the governance structure of the previous government, be held to account, so that lessons can be learnt by the current and future government?
About the authors
Trevor Jenkins-Johnston FCCA (Photo) is the Founder and Managing Director of SmartCloud Accountants, UK; and Abdul Rashid Thomas is the editor of the Sierra Leone Telegraph.
You can read the 2017 Auditor General Report here: