Namibian Broadcasting Corporation
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REPUBLIC OF NAMIBIA REPORT OF THE AUDITOR-GENERAL ON THE ACCOUNTS OF THE NAMIBIAN BROADCASTING CORPORATION FOR THE FINANCIAL YEAR ENDED 31 MARCH 2011 Published by authority Price (Vat excluded) N$ 62.28 Report no 57/2014 REPUBLIC OF NAMIBIA TO THE HONOURABLE SPEAKER OF THE NATIONAL ASSEMBLY I have the honour to submit herewith my report on the accounts of the Namibian Broadcasting Corporation for the financial year ended 31 March 2011, in terms of Article 127(2) of the Namibian Constitution. The report is transmitted to the Honourable Minister of Finance in terms of Section 27(1) of the State Finance Act, 1991, (Act 31 of 1991) to be laid upon the Table of the National Assembly in terms of Section 27(4) of the Act. WINDHOEK, June 2014 JUNIAS ETUNA KANDJEKE AUDITOR-GENERAL NAMIBIAN BROADCASTING CORPORATION (Established in terms of the Namibian Broadcasting Act, No. 9 of 1991) CONTENT Ref Detail Page 1. Introduction 2 2. Annual financial statements 2 3. Scope of the audit 2-3 4. Audit observations 3-27 5. General 28 6. Acknowledgement 28 7. Disclaimed audit opinion 28-29 8. Balance Sheet 30 9. Income Statement 31 10. Statement of Changes in Equity 32-33 11. Cash Flow Statement 34-35 12. Notes to the Annual Financial Statements 36-47 13. Detailed Income Statement 48-50 1 REPORT OF THE AUDITOR-GENERAL ON THE ACCOUNTS OF THE NAMIBIAN BROADCASTING CORPORATION FOR THE FINANCIAL YEAR ENDED 31 MARCH 2011 1. INTRODUCTION The Namibian Broadcasting Corporation has been established in terms of Section 2 of the Namibian Broadcasting Corporation Act, 1991, (Act No. 9 of 1991) hereinafter referred to as the Act. Section 3 of the Act stipulates the main objectives of the Corporation as follows: inform and entertain the public of Namibia; contribute to the education and unity of the nation and to peace in Namibia; provide and disseminate information relevant to the social-economic development of Namibia, and promote the use and understanding of the English language. The firm PKF (Namibia) of Windhoek have been appointed under the provisions of Section 26 (2) of the State Finance Act, 1991, to perform the audit on behalf of the Auditor-General and under his supervision. 2. ANNUAL FINANCIAL STATEMENTS – 31 March 2011 The Corporation's statements of accounts referred to in Section 21(1) of the Act and other statements in respect of the financial years ended, duly signed, are on the file in the Office of the Auditor-General and published in this report as follows: Annexure A: Balance sheet as at 31 March 2011 Annexure B: Income statement for the financial year ended 31 March 2011 Annexure C: Statement of changes in equity for the financial year ended 31 March 2011 Annexure D: Cash flow statement for the financial year ended 31 March 2011 Annexure E Notes to the annual financial statements for the financial year ended 31 March 2011 Annexure F: Detailed income statement for the financial year ended 31 March 2011 These financial statements should have been submitted to the Minister of Information, Communication and Technology within six month after year-end in terms of Section 21(3)(a) of the Act but were only availed to the Auditor-General during October 2012 for audit purposes. The amounts in the statements and in this report were rounded off to the nearest Namibia Dollar. 3. SCOPE OF THE AUDIT Management’s responsibility for the financial statements The Accounting Officer of the Corporation is responsible for the preparation and fair presentation of the financial statements and for ensuring the regularity of the financial transactions. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. 2 Auditor’s responsibility It is the responsibility of the Auditor-General to form an independent opinion, based on the audit, on those statements and on the regularity of the financial transactions included in them and to report his opinion to the National Assembly. The said firm conducted the audit in accordance with International Standards on Auditing. Those standards require that the firm complies with ethical requirements and plans and performs the audit to obtain reasonable assurance whether the financial statements are free from misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatements in the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 4. AUDIT OBSERVATIONS During the audit of the Corporation the following observations were made. These observations are set out below for the current year under review. 4.1 Comparison of Airwaves system with AccPac system Through the discussion with management (finance department) auditors confirmed that the following two systems are integrated. They are: • Airwaves system – scheduling, generation and management system with regard to TV and radio advertising income; and • AccPac system Monthly integration runs are performed to ensure that invoices generated by Airwaves are correctly accounted for in AccPac. As part of the controls testing procedures performed to verify as to whether the integration process is operating effectively, Auditors noted the following instances were invoices generated by Airwaves did not appear in the relevant AccPac general ledger account. These instances are listed in the following table: 3 2011 Airwaves Acpac Total Diff Radio TV N$ N$ N$ N$ N$ April 2 600 741 1 214 847 1 239 805 2 454 651 146 090 May 2 554 450 1 153 810 1 247 585 2 401 395 153 055 June 3 717 494 1 300 051 2 308 075 3 608 126 109 368 July 2 968 556 1 097 951 1 600 118 2 698 069 270 486 August 3 055 119 1 504 617 1 451 808 2 956 426 98 693 September 3 228 390 -63 711 - -63 711 3 292 100 October 2 947 121 2 560 625 3 424 016 5 984 640 -3 037 519 November 3 577 762 1 537 706 1 585 785 3 123 491 454 270 December 3 322 847 787 030 1 932 596 2 719 626 603 221 January 2 811 005 1 095 822 1 632 102 2 727 924 83 081 February 2 031 273 899 023 1 104 786 2 003 809 27 464 March 2 901 247 1 276 40 8 1 290 864 2 567 273 333 974 35 716 004 14 364 180 18 817 541 33 181 721 2 534 284 Comfort as to the effective and efficient operation and integration procedures performed on a monthly basis between the two systems (Airwaves and AccPac) could thus not be obtained. This again impacts on the completeness of advertising revenue disclosed in the general ledger and finally in the annual financial statements of the Corporation. Auditors further noted that, in case of errors made with regards to invoice generation or other credit notes being issued, these are only effected on the AccPac side. This also applies for debtor and cash customer payments received. The full potential of the Airwaves system as a control tool with regards to management of radio and TV advertising income is thus not utilized. Recommendation The Board should consider utilizing the Airwaves system to its full potential with regards to radio and TV advertising income generating activities. It is further advised that monthly reconciliation procedures are implemented to verify that the monthly integration process has been correctly performed. Any discrepancies noted are to be followed up. This process also ensures that improved segregation of duties are in place and appropriate responsibilities can be assigned to staff members with regards to the monthly integration process. 4.2 Advertising income – client approval Through the extending testing performed on TV and Radio advertising revenue generated auditors noted that for a number of transactions no signed approval / authorization documentation was in place confirming mutual agreement by client and the Corporation that the TV and Radio advertising transactions to the amount of N$ 1 798 713 was valid. 4 Recommendation The Board should ensure that for all TV and Radio advertising transactions entered into the appropriate approval and authorization from the client is present. This will prevent possible claims for non-compliance with terms and conditions attached to the advertising income incurred. 4.3 Credit note authorization The review performed on credit notes issued during the year and at year end indicated that not all credit notes are approved by management. Auditors noted that the credit note to the amount of N$ 614 642 issued during the year was not approved. Non-approval for the issue of credit notes could lead to manipulation of revenue and could thus also lead to financial losses being incurred by the Corporation. The possibility of fraudulent transactions being hidden in this respect exists. Recommendation The Board should ensure that all credit notes issued are authorized by the relevant senior official responsible.