9th ordinary session of the Plenipotentiary conference of the Pan African Postal Union (PAPU) External Auditors presentation to the Plenipotentiary conference of Ministers

By Andrew Mlingi

PwC

Contents Section 1: PwC in Summary Section 2: 2012-2014 audit reports by Ernst & Young -Financial statements and report to the Administrative Council for the year ended 31 May 2012

- Financial statements and report to the Administrative Council for the year ended 31 May 2013 - Financial statements and report to the Administrative Council for the year ended 31 May 2014

Section 3: 2015 audit reports by PwC -Financial statements and management letter for the year ended 31 May 2015

PwC

PwC in Summary

Our services Audit and Assurance

Advisory

Tax

Our client base

Multinational/National and Local Businesses

Multilateral and bilateral lending/ donor institutions

Governments

PwC

PwC in Summary Our audit procedures

Perform Tests of Details, Substantive Analytical

Procedures or a Combination of Both Considering

the Most Effective and Efficient Approach

Acceptance/Continuance assessment

Understanding the entity and its environment and

assessing risk

Nature, Timing and Extent

of Testing

Perform Tests of Controls

Other audit procedures Financial statements Completion

The PwC audit is based on:

• A thorough and detailed understanding of

business and its risks

• Gathering much of our audit evidence

through a process of enquiry and testing

which evaluates how controls address the

risks identified and whether assertions

about control effectiveness can be

supported by verifiable evidence

• As we complete the consideration of

controls, we assess the extent to which we

need to support the work done with

additional substantive audit evidence

• We remain in effective communication with

management and the audit committee or

those charged with governance throughout

the process through the Communication

Plan

PwC

2012-2014 audit reports by Ernst & Young

PwC

Financial statements and report to the Administrative Council for the year ended 31

May 2012

Opinion An unqualified (unmodified) opinion was issued on 09 July 2013 with an emphasis of matter.

Emphasis of matter Included in the Opinion was an emphasis of a matter drawing attention to note 7 in the financial statements which indicated the Union has not received contributions from member states amounting to US$ 5,943,280(2011: US$ 5,772,260). This condition indicated the existence of a material uncertainty which may cast doubt about the Union's ability to continues as a going concern

Matters in the report to the Administrative Council

Funds set aside for purchase of Motor vehicle for Secretary General were not conclusively utilized contrary to PAPU Financial regulation Article 14. Resolution: Every transaction concerning the vehicle was concluded before the end of 2012/13 financial year.

PwC

Financial statements and report to the Administrative Council for the year ended 31 May 2013

Opinion An unqualified (unmodified) opinion was issued on 12 August 2014 with an emphasis of matter.

Emphasis of matter Included in the Opinion was an emphasis of a matter drawing attention to note 7 in the financial statements which indicated the Union has not received contributions from member states amounting to US$ 5,339,243 (2012: US$ 5,943,280). This condition indicated the existence of a material uncertainty which may cast doubt about the Union's ability to continues as a going concern

Matters in the report to the Administrative Council Findings Recruitment of Translator/Interpreter (French to English) was not in accordance with the PAPU Act of Union Staff Regulations and Rules. An advisory body set up by the Secretary General reviewed applications received relating to the post and recommended two candidates that met the required qualification.

PwC

Financial statements and report to the Administrative Council for the year ended 31 May 2013 (continued)

Matters in the report to the Administrative Council (continued) Findings (continued) A candidate who did not meet the required qualifications was selected without following the recommendation of the advisory body. Resolution The Translator’s appointment was initially converted to contract appointment on non-permanent and non-pensionable terms. Further, as per secretariat’s report and financial statements for the year ended 31 May 2014, the position was re-advertised in compliance with the 33rd Administrative Council decision. A new Translator that possessed the relevant working experience has been recruited and the one without the requisite working experience disengaged accordingly.

PwC

Financial statements and report to the Administrative Council for the year ended 31 May 2014

Opinion An unqualified (unmodified) opinion was issued on 03 June 2015 with an emphasis of matter.

Emphasis of matter Included in the Opinion was an emphasis of a matter drawing attention to note 3 and note 6 in the financial statements which indicated the Union has not received contributions from member states amounting to US$ 5,228,656 (2013: US$ 5,339,243). This condition indicated the existence of a material uncertainty which may cast doubt about the Union's ability to continues as a going concern.

Matters in the report to the Administrative Council Findings (i) Organization structure of the General Secretariat PAPU needs review and update.

The Union did not have a legal department dealing with foster the harmonization of postal services among it’s members and an Information and Communication (ICT) department to drive some of it’s strategic objectives.

PwC

Financial statements and report to the Administrative Council for the year ended 31 May 2014 (continued)

Matters in the report to the Administrative Council (continued) Findings (continued) (ii) Strategy for recovery of long outstanding contributions receivables needs review. Some member states have accumulated outstanding contributions for 10 plus years and others for more than 20 years. The Union may experience cash flow problems unless concrete and workable solutions such as attraction of new members, payments of contributions in advance are implemented. Resolutions (i) In line with the Decision of the 32nd Ordinary Administrative Council creating the post, a Legal Officer was seconded to the Secretariat by the Republic of Niger and he has since taken charge of legal matters. (ii) This is a perennial problem that has lingered over the years. The issues of huge outstanding contributions are being addressed through constant appeals to Member States as well as in collaboration with the Administrative and Technical Committee and the Sub-regional Postal Organizations. The Plenipotentiary Conference also applies all the stipulated sanctions during her meetings, to ensure more compliance. The Union still has significant amount of outstanding contributions. Refer to report of the financial year ended 31 May 2015

PwC

2015 Audit by PwC

PwC

Financial statements and management letter for the year ended 31 May 2015

Opinion A qualified (modified) opinion is to be issued.

Basis for qualification (i) Long outstanding receivable balances

Included in the statement of financial position is contribution and other receivables amounting to USD 5,221,528 out of which USD 4,217,769, USD 212,015, USD 350,738 and USD 405,735 are contributions receivables from financial years 1980/81 to 2011/12, 2012/13, 2013/14 and 2014/15 respectively. There is no indication when the outstanding amount will be paid. As there were no other practical audit procedures that we could adopt to confirm the recoverability of the balances, we are uncertain whether the total contribution receivable due from member states of USD 5,186,257 is recoverable in full. Any adjustment to the contribution receivables would have a similar effect to the surplus reported for the year.

PwC

Financial statements and management letter for the year ended 31 May 2015

Basis for qualification (continued)

Qualified opinion In our opinion, except for the effect of the matters described in the Basis of Qualified Opinion, the accompanying financial statements presents fairly, in all material respect, the financial position of Pan African Postal Union as at 31 May 2015 and its financial performance and cash flows for the year then ended in accordance with International Public Sector Accounting Standards.

PwC

Financial statements and management letter for the year ended 31 May 2015

Matters in the report to management

Significant auditing/accounting matter

(i) Existence of significant long outstanding contribution receivables

Our audit noted that out of the total contribution receivables balance of USD 5,393,200 of which some of them are dated back to 1980 as summarised in the table below, only USD 206,944 has been provided for.

(ii) Accounting for leasehold land and capital grant

Included in the statement of financial position is capital grants amounting to USD 65,271 and leasehold land of USD 61,627. This is a historical issue that is being explored in collaboration with the previous external auditor and the General Secretariat. The matter was kept in view to enable the Union to provide the third party documents to support both their carrying values and to establish the basis for their amortisation.

Year 1980/81 to 2011/12 2012/2013 2013/14

2014/15 Total

Amount (USD) 4,424,712 212,015 350,738 405,735 5,393,200

PwC

Financial statements and management letter for the year ended 31 May 2015

Matters in the report to management

Other control matters

(i) Incomplete fixed asset register

According to the Pan African Postal Union’s Accounting and Financial Procedures Manual section 12.2, the fixed asset register should be maintained to record all assets of the Union with the following details to be shown; type of asset, description of asset, date of Purchase, cost. payment details, location/user, make/model and registration/serial number. However, the fixed asset register provided for audit of the year ended 31 May 2015 did not include location and registration/serial number of the respective assets. _______________________________________________________________________________

Management is in agreement with the recommendations and have requested for budgetary approval to make appropriate alphanumeric inscriptions on all PAPU Assets. The fixed assets register is being expanded with additional columns to show the physical location of all the Union’s assets.

PwC

Financial statements and management letter for the year ended 31 May 2015

Matters in the report to management

Other control matters (continued) (ii) Weaknesses in the IT environment

There are no mechanisms in place to protect and safeguard the Union’s accounting records. We observed that most of the records are maintained in one computer, this is the only computer that is installed with the accounting software and that there are no off site back ups maintained for the accounting and other financial data.

_______________________________________________________________________________ Management is exploring the possibility of backing up the accounting information outside the General Secretariat in line with the Regulations of the Union. Presently (financial year 2016), the accounting records are backed up with external hard disk that are kept outside the General Secretariat. The possibility of backing up the data offsite with the mother organization or an Agency of the host country are also being explored. This can only be possible with the approval of the Council .

PwC

Financial statements and management letter for the year ended 31 May 2015

Matters in the report to management

Other control matters (continued)

(ii) Lack of life insurance scheme The Union does not have a life insurance scheme for its employees as required by Article 48.1 of the staff rules and regulations that states that, “the Union shall enter into contract with an Insurance Company to provide a life insurance coverage for all staff members including elected officers, against injury or death in the performance of their duties”. ___________________________________________________________________________________________

The General Secretariat is interested in insuring the life of its staff, but is being hampered by two key factors namely: i) Absence of reputable service providers in the host country to facilitate due process in the selection of the most qualified Insurer; ii) Restriction of the premium payable to the Insurance Company to 5% of basic salary by Regulation 53 paragraph 5 of the Staff Rules and Regulations; The search for a reputable service provider will be extended beyond the host country.

Thank you!