PHILIPSBURG — The government still has not put its financial household in order. According to the government’s accountants bureau SOAB the uncertainties in the financial statements add up to a whopping 1.3 billion guilders (more than $726 million) while the General Audit Chamber maintains an adverse opinion about the country’s 2021 financial statements.
“Like the financial statements of previous years, they could be more reliable, making it difficult, if not impossible to use the actual figures for the preparation of the government’s subsequent budget,” the Audit Chamber writes in its report about the 2021 financial statements that appeared this month.
“The SOAB correctly issued an adverse opinion about the financial statements. Expenditures were incurred for which no funds were budgeted and income was not realized or lower than expected.” The 2021 budget and the 2021 financial statements lack the information required by the National Accountability Ordinance (NAO),” the Audit Chamber-report states. “Unless a budget is prepared in according with the NAO, it cannot serve as a standard for financial statements.”
The Audit Chamber includes the following recommendations in its report. The government has to present the draft national ordinance adopting the financial statements to parliament within a month after receiving the report from the General Audit Chamber. It must consistently provide parliament with policy information in the financial statements. The government must prepare memoranda in accordance with the NAO. Quarterly reports do not meet these standards because they do not contain information about required budget amendments and their impact on the budget. Parliament must ensure that the government is in complete compliance with the NAO. Lastly, the parliament should call the responsible minister to account when accountability information is absent.
Previous Chamber-reports highlighted that the government’s balance sheet did not include 120.6 million guilders (around $67.4 million) for future payments of cost of living allowance as a liability. This has now been disclosed in the explanatory notes to the balance sheet.
The Chamber found ‘smaller’ reliability errors in the statements for an amount of 6.3 million guilders ($3.5 million). “Considering the total of the errors (126.9 million guilders, or $70.8 million) the Audit Chamber maintains an adverse opinion about the 2021 financial statements.” The report notes that the errors amount to just 14.2 million ($7.9 million) according to the internal auditor but that there is no explanation for the difference between the two amounts.
The government has also internal control issues. According to the Chamber-report that control is inadequate when it comes to recording the outcome of processes in the procurement of goods and services, the granting of subsidies, and the payment of salaries. There are also doubts about the accuracy and completeness of levying and collection of taxes and fees.
Because of all this, the Audit Chamber cannot assess whether and to what extent the government realized policy intentions.
There is however also some positive news: the internal auditor received more documentation than during previous years and the Ministry of Finance and the Temporary Work Organization (TWO) conducted a cleanup of the balance sheet and the general ledger as part of the measures established in the country package. The quality of the financial statements has therefore improved though the Audit Chamber has reservations about the improvements because they have not been verified yet.
“The financial statements remain unreliable, making it difficult, if not impossible to use the actual figures in the preparation of the government’s subsequent budget and for parliament to assess whether ministers conducted sound financial management.”
The Chamber concludes that the financial statements do not represent a true and fair view of the financial position per December 31, 2021. Nor do they represent an accurate picture of the result for 2021. “The statements have not been prepared in accordance with all provisions of the NAO.”
See also
Offsetting overspending against underspending, the 2021 budget underperformed for 146 million guilders or $81.5 million (2020: 53 million guilders or $29.6 million).
“Income, expenses and balance sheet changes were not prepared in accordance with the 2021 national budget and other legal requirements,” the report states. “No improvement compared to previous years is evident to us.”
The Chamber-report highlights five shortcomings that have been around for more than a decade, since the transfer to country-status on October 10, 2010. These shortcomings deal with wages and salaries, goods and services, tax revenue, cost of social services and scholarships, subsidies and transfers.
“There are inadequate internal control procedures across all ministries. There are material uncertainties that have a profound impact on the financial statements. More is needed to achieve the government’s goal of attaining auditor-approved financial statements.” To reach that goal, the government must address the shortcomings listed in the report first.
The uncertainties in the government’s financial household are at times flabbergasting. Under the post goods and services (scope: 103 million guilders or $57.5 million) the auditors found 56 million ($313 million) or 54 percent uncertainties. Subsidies and transfers (scope: 133 million guilders or $74.3 million) did a lot better but there were still uncertainties amounting to 30 million guilders ($16.8 million – 22 percent).
The huge amount SOAB listed as uncertainties (1.3 billion guilders) includes uncertainties that cannot be quantified. The Audit Chamber left these out of its overview and observed that uncertainties declined in 2021 by 209 million guilders ($116.7 million).
The Ministry of Finance attributes this decline to the cleanup of balance sheet items, but the auditor cannot confirm that this cleanup was done in an unbiased manner or that proper authorization was obtained for the removal of specific items from the financial records. Minister of Finance Arwell Irion wrote in a reaction to the draft report that no items were removed. The auditor could not verify the accuracy of all material corrections either.
###
Related articles:Compliance audit reportOpinion piece: Unlawful Spending
Discussion about this post