Your Excellency the Chief Executive,
The Commission of Audit audited the consolidated financial statements on pages 9 to 17.
Respective responsibilities of the Financial Services Bureau and competent bodies
The public accounting regime is laid down by the Decree Law N.o 41/83/M and further regulated by the Administrative Regulation N.o 6/2006. In accordance with Paragraph 1, Article 35 of the Decree Law N.o 41/83/M, the Financial Services Bureau is responsible for the preparation of financial statements. Concurrently, the Administrative Regulation N.o 6/2006, Article 77, determines that the public departments and entities’ budget management and control should be exercised by the respective managing bodies and by the Financial Services Bureau.
Responsibility of the Commission of Audit
It’s the responsibility of the Commission of Audit to form and express an opinion on those financial statements, based on the audit it has conducted. The Commission carried out the audit according to the defined audit plan and scope. On a sampling basis, the audit examined documents related to the amounts in the financial statements and verified whether the accounting policies are appropriate, consistently applied and adequately disclosed.
The Commission of Audit planned and performed the audit so as to obtain all the information and explanation considered necessary in order to obtain sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements. In effect, the Commission of Audit collected sufficient and relevant audit evidence to form and express a reasonable and grounded audit opinion.
Basis for expressing a qualified opinion
This part highlights the major conclusions laid out in the annexed “Detailed explanation of the audit opinion”, which should be referred to for details.
With reference to the rules and terms of the public accounting regime, the consolidated financial statements prepared by the Financial Services Bureau, for which it is statutory responsible, contain material misstatements in the areas of investment buying and selling, issuing and reacquisition of bonds as well as in the area of lendings and borrowings (generically designated hereafter as “special financial operations”). All misstatements stem from accounts of public departments and entities (commonly known as autonomous departments), including the Macao Monetary Authority, Postal Savings and Pensions Fund, that, exempted from the public accounting regime, have been using the Official Accounting Plan or a private accounting plan and on an accrual basis.
The entry into force of the Administrative Regulation N.o 6/2006 revoked the Decree Law N.o 53/93/M, and, consequently, the autonomous departments ceased to be able to invoke it to exempt themselves from following the regime of public accounting. The Administrative Regulation N.o 6/2006 states clearly, in its Article 68, Paragraph 1, that these departments, by virtue of the nature of their activities, may prepare an additional account, following the instructions of the Financial Reporting Standards or according to a private accounting plan. However, this shall not result in an exemption from presenting their accounts based on the public accounting regime.
The Paragraph 1, Article 93 of the Administrative Regulation N.o 6/2006 established that the new financial regime should begin applying from economic year 2007, including the autonomous departments, which from that moment on must also abide with the regime of public accounting for preparing their budgets, accounts and financial statements.
The autonomous departments recorded part of the “special financial operations” in Assets and Liabilities, in accordance with the accrual principle, and didn’t record part of them in the consolidated financial statements. This handling is against the public accounting regime, which determines all of them should be recorded as revenues or expenses in the consolidated financial statements, and caused the Consolidated Revenues and Expenses Sheet registering less 803.3 thousand millions patacas in “capital revenues”, less 790.1 thousand millions in “capital expenses” and less 13.2 thousand millions patacas in the budgetary operations balance; in the Consolidated Balance Sheet, more than circa 1.2 thousand millions patacas was registered in “assets – credits over third parties”; more than circa 62,7 thousand millions patacas in “liabilities – debits to third parties”, but less 61,5 thousand millions in the net assets.
The Commission of Audit verified the “special financial operations” of the autonomous public departments were highly frequent, which by following the public accounting regime, as the law demands, would artificially and fictitiously inflate the revenues and expenditure on the Revenues and Expenditure Sheet. The situation makes clear the legislation in force is not suitable to adequately present the public department’s special financial operations transactions, which in their turn cannot be fully reflected by using the single entry registration of the cash basis accounting.
In spite of the situation, the legislation in force doesn’t bestow on the Finance Services Bureau discretionary powers to introduce special accounting measures to handle situations to which the accounting regime approved by law appears inadequate. So, at present, the Finance Services Bureau cannot help but abide with the law to prepare the General Account.
The Commission of Audit has the responsibility to verify whether the accounts of the year were prepared in compliance with the accounting regime set up by law and to express an opinion. Besides pointing out the legislation shortfalls, this Commission should also, in an unambiguous way, present in its opinion all material relevant misstatements (accounting errors involving very substantial amounts) resulting from not abiding with the terms and rules of the public accounting regime. This following, the Commission of Audit cannot express an unreserved opinion.
As for other areas of the consolidated financial statements, the audit results confirm there are no errors of great impact in aspects of material relevance.
Based on the audit, the Commission of Audit expresses a qualified opinion on the consolidated financial statements.
Audit opinion — qualified opinion
The consolidated financial statements attached to this report, except for the effects caused by the “special financial operations” reported in “Basis for expressing a qualified opinion”, do present the financial position and the result of the budget execution as at 31 December 2007 in all aspects of material relevance, in accordance with the public accounting regime of the Macao Special Administrative Regime.
