FY 2025 Annual Audit Report (Xisaab-Xirka 2025), English Version

All Government expenditure must be fully supported by complete documentation identifying the correct beneficiary, per Sections 11(2) and 33(4) of the Puntland Public Financial Management Act No. 09 of 15 August 2023.

Expenditure totalling $21,390,477.60 was not fully supported. Of this, $5,876,195.55 was recorded in PFMIS as payable to the Puntland State Central Bank instead of the actual beneficiaries. A further $15,514,282.05 lacked complete supporting documentation: $7,360,743.00 was paid without the required requisition or payment request, and $8,153,539.05 was paid on incomplete requests lacking required signatures and approvals.

Weak controls over expenditure authorisation, documentation requirements, and PFMIS data entry discipline.

The occurrence, accuracy and purpose of the affected expenditure could not be fully verified — the basis for the Qualified Opinion.

Government must maintain a complete and accurate register of all public liabilities in accordance with Sections 36, 40 and 42 of the PPFM Act.

Liabilities submitted for audit totalled $16,354,587.86, relating to construction companies, employee entitlements and military personnel. The audit identified additional liabilities not recorded in official registers, including amounts owed to Hantaara Company, utility service providers, and Gondogooye Company.

Absence of a comprehensive, centralised liability register and weak controls over recognising and recording all Government obligations.

The Financial Statements do not fully reflect all Government liabilities, understating actual public debt and limiting oversight.

Financial management information systems must produce information that is complete, accurate and reliable, given that the Financial Statements rely significantly on their output.

The audit found weaknesses affecting the completeness and reliability of information recorded in PFMIS and PUNTCAS, including gaps in reconciliation between system-generated data, supporting documentation and the Financial Statements.

Insufficient system controls, incomplete data entry, and lack of regular reconciliation between system records and bank statements.

Reduced reliability of financial reporting and increased risk of undetected errors or misstatements.

Government contracts must be awarded through competitive procurement with full documentation, per Section 5(1) of the Procurement and Concessions Act (Law No. 8 of 16 August 2000).

Procurement transactions totalling $7,098,793.00, relating to infrastructure development projects and Government services, were processed without key procurement documentation — procurement requests, bid evaluation reports and contract award documentation were not available.

Non-application of procurement rules and insufficient oversight of contracting processes across ministries.

Reduced value for money, elevated corruption risk, and non-compliance with the procurement legal framework.

Withholding taxes must be deducted from applicable Government payments per the Revenue Act (Law No. 11 of 20 December 2023); revenue must be fully documented and promptly deposited per Presidential Decree No. 10 of 1 October 1999.

The audit found expenditure incurred without required tax deductions, incomplete supporting documentation for certain revenue collections, and instances of Government revenue held in cash beyond the permitted period before deposit.

Gaps in payment-processing controls, incomplete enforcement of revenue regulations, and inadequate supervision of revenue collection officers.

Loss of Government revenue, non-compliance with tax legislation, and reduced accountability over collected funds.

Government revenue collection should meet approved budget projections; significant shortfalls require investigation and corrective action.

Revenue collected in the Raascaseyr Region declined by approximately 61% against the prior year, Mudug Region by 11%, and Nugaal Region by 6%. Some local governments budgeted revenue that was never collected, and some districts recorded zero revenue in FY 2025 despite reporting revenue in FY 2024.

Weaknesses in regional revenue administration and gaps in oversight of district revenue collection.

Material shortfall in regionally-sourced Government revenue, reducing funds available for public services.

Management is expected to implement audit recommendations in a timely manner to strengthen financial controls and reduce recurring risks.

Of the eight recommendations issued in the FY 2024 audit report, six were not implemented and two were only partially implemented, covering expenditure documentation, bank reconciliation, procurement compliance, Central Treasury channelling, and the Government liability register.

Insufficient prioritisation of audit follow-up and lack of accountability mechanisms for implementing recommendations.

Recurring weaknesses in financial management — deficiencies identified in FY 2024 reappeared in FY 2025, compounding fiscal risk.