FY 2024 Annual Audit Report (Xisaab-Xirka 2024), Somali Version

The audit revealed that expenditures amounting to $12,489,662.38 were not fully supported by appropriate supporting documentation and were recorded under incorrect beneficiary names. The breakdown is as follows:-

$7,564,770.00: While central bank officials confirmed payments were made to the correct payees, the transactions lacked adequate supporting documentation. This prevented auditors from verifying that funds were used for their intended purposes, in contravention of public finance regulations.

$2,317,252.00: Payments disbursed as staff bonuses were not supported by approved payrolls or beneficiary lists. The absence of these documents made it impossible to verify the identity and eligibility of the recipients.

$1,434,051.70: Expenditures for travel and medical assistance were not supported by required documents, such as travel authorizations or official medical receipts. This omission hindered the verification of the claims' legitimacy.

$1,173,588.68: Payments were processed without the required Expenditure Warrants from the Budget Department. This lack of proper authorization bypasses critical internal controls and increases the risk of misuse or misappropriation of public funds.

Expenditure totaling $1,450,000.00 was improperly charged to Budget Head 211401 - Salary and Allowance Arrears. This budget line is specifically designated for the settlement of government salary debts. However, our audit confirmed that the funds were diverted to cover expenses belonging to a different budget line. This misclassification constitutes a direct violation of the financial regulations stipulated in the approved 2024 Budget.

The audit I have conducted revealed that there is still significant weakness in the internal controls intended to safeguard the government's revenue collection and the expenditure process. The following deficiencies were observed:

• Revenue and expenditure lacking supporting documentation for revenue collection and expenditure authorization. • Expenditures charged to budget heads that are not aligned with the approved budget. • Expenditures approved without deducting the applicable taxes. • Expenditure charged to the budget allocation of one institution, while the institution neither requested and have no part in the expenditure. • Incomplete revenue collection documents lack key information, making it difficult to verify and trace the collected funds. • Expenditures that belonged to other institutions were recorded with the Central Bank listed as payee, instead of the actual institution that was supposed to receive the funds. • Weak Internal Controls over the Government’s Procurement Process.

These issues indicate that internal control systems for revenue collection and expenditure in both the Ministry of Finance and the Office of the Accountant General have serious gaps. These weaknesses could lead to loss of revenue or the use of public funds for purposes other than those originally intended.

During the audit, I confirmed that the closing balance as of 31st December 2023 did not match the opening balance reported on 1st January 2024. The difference amounted to $48,182.90, caused by the following factors:

• Regional Accountants included accounts in the cash book that were not actually held in bank accounts, whereas these should have been excluded from the cash book. • The reconciled closing balance agreed upon between the Accountant General and the Auditor General was not shared with the regional accountants, or if it was shared, proper follow-up was not conducted to ensure its correct implementation.

The audit revealed that Bank Reconciliation Statements were either missing from some of the Regional Finance Offices or were not prepared on a regular monthly basis. This made it difficult to confirm whether the bank account balances matched the accounting records maintained by the regional offices.

The audit revealed that proper procurement procedures were not followed, particularly in relation to government construction contracts, renovations, and road works. These contracts were awarded using non-competitive methods (Single Source procurement), by passing the required open bidding process.

The total Government Budget for 2024, as approved by the House of Representatives, amounted to $395,359,029.00, which was balanced between revenue and expenditure. However, the financial report submitted by the Accountant General of Puntland to the Auditor General reflected a total of only $156,778,675.00.

This discrepancy of $238,580,354.00 arose from funds that did not pass through the Government’s Central Treasury, particularly international agencies and local governments.

The Accountant General shared with the Auditor General a list of international organizations comprising 9 UN agencies that reported implementing projects in Puntland worth a total of $123,401,500.00 (see page No. 21). However, the Auditor General did not receive any supporting financial documentation or accountability reports such audited financial statements for these amounts and also did not conduct an audit over those funds.

The audit revealed that the Government lacks a comprehensive debt register to track the amounts it owes. Only debts owed by the Government to construction companies were reported and submitted to the audit team. This limits the Government’s ability to monitor and manage its financial obligations effectively.

According to Article 156 of Law No. 317 on the Government Accounting System, issued on 17 December 1962, the financial statements must include a full disclosure of government-owned assets and be submitted to the Auditor General for audit and verification of their existence.

However, the Office of the Accountant General included only an incomplete version of the Government’s assets, as noted under Article 8 on page 22 of the financial statement. As a result, the submitted financial statements do not provide a complete and detailed list or valuation of Puntland Government’s assets.

The audit revealed that revenue collection documents were not properly completed with the required details, and the nature or type of revenue was not clearly specified. As a result, it was not possible to identify the taxes withheld or determine the source of the collected revenue. The revenue streams affected:-

• Salaries of private and civil service employees • Registration and service fees • The Large Taxpayer Payees Organizations (LTO) • Freight transportation • Airline tickets and passenger travel • Ship and Boat licenses • Small and medium sized business profits • Court revenues