09 November 2009

Timor-Leste Government: Fretilin misrepresents Diloitees Touch Tohmatsu report

The Secretary of State for the Council of Ministers and Official Spokesperson for the Government of Timor-Leste Agio Pereira November 5, 2009 Dili, Timor-Leste - The yearly pre-budget media campaign by opposition to discredit the Xanana Gusmão Government is in full swing; this time misrepresenting the merits and conclusions of an audit report conducted by Deloittes Touche Tohmatsu; propaganda echoed in the Australian media.

Although the report can be manipulated, the facts cannot.

Quite opposite from the assertions made in article in The Australian on November 5, 2009 “East Timor has financial worries”, the Government has been progressively reforming and improving the financial management system of Timor-Leste, a system which now includes the ability to monitor on a real time, daily basis the expenditures of Government and the collection of tax and customs revenues.

There was not and has never been US $189 million in ‘discrepancies.’ The audit report clearly states “We were unable to review the prior year audit working papers and were not able to perform alternative audit procedures to enable us to form an opinion on the opening cash balance as at December 31, 2007 or on the adjustment of US $73.2m in Notes 7 to amounts accounted for prior years.”

These are facts that cannot be used against Xanana Gusmão’s Government, who have collectively reformed and decentralized the entire financial system of the nation to meet international standards. The new system has allowed the Fourth Constitutional Government of Timor-Leste to increase budget execution, increase revenues and increase economic growth; all key indicators the reforms to public finance management are achieving results for the nation.
The Government has stopped the practice of carry- overs, an ineffective system started by the previous Government. Now, there is clear reporting on the exact amounts actually spent against the budget approved by National Parliament.

The reference to payments of US $116m being post 2008, transaction accorded to the Prime Minister May 4, 2009 directive, the auditors clearly state “we were unable to satisfy ourselves as to the completeness of these receipts and payments as we have not audited all receipts and payments for the period 1 January 2009 to 30 June 2009.”

These are payments pertaining to the 2008 budget made in 2009. The Government of Timor-Leste's budget is prepared on a modified cash basis which is cash basis adjusted to account for liabilities existing at 31 December to be paid during a pre determined period in the following financial year against the budget of the previous financial year.

In response to the assertions of Bano and Teixeira of October 27, on which recent media reports are based: Deloitte Touche Tomahatsu had, during the course of their audit, asked for a list of
contracts of a number of employees. The Treasury was able to produce the contracts of employees appointed during the last two years to audit for their examination. However, contracts of employees who were appointed during the period of the UN Transitional Administration and thereafter till 2006 were not readily available as these documents were left in the Government warehouse during the disturbances of 2006 without any proper archival system rendering the documents irretrievable.

1. The comment by the auditors that they could not obtain evidence ‘to support the validity of pension payments’ is due to the fact such payments are made in cash in the districts on a quarterly basis and the auditors were unable to physically verify actual pension disbursements in the field due to the lack of time.

2. The assertions by Bano and Teixeira that there were no audit qualifications in the reports of the previous years were not factual. Merit Partners in their audit report for the year 2006-07 mentioned among others the following:

• ‘That the National Administration of Customs was unable to provide supporting documents for the financial transactions for the year ended 30 June 2007. We were advised that all documents were destroyed during an arson attack during civil disturbance’

• ‘The value of “unallocated stores” of US $1.176 million disclosed in the financial statements does not reflect the actual value of the asset as at 30 June, 2007. We understand that during the period of civil disturbances a substantial amount of stock was removed without authority from the Government warehouse housing unallocated stores”

• “We are unable to comment on the valuation of the investment in the BPA as disclosed in the Statement of Affairs as we have not been provided with audited financial statements of the BPA or other supporting documentation”

• “Five of Treasury’s bank accounts (including the main operating account) have not been
reconciled to the bank statements as at 30 June 2007” Government Spokesperson Ágio Pereira noted ‘It is quite unbelievable that an audit report could be so manipulated. The reforms to public finance management have been supported, endorsed and praised by the donors, the World Bank, and the IMF. It has been a massive undertaking that Xanana Gusmão’s Government is very proud of. We are establishing the foundations which will ultimately provide better service delivery for our people.’

‘We are the Government that has made the budget process and state expenditure a transparent
process, which has opened the door to healthy discussion and debate; but it is a violation of the
people’s trust to deliberately misinform for political gain.”

2008 was a transitional year for the Government to adopt the recommended international best
practice modified cash accounting system. The system used by the former Government did not
comply with the laws of Timor-Leste; The Budget and Financial Management UNTAET
Regulation 2001/13 Section 39.1 (b) which requires that ‘public accounts must be consistent
with international accounting standards.’ ENDS

For More Information please use the MoF website as a source: http://www.mof.gov.tl/en/sf/DT/Default.htm For comparative analysis of Public Finance Management Performance, please refer to the Linpico study which evaluated the 3 year period ending 30th June 2006

Contact: Ágio Pereira +670 723 0011 E-mail: agiopereira@cdm.gov.tl

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