Saturday, January 16, 2021

Audit exposes BOPEU shady transactions

A damning audit report has revealed that millions of Pula were siphoned from Botswana Public Employees Union (BOPEU) through flawed internal controls and questionable donations to unnamed “third parties.”

The audit report by Ernest and Young signed on 20 September 2018, a copy of which has been leaked to the Sunday Standard, also raises questions about financial controls and management within BOPEU at a time the union is embroiled in a bitter power struggle.

The auditors found that “…Some of the Group’s payments to third parties amounting to P939,918 which are included in the administrative expenses and donations in the Statement of Comprehensive Income as amounts of P86, 124,341 and P3,524,408 respectively were not supported by sufficient appropriate audit evidence to confirm the occurrence and measurement of the recorded expenditure.”

According to the report “There was no system of internal control over such payments on which we could rely for the purpose of the audit. Owing to lack of accounting records, we were unable to confirm the occurrence and measurement of this expenditure by alternative means. Consequently we were unable to determine whether any adjustments to these amounts or profit or loss may be necessary.”  

The auditors also found that included in trade and other payables stated on the Statement of Financial Position “as P23, 057,982 is an amount of P741, 630 for which no supporting documentation or reasonable explanation could be provided.”

The report states that “Owing to the nature of accounting records and lack of information on this matter, we were unable to determine whether any adjustments were required to the consolidated financial statements in respect of specific payable’s existence, completeness and valuation. Consequently, we were unable to determine any adjustments to this amount or profit or loss may be necessary.”

The auditors noted that because of the above findings, “the accompanying consolidated financial statements do not represent fairly the consolidated financial position of the Group as at 30 June 2017 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).”

The report also raised red flags over some of the questionable investments undertaken by BOPEU and its subsidiaries.

“The group (BOPEU) has not consolidated investments in subsidiaries; Babereki ka Lorato Funeral Services (Propriety) Limited and Future Sustain International (Proprietary) Limited that the Group acquired during 2016 because it has not been able to determine the fair values of certain of the subsidiaries’ material assets and liabilities at the acquisition date. The investments are therefore accounted on a cost basis,” the report says.

“Under International Financial Reporting Standards, the Group should have consolidated these subsidiaries and accounted for the acquisition based on provisional accounts. Had Babereki Ka Lorato Funeral Services (Proprietary) Limited and Future Sustain International (Proprietary) Limited been consolidated, many elements in the accompanying consolidated financial statements of the failure to consolidate would have not been determined,” the report.

The report also found that BOPEU “has not equity accounted for an Associate, Stoffberg Investments (Proprietary) Limited.”

“ Stoffberg Investments (Proprietary) Limited was acquired during the year ended June 2016 and due to unavailability of reliable information in both previous year and current information, this investment is accounted on for on a cost basis,” the report says.

It adds that “Under International Financial Reporting Standards, the associate should have been accounted on equity basis. Had investment been accounted for under the equity method of accounting, the financial performance of the Group and the carrying value of the investment may have been materially affected.”

The auditors noted that “In the absence of adequate information, we are unable to determine the effects of the failure to equity account for the associate on the consolidated financial statements.”  

The report further states that the Group owns 30 percent shareholding in African Wild Lodges and Safaris (Pty) Ld and as at 30 June 2017 this investment was not performing as was impaired.

It also stated that as at 30 June 2017, all loans amounting to more than P50 million disbursed to the associated and subsidiary companies were not performing and impaired.

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