Auditor-general Mildred Chiri has raised a red flag over the Zimbabwe Manpower Development Fund (ZIMDEF)’s non-compliance to International Accounting Standard 21 in respect of its 2018 financials.
IAS 21 outlines how to account for foreign currency transactions and operations in financial statements, and also how to translate financial statements into a presentation currency.
ZIMDEF reported revenues amounting to US$46 021 743 for 2018, up from US$44 261 474 in 2017.
However, in reporting its 2018 financials the fund failed to take into account the effects of the changes in foreign exchange rates.
This was in addition to reporting its financials in United States dollar, even though the Zimbabwe dollar is presently the reporting currency.
Zimbabwe adopted a multi-currency system in 2009, which was largely underpinned by the United States dollar, and listed firms adopted the US dollar as their book keeping currency.
But there have been significant monetary shifts in the period between then and now.
Said Mrs Chiri in her comments on ZIMDEF’s financials:
“The fund has maintained its functional currency as the US$ and has presented the financial statements in US$ using the official foreign exchange rate of 1:1. Had the fund applied the requirements of IAS 21, many of the elements of the accompanying financial statements would have been materially impacted and therefore the departure from the requirements of IAS 21 is considered to be pervasive.
“The financial effects on the financial statements of this departure have not been determined. A sensitivity analysis of how different exchange rates would impact on the statement of financial position has been presented… However, these amounts presented may not reflect the opening balances, in RTGS dollars going forward.”
IAS 21 has become of particular importance in Zimbabwe due to the currency developments that have taken place since the beginning of the year.
Earlier in February Zimbabwe’s monetary authorities responded to calls for a free floating exchange rate system and set up the foreign currency interbank market.
And in June the Government effectively ended the long-standing multicurrency system and re-introduced the Zimbabwe dollar through Statutory Instrument 142 of 2019.
Between February and October 2019, the local currency (RTGS dollar, then later Zimbabwe dollar) has moved from trading at a rate of 2,5 to the United States dollar, to around 16 to the US dollar on the interbank market.
ZIMDEF was established in terms of the Manpower Planning and Development Act and is administered by the Ministry of Higher and Tertiary Education, Science and Technology Development; its contributions are employer contributions only based on cost to the employer of the employment of staff.
The payment is based on 1 percent of the total wage bill inclusive of allowances, bonuses, benefits, National Social Security Authority, Medical Aid, National Employment Council and Pension contributions.