Zifa swims in debt

HARARE - Auditors of the Zimbabwe Football Association (Zifa) have issued an emphasis of matter over the football mother body’s ability to continue as a going concern due to the ballooning debt which is now over $7 million.

Concerns were raised by auditors from Baker Tilly Gwatidzo Chartered Accountants, over the cash-strapped association’s ability to service its debt if its creditors were to call in what they are owed.

The audit report covers the first year in which current Zifa president Philip Chiyangwa and his executive have been in office.

In their assessment of the 2016 Zifa financial year, the auditors gave the association’s book an adverse opinion.

In accounting terms, an adverse opinion is a professional opinion made by an auditor indicating that a company’s financial statements are misrepresented, misstated, and do not accurately reflect its financial performance and health.

“In our opinion, because of the matters described in the basis for adverse opinion section of our report, the Consolidated Financial Statements do not present fairly the financial position of Zifa as at December 31, 2016, and this financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards,” the auditors said.

“We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

“We are independent of the association in accordance with the International Ethics Standards Board for Accounts Code of Ethics for Professional  Accountants (Parts A and B) (IESBA Code) and other independence requirements applicable to performing audits of financial statements in Zimbabwe.

“We have fulfilled our other ethical responsibilities in accordance with the IESB Code and in accordance with other ethical requirements applicable to performing audits in Zimbabwe. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse opinion.”

Turning to Zifa’s inability to continue as a going concern, Baker Tilly Gwatidzo Chartered Accountants said the association’s failure to pay creditors was a huge worry.

“We draw attention to the fact that at December 31, 2016, the association incurred a consolidated net loss of $854 902 and had accumulated losses of $7 353 324 ($6 541 879) and that the group’s total liabilities exceed total assets by exceeding total assets by $5 944 656 (2015: $5 089 754),” the auditors said.

“The association has not been able to pay its creditors, including statutory payments when due. There are pending legal cases against the association, that may successfully, result in claims that the association is unlikely to satisfy.”

However, Zifa are optimistic that their financial situation will improve owing to future funding from Fifa and a number of austerity measures.

“The ability of the organisation to continue as a going concern is dependent on a number of factors. In response to the challenges that the association is facing, management is pursuing the following initiatives which have a potential to improve the association’s profitability and liquidity,” the auditors said.

“The association expects to receive $750 000 in 2018 from Fifa which will be used in building infrastructure, capacity building and revenue generation.

“The association has suspended participation in some tournaments, in order to cut down on expenditure. The association has laid off some staff in order to cut down on employee costs.”

The auditors also noted that there are a lot of possible misstatements on the liabilities Zifa is currently facing regarding the $7 million debt.

“The association has many pending legal cases that could give rise to liabilities. In some cases, the actual amounts of the liabilities are under dispute. We could not determine whether an adjustment could have been required on liabilities to achieve fair presentation,” Baker Tilly Gwatidzo Chartered Accountants said.

During the campaign trail and soon after winning the elections to become Zifa president in December 2015, Chiyangwa and his executive promised to conduct a forensic audit to determine the origins of this huge debt.

However, up until this date, the forensic audit has not been conducted.

Chiyangwa has also categorically stated that since coming into office he does not owe any creditor a cent but this audit report suggests otherwise.

When the current Zifa leadership came into office in December 2015, the association’s debt stood at $6 541 879 but at the moment it has risen to $7 353 324.

One of the reasons the debt has increased is because before the 2017 Africa Cup of Nations (Afcon), Zifa took out a loan from the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) which they are failing to repay which is now accumulating a five percent interest on a monthly basis

“Zifa obtained a loan from Potraz amounting to $225 000 on November 10, 2016 to meet the national soccer team’s travelling costs for an Afcon match in Guinea,” the auditors said.

“The loan carries interest at five percent from October 1, 2016. The capital sum shall be paid in 12 instalments of not less than $20 000 each the first of which is payable on or before  October 31, 2016.

“Interest and the capital amount must be repaid by September 30, 2017. To date no repayment has been made for both capital and interest.”