By Kebba AF Touray
The Minister of Finance, Seedy Keita, said they will welcome and cooperate with any investigation from the Auditor General concerning the D34.7 Million net variance detected in the 2019 report of the National Water and Electricity Company (NAEC). The Minister said this in response to the resolutions of the Public Enterprise Committee (PEC) of the National Assembly, during his appearance on Tuesday 17th September 2024.
The said PEC resolutions recommended that the Board investigate the net variances of D34.7 million, and adjust the books accordingly on or before the 30th June 2024, failure of which the Auditor General will investigate the matter and report to the Committee by 31st October 2024. He explained that the adjustment was part of the D196.542 million which was adjusted as write-off or correction with trade payables as part of the 2019 clean-up. He added that the justifications were documented in a memo that was presented to the Board of Directors of NAWEC.
The Board’s approval and the accompanying memorandum he said, are attached but it was noted that this write-off was necessitated by the need to clear up the balances in time for migration into a new integrated management system.
This, he said, can guarantee the integrity of financial reporting in a manner that the previous system was never able to do. He said the issue is now resolved because they now have a regular vendor reconciliation system in place that keeps track of un-reconciled accounts and ensures prompt correction is done.
“From the Board of Director’s perspective, enough has been done to prevent recurrence. We will however welcome and cooperate with any investigation from the Auditor General in this regard,” he said.
On NAWEC Management’s canceling of the overdraft facility of D77.2m because the Company has a huge cash balance that can be used for its operation, Finance Minister Keita told lawmakers that at the time of writing the report, NAWEC had no overdraft facility.
On the resolution that the Board must investigate the manual journal postings made into the account amounting to D569,895,320 with supporting documents, the Finance Minister said the amount is D604,041.841 and not D569,895,320, adding that there was a mathematical error in the table presented by the auditors on page 20 of the Management letter. As documented in the attached reconciliation of trade payables, he reported there are accompanying journals with an explanation for the adjustments one of which is the write-off of D34.7 million discussed in the previous point.
“From the Board of Director’s perspective, enough has been done to prevent recurrence. We will however welcome and cooperate with any investigation from the Auditor General in this regard as alluded to,” Mr. Keita said.
On the resolution that by 30th June 2024, the Memorandum of Association of NAWEC must be updated to reflect the debt conversion to an equity of D2.6 billion by the GoTG to make the necessary adjustment in the authorized share capital structure and to notify the registrar of companies, the Finance Minister said that the Memorandum of Association of NAWEC has been updated to reflect the debt conversions to an equity of GMD2.6 billion. PEC also resolved that the reason for the overstatement of D4.8 million posted in the cost of sales account must be investigated by the Board and details furnished to the Auditor General for confirmation on or before 31st May 2024, failure of which the Auditor General should investigate the matter and report to the Committee latest 31st October 2024.
The Minister replied that as previously discussed, the old ERP system was based on manual journal entries which were done by staff of the finance department with a process that is reviewed by a supervisor prior to postings. This he said was designed to ensure the existence of the four eyes principle in the accounting of transactions. He however said that unfortunately for this particular transaction, there appears to have been a failure of control that should have detected the errors in the initial postings.
“The document (invoice) which forms the basis of the transaction had one zero less than the posted amount, and this is the result of human error and subsequent failure of manual control,” Minister Keita said.
On the IGP’s investigation of the contract awarded to Kutejumble Electrical Engineering Services owned by a member of staff totaling D1.036m and report to the Committee by the end of June 2024, as highlighted in the 2020 report of NAWEC, Minister Keita said: “NAWEC will fully cooperate with the Office of the Inspector General of Police to investigate the contract awarded to Kutejumble Electrical Engineering Services. At the time of writing this report, NAWEC was not contacted by the IGP’s Office. We therefore seek guidance as to how to proceed with this resolution.”
On PEC’s resolve that NAWEC ascertain and reconcile the understated amount of D236,479,109 latest end of May 2024, otherwise the IGP can proceed with investigations and report back to them, the Minister replied that reconciliations have been performed monthly but unfortunately, the old system for billing allowed the retrospective adjustment of revenue amounts if an error is identified. He added that this leads to the risk that even when reconciliation is done for a particular month and the customer service and finance balances reconcile at the time, subsequent adjustments may be made to both finance and the customer service teams for the periods already reconciled.
“We will however welcome and cooperate with any investigation from the Inspector General of Police in this regard as alluded to,” the Minister said.
