Police owe over E7.2m VAT
MBABANE –The Royal Eswatini Police Service (REPS) has been advised to settle an eight-year-old VAT debt amounting to over E7.2 million.
The police service is in breach of the Income Tax Order, as they have failed to remit their taxes to the Eswatini Revenue Service (ERS) since 2016.
The Auditor General (AG), Timothy Matsebula, has advised against breaching tax laws by all government entities and departments as this deprived the State of much needed revenue to keep the country afloat.
Through his financial audit report, the AG reported to the controlling officer, Acting National Commissioner Lydia Dlamini that records from ERS revealed that the REPS had a Value Added Tax (VAT) debt worth E7 253 044.16 relating to tax periods dating back to July 2016 and remain unpaid to date.
Of note, the report is subject to be debated by the Public Accounts Committee (PAC) and be adopted by Parliament through a recommendation report to be tabled by the PAC chairperson.
DEBT WAS NOT DISCLOSED
Moreover, the debt was not disclosed in the financial statements for the year ended March 31, 2023.
“I cautioned the controlling officer that public entities are required by the Income Tax Order of 1975 as amended to remit taxes accordingly. I reminded the controlling officer that government was deprived of receiving revenue in the form of taxes and that this was in contravention of tax laws and regulations of the country by the police service,” said the AG.
Matsebula then advised the controlling officer to settle the VAT debt with ERS and provide proof of settlement.
At the time of compiling the report, the REPS controlling officer had not responded to the audit finding.
On another note, the AG reported that records from ERS revealed that His Majesty’s Correctional Service (HMCS) had a VAT debt worth E9 030.59 relating to tax periods dating back to September 2014, which was still outstanding and not disclosed in the financial statement for the year ended March 31, 2023.
Matsebula also said public entities were required by law to remit taxes in accordance with the tax law. He once again reported that government was deprived of receiving revenue in the form of taxes. He advised the controlling officer to settle the VAT debt with the ERS and provide proof of settlement.
In response, the controlling officer concurred with the observation and further submitted that the department honoured its tax obligations unless they were not aware of them, hence it has deferred repayment accounts. She said the department has since engaged the ERS on the outstanding tax liability and payment was being processed.
PROOF OF PAYMENT
The AG noted the controlling officer’s submission. However, the audit finding remained unresolved until payment of the VAT had been made to the government tax collector and proof of payment submitted.
Meanwhile, the AG further reported that the police service made foreign payments without budget provisions and non-adjustment of variations of foreign currency exchange losses.
Matsebula observed that foreign payments amounting to E4 355 849.65 were made without provision of budget from the recurrent vote, grants and subsidies external item, since financial years ended March 31, 2022 to March 31, 2023, under the responsibility centre 2201, Hhohho General Police.
The AG reported that the police service did not adjust variations of foreign currency exchange losses on accounts payable.
He also reported to the controlling officer that foreign payments amounting to E97 098 were incurred without provision of budget from the recurrent vote, grants and subsidies, external item, in the financial year ended March 31, 2023 under the responsibility centre 2204, Shiselweni General Police.
PAYMENTS WITHOUT BUDGETS
He said the un-appropriated expenditures or payments without budgets and non-adjustment of currency variations amounting to E4 452
947.65, were incurred and fictitious assets were created in the financial years ended March 31,
2022 to March 31,
2023. “The recurrent expenditure and variations were not included in the financial statements. The fictitious assets originate from prior financial years,” he said.
Elaborating, the AG advised that the controlling officer ought to have recorded the payments in the recurrent expenditure account in the fiscal years, where the transactions occurred and reconciled the accounts payable to clear the fictitious asset. According to Section 11, paragraph 5.4 of the Financial Management and Accounting Procedures Manual, ‘apart from entering the eventual transaction total, an adjustment will also be required to balance the foreign payments suspense by the amount of the currency variation. Further, paragraph 5.6 requires that, year-end balances on this item should normally equal zero.
FINANCIAL POSITION
Matsebula said the recurrent expenditure was misstated, while liabilities and assets were overstated; thus distorted the financial performance and financial position of government. He advised the controlling officer that payments should be recorded in the recurrent expenditure account for the fiscal years in which the transactions occurred and then reconcile the accounts payable to clear the fictitious asset accordingly as this anomaly originated from prior financial years.
The controlling officer acknowledged the AGs observations and stated that the adjustment in respect of accounts payable, which was in respect of the Regional Development Fund (RDF) was done in the year 2020/2021. She stated that the voucher was reversed by the Treasury Department on April 27, 2022.
The controlling officer further explained that on the issue of accounts payable amounting to E1 442 857.50, the police service discussed with the accountant general on how best it could be cleared. They were advised to clear it using budget savings. However, the controlling officer had no savings and hoped to clear the balance using savings in 2023/2024.
STATE THE REASON
The controlling officer did state the reason for the reversal by the Treasury Department and did not provide evidence of the adjustment made. Further, the AG concurred with the accountant general that the un-appropriated expenditure amounting to E1 442 857.50, should be cleared using budget savings.
Moreover, there were no responses on the non-adjustment of unutilised budget and variations of foreign currency exchange gains on account payable amounting to E4 168 210.80. Furthermore, there were no responses on foreign payments without budget and non-adjustment of variations of foreign currency exchange losses on accounts payable amounting to E4 452 947.50, which should be cleared using budget savings.