Municipalities owed over N$600 million

March 2, 2015, 6:51am

Municipalities owed over N$600 million

 

A severe shortage of technical and accounting skill in most municipalities and local authorities has seen them failing to collect a whooping N$600 million debt from service seekers The Villager can reveal.

The findings of municipalities in the country sinking into debt are captured in the  Auditor General and comptroller Junias Kandjeke’s audited financial statement of trading periods  2010 to the latest being 2013, that was tabled in 2014.

Minister of Regional Housing, Local Government and Housing and Rural Development, Major General Charles Namoloh also confirmed that the bulk of municipalities in the country are owed huge sums of money because of unavailability of skill in going after the missing funds.

 Namoloh added that they are putting up categories for the different local municipalities were they can be proclaimed as towns to be able to generate an income.

“Some municipalities depend on government, they are used to receiving government support as it is difficult for them to perform. Some of the people employed in positions at this Municipalities do not have the adequate skills to perform their tasks,” said Namoloh

Namoloh added that he is not happy with the operations of most municipalities in the country and called for remedial measures to be put in place.

 “It is frustrating when some municipalities do not perform yet the people in positions are just stuck in that position maybe because of the money. When things are going bad, then they would attack the ministry for funds when the ministry expects them to finalise their reports,” said Namoloh.

He also noted that since the Local Authority Act is being amended, this assist to address the debt issue as well as performance of people running these municipalities.

“We will have a performance structure that will grade the performance of those running municipalities. We just do not want to set up policies but we also need to have the proper structures to monitor these policies that we implement,” said Namoloh.

In corroborating the Minister’s sentiments Kandjeke also revealed that, “Local authorities’ debt to government stands at N$ 260 million and the average payments per annum stood between 1 and 2 million. Which is does not make much impact. Even if the government writes off these debts like what the Office of the Auditor General has been doing for local  the past 5 years in terms of audit fees; it is also the responsibility of our citizens to honour their obligations. I therefore call upon and encourage everyone using services for local authorities to make an effort and pay or reduce the heigt debt that is owed to them.”

“It is acknowledged that a significant portion of debt has been handed over to lawyers for collection but to date, no fruitful recoveries have been made,” said Kandjeke.

The municipality of Henties Bay recorded a trading deficit for the year of N$3 255 693.

As at the 30th of June 2012, debtors owing the council stood at N$2 573 108 before increasing upwards to N$3 015 024 for the financial year ended 2013.

“A considerable provision for bad debts has been raised. This is an indication that the Municipality needs to improve its debt collection system. This could rectify the tendency to operate at a loss,” said Kandjeke.

 

The balance of the provision of N$ 11 079 491 made by the Municipality of Keetmanshoop for bad and doubtful debts remained constant since prior financial statements, effectively making it the least performer on the list.

As at the 2012 trading period, the municipality of Keetmanshoop was owed N$33 604 547.

The review and considering slow repayment by consumers indicate an under provision of N$ 16 190 127, according to the auditors.

Next to follow on the list was the Municipality of Outjo which also did not fair too well either as it was owed N$19 177 715 during the period under review.

The average collection period of trade receivables stood at 449 days and the auditor general noted that council should attend to the arrears as a matter of urgency.

Provision for bad debts stood at N$16 131 74.

External government loans are not repaid but the repayments are provided for arrear loan instalments amounting to N$2 551 072.

No interest on overdue amounts due to Government has been provided for.

Based on an average collection period of 60 days for the municipality of Otjiwarongo, the auditors were of the opinion that the debtors provision is understated by at least N$16 636 716.

Internal loans to the amount of N$ 19 211 695 were also not disclosed in the Balance Sheet.

Up to N$16 287 558 of loans due to the municipality remained unpaid.

A number of reasons were cited including poor repayment of build together loans, non-payment of services, as well as over and understatement of provision for bad debts.

As at the year ended June 2013, the Municipality of Gobabis made a provision for bad and doubtful debts as per the financial statement amounting to N$9 374 835.

A donated vehicle valued at N$ 2 497 571 was not included in the financial statements resulting in understatement of the property, plant and equipment and the related fund account.

Kandjeke told The Villager that the slow debt collection on consumer accounts indicate an under-provision of N$16 713 889.

“Local authorities are struggling to collect debts from consumers. As a result local authorities are owed more than what they owe to government in terms of loans and interests there on. Therefore amount of money owed by residents and other consumers are more than double the amount the local authorities owe the government. Provision for bad debts is just a potion of the debt,” said Kandjeke adding that, “Contributing facts are late payments, delays, partial payments, non payments resulting in high provision of bad debts.”

 

Dues to the Municipality of Okahandja for housing loans alone came to N$36 000 while the records reflect a bad debt provision of N$ 4 000 000, which in the opinion of the auditors, is inadequate.

The debtors provision is understated by at least N$ 19 915 467.

Due to cash flow problems related to the revenue account, cash amounting to N$ 35 091 610 from investments of the Capital Reserve and Housing Funds had to be used to fund the shortfall on the revenue account.

At year-end, the revenue account had a negative balance of N$ 14 802 819.

During the year under review, the Municipality of Mariental’s debt outstanding had increased by 17% and provision for bad debts increased by 6%.

The auditor general recommended that the municipality’s effectiveness on debt recovery policies should be reviewed and improved on.

Furthermore debtors handed over to debt collectors amounted to N$ 606 233 and no provision was made for these debtors.

The AG also said  it should be of concern for the municipality that debtors outstanding for 120 days and above consisted of 46% of total debt before handovers while recoverability of the debtors remained doubtful and the provision for bad debts inadequate.

The Municipality of Karasburg made a provision of N$2 926 958 and the auditor noted that the recoverability of outstanding debts remained a serious concern and still poses a major threat to the cash flow of the Municipality.

The auditors were of the opinion that the provision for bad debts is sufficient.

External loans are, as in previous years, not repaid but the repayments are provided for as arrear loan instalments. The total instalments in arrears amount to N$ 1 144 747.

With regard to the municipality of Omaruru the council's debtor’s balance at 120 days and more constituted 42% of total debt outstanding.

The Council provision is the same as prior year, no adjustments were made for the year under review and this resulted into a under provision of N$ 440 467.

During the audit, the auditors noted that the sample tested of N$ 36 887 on debtors with credit balances revealed that N$ 13 624 of this reflect incorrect balances mainly due to unallocated deposits.

This represented a sample error rate of 37%.

Based on an average age of 30 days for Swakopmund, the provision for bad debts was overstated by N$ 4 527 877.

However, the municipality made a profit of N$ 4 881 204 (2012: N$ 10 523 426), before any transfers to funds and appropriations during the financial year and remained one of the best performing municipalities.

With regard to Walvis Bay Municipality, the auditors were of the opinion that the provision for bad debts was understated by N$ 37 989 027.

Debtors as at the end of June 30, 2013 stood at N$115 142 185 and it was noted that sundry debtors and subsidies remained high in value, with little prospects of being recovered.

However, Walvis Bay like Swakopmund excelled, with all building projects being completed on time as per plan.

With regard to the Municipality of Karibib there is still no list of long-term loans receivable to the amount of N$ 1 276 752 as at 2010 for housing loans and Build Together loans.

The auditors thus could not perform any tests to verify the correctness of these loans.

“The recoverability of outstanding debts remains a serious concern and is still a major threat to the cash flow of the Municipality,” the auditors noted.

The bad debts for the municipality of Windhoek increased to N$ 150 000 000 in 2012 from N$ 33 383 077 in 2011, and council adjusted provision for doubtful debts with an amount of N$ 116 000 000, to account for an under provision of N$ 105 000 000 in the 2011 financial year.

Debtors as at June 30, 2012 comprising services accounts and sundry debtors stood at N$426 874 678.

Charmaine Ngatjiheue and Kudzai Chimhangwa: The Villager