THE NATIONAL TREASURY FEEDBACK WORKSHOP ON THE ANNUAL FINANCIAL STATEMENTS FOR FINANCIAL YEAR 2017/2018

Top 20 Quality Review Issues for FY 2017/2018

Top 20 Quality Review Issues for FY 2017/2018 Financial Statements Prepared out of IFMIS Variance between forward by the CS and the primary financial statements Incomplete approval of the financial statements Non applicable line items in the financial statements Differences in exchequer releases Unsupported prior year adjustment Statement of assets not balancing Cash and cash equivalent at the end of the current and comparative year in the Statement of Cash Flows does not agree to cash and cash equivalents in the Statement of Assets Inconsistency between the Statement of Receipts and Payments and the Combined Summary Statement of Appropriations Missing/Inconsistency between the Statement of Budget Execution by Programmes and Sub Programmes and the Combined Statement of Appropriation Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 Inconsistency between the Printed Estimates and Statements of Appropriation Unexplained Utilization Differences Missing listing of transfers to other government entities and confirmation letters Casting Errors in the financial statements Inconsistency between notes and Primary Financial Statements Missing/ Erroneous Bank Reconciliation Reports Missing / Incomplete Related Party Disclosures note Missing/ Unreconciled Summary Fixed Assets Missing/ Incomplete support of Accounts Receivable and Payable Listing Incomplete Financial Statements Disclosures i.e. Progress on follow up of the auditor’s recommendations, pending bills note and analysis and IFMIS generated financial reports Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 1. Financial Statements Prepared out of IFMIS: We identified that figures reported in the financial statements do not tie to the figures in IFMIS. This related to both Statements of Receipts and Payments and Statement of Assets. The main reasons for these could be: Ministries not completing the auto bank reconciliation process. Not capturing and remitting of receipts, capturing receipts twice. Differences in opening/ fund balances brought forward in statement of assets. Resolution: Ministries should reconcile their financial statements to IFMIS and ensure that their auto-bank reconciliation is up to date, all receipts are captured correctly and remitted. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 2. Variance between forward by the Cabinet Secretary and the primary financial statements: We noted that there were variances in the amounts reported in the forward by the Cabinet Secretary and the amounts reported in the primary financial statements. The differences may imply inaccuracy of the financial statements. Resolution: the financial data included in the “Forward by the Cabinet Secretary” should be supported by and reconciled to the primary financial statements. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 3. Incomplete approval of the financial statements We noted that some statements had not been approved by the Cabinet Secretary, the Accounting Officer and/ or the Principal Accounts Controller. This means that the financial statements are not fully authorized. Resolution: entities should ensure that the Cabinet Secretary, the Accounting Officer and the Principal Accounts Controller sign all statements that require their approval. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 4. Non applicable line items in the financial statements: Included in the financial statements are notes that have nil balances, both for the current year and the prior year. These notes do not provide any additional information to the users of the financial statements.  The financial statements are therefore, not properly edited before submission to the stakeholders. Resolution: all unused notes/ line items that are not applicable and have nil balances in both current and prior year should be deleted. Further the numbering of applicable notes after revision of the statements should be realigned. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 5. Differences in exchequer releases: Amounts recorded as exchequer releases in the financial statements differ from the amounts reported by the National Treasury. This may imply inaccuracy of the financial statements. Resolution: ensure that the exchequer releases recognized in the financial statements agree to the disbursements from the National Treasury as per the exchequer notifications.. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 6. Unsupported prior year adjustment We noted that some ministries included unsupported prior year adjustments in their Statement of Assets. Although a breakdown showing accounts affected had been provided, sufficient detail on the nature of the errors being corrected had not been provided for each of the items included in the prior year adjustments. Resolution: Prior year adjustments should be properly accounted and disclosed in the financial statements in line with IPSAS cash standard section 1.5.3.An explanatory note should always be included in the financial statements to give more information in regards to the prior year adjustment. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 7. Statement of assets not balancing We noted that for some entities, the net financial assets did not agree to the net financial position creating a suspense in the financial statements. This was due to: Inaccuracy or incompleteness of amounts captured in the financial statements Wrong fund balance brought forward Financial statement figures not tying to the referenced notes. Casting errors in the financial statements. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 7. Statement of assets not balancing (continued) Resolution: The suspense noted should be investigated and resolved Ensure that the fund balance carried forward from the prior financial year agrees to the fund balance brought forward in the current financial year. Entities should ensure that the amounts in the primary financial statements tie to the referenced notes. Submitted financial statements should be reviewed for arithmetic accuracy. Any differences should be analysed and corrected. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 8. Cash and cash equivalent at the end of the current and comparative year in the Statement of Cash Flows does not agree to cash and cash equivalents in the Statement of Assets Some of the MDAs Cash and cash equivalent at the end of the current and comparative year in the Statement of Cash Flows did not agree to cash and cash equivalents in the Statement of Assets . Resolution: The cash and cash equivalent balance in the Statement of Cash Flows should agree to the cash and cash equivalent in the Statement of Assets as it represent the amount of money held in bank or cash at the end of the year. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 9. Inconsistency between the Statement of Receipts and Payments and the Combined Summary Statement of Appropriations Some of the MDAs Combined Summary Statement of Appropriations did not agree to the statement of receipts and payments. Resolution: The combined summary statement of appropriation should agree one to one to the statement of receipts and payments since the reports are prepared on IPSAS cash basis. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 10. Missing/Inconsistency between the Statement of Budget Execution by Programmes and Sub Programmes and the Combined Statement of Appropriation Some of the MDAs did not include Statement of Budget Execution by Programmes and Sub Programmes contrary to IPSAS Cash template prescribed by PSASB. For some, the amounts in the Statement of Budget Execution by Programmes and Sub Programmes did not agree to the amounts in the Combined Summary Statement of Appropriations. Resolution: All MDAs should include the Statement of Budget Execution by Programmes and Sub Programmes in their financial statements and ensure the budget and actual amounts in the statement agree one to one to the combined summary statement of appropriation. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 11. Inconsistency between the Printed Estimates and Statements of Appropriation We noted that for some of the MDAs, the original and final budget amounts in the Statements of Appropriations did not agree to the printed estimates. Some of the budgets were erroneous as they had a deficit or surpluses in their budgets. Resolution: The MDAs should ensure that the budget amounts in the Summary Statements of Appropriation both recurrent and development agree to the printed estimates. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 12. Unexplained Utilization Differences Some MDAs did not include a commentary on significant underutilization (below 90% of utilization) and any overutilization. Resolution: Ministries should give a commentary for all significant under/over utilisation. Section 1.9.12 of the IPSAS cash standard requires that explanations to be provided for variances between actual and budgeted amounts. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 13. Missing listing of transfers to other government entities and confirmation letters We noted that some MDAs did not provide a complete listing on amounts transferred by the MDAs to State Corporations and SAGAs. Some also did not attach confirmation letters showing that the transfers had been agreed with the receiving entities. Resolution: Ministries should provide a complete breakdown listing showing the specific entities to whom transfers were made. Further, confirmation letters should be obtained and attached as annexures to the financial statements. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 14. Casting Errors in the financial statements We noted that some MDAs had casting errors in the financial statements. This errors resulted to an unreconciled differences in the financial statements. Resolution: Ministries should review financial statements for arithmetic accuracy before submission. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 15. Inconsistency between notes and Primary Financial Statements We noted that some MDAs’ financial statements had inconsistencies between the notes and the primary financial statements. This errors result to unreconciled differences in the financial statements. Resolution: Ministries should review financial statements for arithmetic accuracy before submission. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 16. Missing/ Erroneous Bank Reconciliation Reports Some MDAs had not attached bank reconciliation together with the board of survey and bank certificates to support the bank balances included in their financial statements. Some of the bank reconciliations could not reconcile to the bank balances included/ reported in the financial statements. Resolution: MDAs should provide bank reconciliations, board of surveys and the bank certificates to support the bank balances included in the financial statements. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 17. Missing Related Party Disclosure Note Some MDAs financial statements submitted did not include related party disclosure note contrary to the IPSAS cash reporting template prescribed by the board. Resolution: Ministries should include the related party disclosure note which includes the key management compensation and transfers to and from other government entities. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 18. Missing/ Unreconciled Summary Fixed Assets Some MDAs financial statements submitted did not include the summary of fixed assets as a disclosure to the financial statements. Some included the fixed assets register but the amounts reported in the Statement of Receipts and Payments as acquisition of assets did not agree to the additions in the year in the summary fixed assets register. Resolution: Ministries should include a fixed assets summary indicating cumulative historical cost in both the current and prior year. Additions in the fixed assets register should be reconciled to acquisition of assets during the year. Any difference should be explained. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 19. Missing/ Incomplete support of Accounts Receivable and Payable Listing Some MDAs financial statements did not include a breakdown listing to support imprest, advances, district suspense and also accounts payables included in the financial statements . These amounts could therefore not be supported. Resolution: Ministries should include listings to support the accounts receivable and payable amounts in the financial statements. The listing included should agree to the accounts receivable and payable amounts reported in statement of assets. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 20. Incomplete Financial Statements Disclosures Some MDAs financial statements did not include some of disclosures that are mandatory in the financial statements. This included: Progress on auditors recommendations Pending bills note and analysis IFMIS generated reports Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 20.1 Missing Progress on Follow up of the Auditor’s Recommendations Some MDAs financial statements submitted did not include a disclosure on the progress of the prior year auditor’s recommendations as required by the IPSAS. This implied incompleteness of the financial statements. Resolution: Ministries should include progress against the prior year auditor’s recommendations indicating if the matters are resolved ,if not, a time frame for expected resolution of the outstanding issues should be included. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 20.2. Missing Pending Bills Note and Analysis Some MDAs financial statements submitted did not include a pending bills note on unpaid liabilities at the end of the financial year arising from contracted goods or services during the year or in past years. Some included a note but did not include an analysis of the pending bills amount shown in the note. Resolution: Ministry should include a note and analysis on pending bills in the financial the statements as required by the IPSAS cash template. The listing included should agree to the pending bills note in the notes to the financial statements. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 20.3. IFMIS generated financial reports Some MDAs financial statements submitted do not include financial reports generated from IFMIS for the financial year. Resolution: Financial reports generated IFMIS for the financial year should be attached as annexures to the financial statements in accordance with the requirements of IPSAS cash template as prescribed by the Public Sector Accounting Standards Board. Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 20.3. IFMIS generated financial reports The reports include: GOK IFMIS Comparison Trial Balance GOK IFMIS Receipts and Payments Statement GOK IFMIS Statement of Financial Position GOK IFMIS Statement of Cash Flows GOK IFMIS Notes to the Financial Statements GOK IFMIS Bank Reconciliation (F.0.30 Report) GOK IFMIS Statement of Budget Execution GOK IFMIS Statement of Deposits GOK IFMIS Budget Execution by Programmes and Sub Programmes GOK IFMIS Budget Execution by Programmes and Economic Classification GOK IFMIS Budget Execution by Heads and Programmes Top 20 MDA Quality Review Issues for FY 2017/ 2018

Top 20 Quality Review Issues for FY 2017/2018 QUESTIONS AND ANSWERS Top 20 MDA Quality Review Issues for FY 2017/ 2018