Auditor General's special report on Public Accounts: No internal audit on $2.6b error

The Special Report of the Auditor General on the Public Accounts for the Financial Year 2023 says that, to date, there has been no internal audit into the understatement of revenue for the financial year 2023 by the Ministry of Finance.

The report was prepared by Auditor General Jaiwantie Ramdass and laid in Parliament on September 9. It was prepared after an overstatement of tax refunds and a subsequent under-reporting of net revenue led to a $2.6 billion discrepancy in the revenue figures for 2023.

The report said adjusted financial statements received on May 29 showed total receipts deposited into the Exchequer Account for September 2023 were adjusted to $11,588,720,312.10, a difference of $2,598,130,761.72 when compared to $8,990,589,550.38, as shown on the Exchequer Account Statements dated January 31, 2024, and April 16, 2024.

It noted there were several discrepancies in authorisation, segregation of duties, reconciliations and monitoring and reviewing related to these transactions.

In terms of authorisation, the report said there was no evidence that adjustment vouchers IDAs (inter-departmental) were signed by the Comptroller of Accounts to authorise changes to the General Ledger Accounts. It said all adjustment vouchers to adjust refunds totalling $2,599,278,188.73 for financial year 2023 were reviewed.

But it was also noted that none was signed by the Comptroller of Accounts as required.

The report said no evidence was seen that debit advice slips, prepared by the Comptroller of Accounts and sent to the chairman of the Board of Inland Revenue, were examined for unusual or material transactions.

“Signatures of preparation, checking, reviewing and approving debit advice slips were not seen on the documents examined. As a result, Audit (Auditor General) could not determine who prepared, checked and reviewed the debit advice slips.”

It said monthly reconciliation statements on the Exchequer Account were not prepared on a timely basis, with an approximate average period of five months before its preparation.

Regulation 13(4) of the Exchequer and Audit Act Chapter 69:01 states, “Each accounting unit shall have a check staff and an independent internal audit section.”

The report said evidence of internal audit checks was not seen on any documents examined at the Inland Revenue and Treasury Divisions.

“Documents such as vote books, credit advices, debit advices, debit advice slips, adjustment vouchers, Central Bank statements of account, other charges vouchers and cheque listings bore no signs of examination by internal audit.

“There was a reported material misstatement of $2.599 billion in the Statement of Receipts and Disbursements certified by the then chairman, Board of Inland Revenue and the Statement of Revenue from the Treasury Division. To date, there is no Internal Audit Report on this matter.”

The report noted the accounting books and records of the Ministry of Finance were finalised on or after May 14, 2024. It said with the financial statements being reconciled with the records of the Treasury on May 14, 2024, onwards, the Statement of Declaration and Certification, which were previously included with the versions of financial statements received on January 31, 2024, April 15, 2024, and April 16, 2024, were “wholly inaccurate.”

The report said the Finance Ministry stated the problem with the Central Bank’s electronic cheque-clearing system (ECCS) was that it “experienced a system malfunction which resulted in erroneously overstated debit advices generated. Subsequently, the CBTT corrected the inaccuracies by issuing reversal credit advices. However, the Treasury Division does not have a record of the receipt.

“As a result, the error was unknown to the Inland Revenue Division and the debit advices were processed to replenish the sum initially debited from the IRD Refund bank accounts.”

The Finance Ministry’s team, in response to a letter on July 24, 2024, said the internal audit reports on the operation and implementation of the ECCS are currently unavailable, but the Internal Audit team is doing an audit of the General Ledger Services Unit and will provide a report on this area of concern.

The report further noted when asked why the variance had occurred in the financial statement for revenue for 2023, the Finance Ministry said it was due to “posting errors, including double booking of transactions and decimal-point transposition errors which arose as a result of the implementation of the new ECCS at the Central Bank as well as the Go Anywhere Platform…”.

The Auditor General said a meeting was requested of the Central Bank to examine the system on June 25. On June 26, the bank asked for a scope of works for the examination. Details were given in a letter on June 28. It said on July 2, the governor indicated: “The Central Bank of Trinidad and Tobago is unable to accommodate your request.”

It said requests were made to the ministry’s permanent secretary as contracts, Cabinet minutes and related information linked to the ECCS. None of these documents were received.

It concluded that the limitation of scope resulted in the Auditor General's being unable to determine whether the controls at the Central Bank and the Ministry of Finance were suitably designed and implemented to prevent or detect and correct processing errors that could result in and potentially cause material misstatements in the Public Accounts.

It said the Auditor General was unable to gain any assurance on the reliability of data from the ECCS and Go AnyWhere Platform and its impact on the completeness and accuracy of the Public Accounts of TT.