Audit Qualifications Highlight Concerns Over St Helena Government’s Financial Reporting

The recent audit report for the St Helena Government has raised several concerns over its financial reporting, leading to qualifications in the auditor’s opinion.

Depreciation and Asset Valuation Issues

The audit report highlights two significant issues related to depreciation and asset valuation:

Estimation uncertainty: The reported value of aid-funded airport wharf and roads infrastructure may not fairly reflect their replacement cost due to the absence of a professional valuation.
Straight-line depreciation: New roads are being held at cost and depreciated on a straight line basis, but should be recognized on a replacement cost basis since they are aid-funded in whole or in part. The auditor was unable to apply alternative audit procedures to confirm the carrying values, resulting in a scope limitation qualification for the asset class of roads infrastructure.

Other Areas of Concern

The report identifies several other areas that require attention:

Planned valuation: A planned formal valuation of infrastructure assets as at the date of operational readiness has not been completed, and the auditor is unable to obtain an independent expert assessment of replacement cost before the required audit reporting deadline.
Special Funds - Projects: The restatement of these Special Funds resulted in a significant adjustment to the opening balances. However, the auditor was unable to secure adequate evidence regarding the restatement, leading to a qualification of the opinion on fair presentation.
Non-current investments: Non-current investments in subsidiary entities, including the equity interest in the Bank of St Helena Ltd, carried an uncertain value at 31 March 2018 due to restricted access to financial information and underlying records held by the Bank. The auditor was unable to determine whether any adjustments were necessary to the amount of non-current investments reported.
Revenues from customs duties: Revenues from customs duties were reported as £0.576m less than those recognized within taxation in the Statement of Financial Performance. Management struggled to perform an auditable reconciliation between these two systems, and the auditor was unable to secure adequate evidence regarding the completeness and accuracy of the reported revenues.

Conclusion

The audit report concludes that several limitations of scope have been identified, leading to qualifications in the auditor’s opinion on fair presentation. The report emphasizes the need for improvements in financial reporting and internal controls to ensure the accuracy and reliability of financial information.