Mr Trawally made this declaration in response to questions by the commissioners of the Local Government Commission of Inquiry, giving the difference between the audited report and the management letter accompanied by the final report.
“Before, Area Councils never prepared a financial statement, even though by law they were supposed to, so that the auditors could express an opinion,” he stated. “Financial statement shows the balance sheets, assets, liabilities, income and revenue. This is where auditors will express an opinion and it is called the audit report.”
According to him, the management letter that goes together with the audit report details the internal control weaknesses and performance issues amongst others.
“Even though Area Councils and Municipalities have not been providing financial statements, that would not prevent the National Audit Office from carrying out our audit exercise,” he averred, saying: “We will go and look at the internal control weaknesses that are happening in the councils and then report. This is what is called a management letter.”
He said some Area Councils lacked the capacity to write financial statements, adding that it had always been difficult to work with Councils due to their lack of providing financial statements for activities.
In 2018 and 2019, Area Councils and Municipalities prepared no financial statements for auditing, the NAO auditor stated, saying the NAO would report the issues discovered to the management of the councils.
“But if you look at the recent audit reports, at least they have been preparing financial statements,” Mr Trawally said, adding: “Whether they are credible or not is something else. This is why in the latest audit report it is accompanied by a letter to the management.”