- Audit Scope
Our audit was based on a contract dated 4 November 1997 and signed by Mr Aidan White on behalf of the IFJ Media for Democracy Unit. As it was a full scope audit as at 30 November 1997 on the Open Broadcast Network in Bosnia and Herzegovina we were requested to cover:
- A reconciliation of the opening balance position of the OBN, as regards cash, debtors or creditors brought over from other fund-holders for this project.
- Income and Expenditure for the year from 1 December 1996 to 30 November 1997.
- Fixed Assets acquired for, and by, the Open Broadcast Network, from funds donated, and under the control of the IFJ Media for Democracy Unit.
- An examination of the bank payments and receipts in Brussels from
1 December 1996 to 30 November 1997
- Audit Work Performed
Income: US$ 3,657,642.
- Balances brought forward
- At the close of our previous audit of the OBN at 30 November 1996, there were cash balances within IFJ controlled banks, and cash balances, creditors and debtors within the accounting system maintained in the United Kingdom for the OBN by NTL, which had been the technical implementation manager and a fund-holder in the initial phase of the work. The initial phase having been completed, NTL wished to retire from the project, and hand on any cash balances, creditors and debtors to the subsequent manager(s).
At this time, consultants hired by the Soros Foundation and based in Sarajevo took over the running of the project from NTL and the IFJ. NTL allowed one of them to withdraw US$ 50,000 in cash and take over the remaining cash balances of US$ 6286.39 in Sarajevo.
During this period donations of DEM 299,550 dated 19 November 1996 and DEM 284,909.49 dated 4 February 1997 were made, and as far as can be seen from the accounts left behind by the consultants, some DEM 617,170 was posted to expenditure accounts. When the IFJ were again requested to become the fund-holders on 1 March 1997, there should have been a balance of DEM 85,366 from the following calculations:
| Revenues |
DEM |
| Funds taken from NTL (US$ 56,286.39) | 88,077 |
| Donations | 584,459 |
| Cash repaid by consultants when
they quit the project | 30,000 |
| Total: | 702,536 |
| Expenses (as recorded) |
DEM |
| Advertising | 1,335 |
| Bank charges | 2,635 |
| Cars | 14,800 |
| Building cost | 55,140 |
| Administration | 87,987 |
| Travel & transport | 19,814 |
| Programming | 158,943 |
| Wages | 173,580 |
| Equipment | 29,221 |
| Sundry | 7,215 |
| Total: | 617,170 |
| Balance: | 85,366 |
We cannot account for any of this balance, and would assume that Soros Foundation took it back, or that it covered unbooked expenses and was thus used by the consultants. There were no supporting documents for the period, and the software master-programs had been removed. It was therefore impossible to audit these items.
- The IFJ took over the remaining cash and creditors from NTL and have correctly accounted for these as their opening balances.
- Contributions
US$ 3,568,513
Donations were all from governments or similar institutions such as the European Commission.
In order to verify that the monies recorded in the banks had been given by the donors on record, we circularised all donors requesting an affirmative reply from the government concerned. Over 99% of the donors replied and the same number agreed.
From this test, and the verification to the bank statements for the sums received, we can conclude that the donations have been correctly accounted for in the financial statements.
B2. Financial Income US$ 10,918
The sundry income was mainly interest received. This was verified with the bank statements, and was substantially correct. The rest of the sundry income arose from some small exchange gains which were not audited, as they were in total, immaterial.
We would conclude from our tests that sundry income was materially correct, as shown in the financial statements.
- Expenditure
US$ 2,736,803 and US$ 70,950
The expenses were divided into three specific geographic areas.
C1. Expenses in Belgium, or paid from Belgium
These expense were paid from the banks directly controlled by the IFJ in Brussels, by direct transfer. Our audit approach on these items was simply to match all the bank transfers to the underlying documentation of invoices or contracts signed.
There were no material errors found in the amounts paid, and all these had been correctly reflected in the financial statements. There was one major overpayment to Reuters, but the balance had been reflected as a prepaid item, and letters concerning this matter had been evidenced to support the eventual recovery of the money. Also, within this section of the audit, we wrote to the project's bankers as at 15 November 1997 to confirm the balances as at close of business that day. The bank balances were rolled forward to 30 November 1997 for the close. There were no discrepancies or errors found.
However, we observed that quite large amounts of cash were withdrawn from the bank. The reason for this practice was the need to transfer the cash directly to Sarajevo via courier, because the OBN in Bosnia is of itself not an entity it cannot have a local bank account. During the year ended 30 November 1997 a total of DEM 1,900,000 was transferred to Sarajevo in this manner, and a further DEM 230,000 to ATV in Banja Luka.
D2. Expenses in Sarajevo
Our first test was to ensure that all cash monies which had been withdrawn form bank accounts in Belgium were recorded in Sarajevo. Further, the amounts paid from Sarajevo to ATV Banja Luka were also recorded in Sarajevo's spreadsheet accounting. There was one error found in the recording of the money transferred, but this was corrected in the Brussels accounting. An amount of DEM 50,000 had been recorded as being transferred to ATV Banja Luka but was in fact spent in Sarajevo, and this is reflected in expenditure item 17 in the financial statements.
The second test was to verify that the monthly expenses reported corresponded to the monthly total by category of expense. As the OBN had no standardised accounting system, all expenses had been sorted by type and placed into large envelopes. The total of each envelope was then posted to a spreadsheet. The interior contents of each envelope, per month was added, and the total written on the outside of each envelope. When we verified the entire year's expenses to the amounts written on the envelopes there were only minor errors which were corrected in the final reporting spreadsheet.
We also examined the contents of 2/3 envelopes per month to ensure that the contents were in accord with the totals written on the exterior.
We ensured that payments made in relation to creditors taken over from Phase I, and not paid by the Soros Foundation's consultants, were identified and booked into the appropriate section of the financial statements.
D3. Expenses in Banja Luka
The first test made on the accounting in Banja Luka was on the system used. This was a standard accounting system in English which appeared to work quite well. However, ATV is a private company, and has private income and expense which have no relationship with donations through the OBN network. It also has direct contacts with the Soros Foundation, who have given assets to the company. ATV is currently negotiating to build a new studio complex, with separate financing arrangements.
With the complexity of the above and the inability of the company to differentiate between expenses relating to its various sorts of income, we modified the audit approach slightly.
Firstly, we verified that the monies transferred from either Brussels or Sarajevo were recorded in the books. The cash-on-hand was counted and a bank confirmation obtained. This cash counted was then reconciled with other elements of income recorded as of the day of the visit, less any income recorded but unpaid as of that date (3 December 1997). The physical cash counted plus that confirmed by the bank was then reconciled to the cash-on-hand which should have been recorded at 30 November 1997.
The results were as follows;
|
DEM |
| a) Cash-on-hand counted at 3 December 1997 | 40,744 |
| b) Cash-on-hand per books expected at 30 November 1997 | 47,832 |
| c) IFJ accounting balance per accounts | 1,533 |
| d) Additional income recorded | 57,525 |
| e) Transfer made, and not yet recorded, from Sarajevo | 20,000 |
| f) Cash and banks per the books of ATV at 3 December 1997 | 53,548 |
Proceeding as follows:
| Reconciliation No 1 |
DEM |
| a) |
Counted cash and banks |
40,744 |
|
Reconciling expenses 1 December to 3 December |
7,089 |
|
47,833 |
| b) |
Per ATV's books |
53,548 |
|
Unpaid income OSCE at 3 December 1997 |
(5,600) |
|
47,948 |
|
Difference not explained |
(115) |
|
47,833 |
| Reconciliation No 2 |
|
|
Cash-on hand as counted |
40,744 |
|
Transit from Sarajevo |
20,000 |
|
60,744 |
| Less: |
Accounting balance in IFJ's statements |
(1,533) |
|
Cash to be accounted for: |
59,211 |
|
Additional revenue paid to ATV: |
57,525 |
|
Difference not explained: |
1,686 |
Whilst neither reconciliation was exact, neither gave cause for concern at this stage.
It was not possible in the time available to audit the expenses as to nature or content.
Due to the arduous nature of access to Banja Luka, the time which we were able to spend there during this audit was very limited.
- Accruals
We were able to do tests on the accruals made, by a comparison with invoices received and contracts signed. As far as we could ascertain the accruals made by the IFJ were materially correct.
- Fixed Assets
We were not able to perform any audit work on these, due to lack of proper documentation. We were, however, able to advise on the way asset registers should be kept, and a list of all assets by reference number and location has been made. The prices have to be evidenced by either invoices or catalogue price, by the suppliers, and a depreciation policy settled and applied.
- Conclusions from audit work performed and our recommendations
- Opening Balances
The balances in cash and payable taken over by the IFJ were accounted for correctly and form the basis for the opening position at 1 March 1997.
We are unable to conclude anything about the 3 month period from 1 December 1996 to 28 February 1997. We would suggest that the OHR asks the Soros Foundation for audited accounts covering this period, or at the very least, a written report of the activities of the OBN from one of their managers. Despite funds being provided by the Soros Foundation to run the project, a cash transfer from NTL of US$ 50,000 was made from money donated by the various governments concerned, as well as the cash balance of US$ 6,286.39 which was in the OBN office in Sarajevo, and that is public money and should be properly accounted for, either by audited financial statements, or some other means. We also believe that due to the prevailing political climate within the country, complete transparency of the usage of any funds should be maintained. The OBN is ostensibly providing a public service, and should be seen to keep its financial affairs in good order, not only as best practice, but as a means of deflecting politically based criticism of itself.
- Income and Expenses
- We strongly recommend that an entity be formed, so that a proper bank transfer system may be used. The carrying of large amounts of cash in DEM 1,000 notes is not recommended as best practice, and of itself, may create unnecessary political or criminal attention.
- We also recommend that the Sarajevo OBN office acquires an accounting system. Each item to be accounted for should be numbered within its section and the items kept numerically. As there are only a limited number of types of entries possible these could all be handled by a standard accounting system, as can be purchased over-the-counter.
- We recommend that a full audit of ATV be carried out for the entire period for which they have been receiving public funds at some point in 1998. We cannot be sure on what the funds received were spent, nor that all possible income has been recorded.
- Fixed Assets
We recommend that the fixed asset register be completed as soon as possible and that it be audited at an early date thereafter.
Allied to this is the need to set down rules for asset depreciation, usage, renewal and active life, if different from the period of depreciation. The rules governing the use of these assets also need to be made clear, and applied fairly between all the OBN members.
- Overall Conclusion
We have examined the Financial Statements of the I.F.J. Media for Democracy Unit at 30 November 1997.
The statements are not prepared under Generally Accepted Accounting Principles, in that fixed assets are neither reported as balance sheet items, nor depreciated, but expensed as purchased.
The statements concerning the Open Broadcast Network include a period of three months from 1 December 1996 to 28 February 1997 which have been commented on more fully under paragraph 2.A.(1), and for which the International Federation of Journalists was not responsible.
Apart from the foregoing reservations outlined in section 3 of this report, and based on our audit work, we are of the opinion that the Financial Statements for the year ended 30 November 1997, as prepared by the International Federation of Journalists show a true and fair view of the income and expenditure for which the fund-holder was responsible, and that the accruals and bank account position shown on the Financial Statements on that date are materially correct.
| Christopher Thubron |
David Lipton |
Brussels, 15 January 1998
|
