Road Fund drastically reduces deficit

. . . but audit paints shambolic picture

 KANANELO BOLOETSE

MASERU – The Road Fund drastically reduced its deficit from M107 million in 2018 to a mere M14 million in 2019, which paints a positive picture of the books until one scrutinizes the statements. Apparently, the Fund spent comparatively much less on road maintenance last year than the previous year. A deficit occurs for a non-profit agency whenever its expenses exceed its revenue. The contraction in the deficit, Public Eye has established, is partly due to a reduction of road maintenance expenses by about M80 million.

While Road Fund spent about M239 million on roads maintenance in 2018, it spent only M152 million on the same in 2019. This led to a decrease in operating expenses and contraction of the net loss. Total expenditure declined by about M80 million from M274 million to M194 million, of which 14 percent was related to the secretariat expenses. Roads that are not properly and timeously maintained are costing Lesotho millions of Maloti and negatively affecting the economy and society, according to pundits.

In addition, Auditor General Lucy Liphafa noted she was unable to obtain sufficient information to form a sound audit opinion on the fund’s financial standing. Liphafa has issued a disclaimer of opinion on the Road Fund’s financial statements for the year ended March 31, 2019. While Road Fund directors prepared the financial statements on a going concern basis which presumes funds will be available to finance future operations, Liphafa stated “future events or conditions may cause the Fund to cease to continue as a going concern”.

A disclaimer of opinion is issued in the event that the auditor was unable to complete the audit report due to absence of financial records or insufficient co-operation from management. It is an indication that no opinion over the financial statements could be determined. Liphafa said she did not express an opinion on the financial statements of Road Fund because she “had not been able to obtain sufficient appropriate information audit evidence to provide a basis for an audit opinion on the financial statements”. Among other things, the Auditor General noted she did not get assurance on completeness of revenue from the department of traffic due to missing receipt books.

She stated that even when using alternative audit procedures, she could not reach “a satisfactory conclusion as to the accuracy and completeness of figures reported in the financial statements.” Liphafa also stated that the Road Fund was required by the Public Financial Management and Accountability (PFMA) Act of 2011 to prepare financial statements in accordance with International Financial Reporting Standards (IFRS).

“However, the Fund does not fully comply with the requirements of IFRS,” she said. The auditor general’s audit procedure included obtaining confirmations from implementing agencies – Roads Directorate, Road Safety, Maseru City Council (MCC) and the Ministry of Local Government. However, confirmation amounts from Roads Directorate and the MCC according to the auditor, “were found to differ from the amounts recorded in the financial statements by M1 120 742.78 and M25 399 479.47 respectively due to improper reconciliations”.

The Road Fund was established by the government to fund maintenance of roads and is a non-profit making organisation. It finances routine and periodic maintenance of all roads in Lesotho, road rehabilitation, road upgrading, new road works and road safety projects and any other project or matter connected with roads. Its set of financials, which Public Eye has seen, indicate that the Fund suffered a deficit of M14 million in 2019, compared to a deficit of M107 million a year earlier.

“The operations for the year resulted in a deficit of M14 194 949 while in 2018 the deficit was M107 866 881,” read the financial statements. In 2016, the World Bank found that the national road network in Lesotho was in excess of 7 500 kilometres in length. The Roads Directorate (RD) managed 5 864 km of this network, of which only 1,526 km were paved and the rest were gravel (3,036 km), earth (1,170 km), and tracks (132 km). Of the paved roads, according to the World Bank, only 38 percent were in good condition, and 12 percent were in poor condition.

“The maintenance of the road network, including routine and periodic, is financed from the Road Fund and the government budget,” World Bank said. The purpose of Road Fund is to collect revenue from road toll-gate fees, cross border fees and levies, license fees on motor vehicles, short term permits and special permits for motor vehicles and any other road user charges including fines on road traffic offences. The main reason for establishing Road Fund was to shift the burden of financing maintenance of Lesotho’s road infrastructure from general taxes collected by the central fiscus to road user fees.

The financial statements also indicated that Road Fund revenue increased to M180 million in the year to March 2019, from M166 million in 2018. They further revealed that over M81 million was collected in road maintenance levy in the year to March 2019, M63 million in tollgate fees and M23 million in road user fees. The road maintenance levy remained fixed at M0.30 and M0.40 per litre of petrol and diesel respectively. The oil companies operating in Lesotho are the collecting agents and the remittances are based on monthly sales volume. Road user fees are collected by the department of traffic on behalf on the Road Fund. The Auditor General found the Road Fund had limited access to the records of the service organisations – department of traffic and the oil companies.

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