The Star Late Edition

Auditor-General raises red flags on Prasa finances

THE Auditor-General has laid bare the state of finances at the Passenger Rail Agency of South Africa (Prasa), which has been under strain in the last few years with low revenues and a drop in passenger volumes.

The auditor-general gave Prasa a qualified audit opinion.

This comes at a time when Prasa is busy with the revitalisa­tion of some of its stations and railway lines.

In the annual report with audited financial statements Prasa said irregular expenditur­e has been declining since 2016. But they wanted to address some of the issues around irregular expenditur­e.

Minister of Transport Sindi Chikunga tabled the report in Parliament. Chikunga had requested an extension from Speaker Nosiviwe MapisaNqak­ula to table the report later.

National department­s and stateowned entities are required by law to table annual reports with audited financial statements by end of September.

In the report, Prasa said it was addressing the issue of R8.9 billion in irregular expenditur­e.

“Internal audit is currently conducting a determinat­ion test on R9.6bn. Once the process is concluded, the irregular expenditur­e will be submitted to the National Treasury for condonatio­n. Initiative­s to enhance internal controls are being implemente­d,” said Prasa.

The report also noted corruption regarding an employee who embezzled millions of rand.

An employee who had embezzled R34.5 million was dismissed by the agency. Management had questioned the employee in October on the matter. Of the R34.5m stolen, R9.5m was returned to Prasa. Criminal charges have been laid against the former official.

But the auditor-general, Tsakani Maluleke, said there were no controls in place to prevent irregular, fruitless and wasteful expenditur­e. She said she did not have evidence that action had been taken against officials implicated in irregular expenditur­e.

She also found proper procedures were not followed in the awarding of a R1.8bn signalling contract in the Western Cape. She found discrepanc­y between what was recommende­d and awarded in the tender.

“The amount recommende­d by the Finance, Capital, Investment and Procuremen­t Committee (FCIP) for approval was R1.6bn, while the contract was awarded at R1.8bn. No evidence was provided to justify the difference in amounts of R255.7m,” said the AG. “There was also no justificat­ion for the difference of R255.7m between the contract value and the value recommende­d by the FCIP.”

Maluleke said the Special Investigat­ing Unit (SIU) was brought in to probe the matter and people implicated in the tender were dismissed by Prasa. Some of the officials resigned.

The AG also noted the problem of ghost employees at Prasa. An investigat­ion found there were more than 1 500 ghost employees and they were removed from the agency. This saved Prasa hundreds of millions of rand.

“Prasa did not maintain accurate records of the contractua­l informatio­n used to determine and disclose commitment­s, as required by the Generally Recognised Accounting Practice (GRAP 1), Presentati­on of financial statements, and GRAP 17, Property, plant and equipment, respective­ly.

“Consequent­ly, commitment­s, as disclosed in note 31 to the financial statements, were overstated by R1.2bn (2022: R3bn) in the consolidat­ed and separate financial statements,” said the auditor-general in her report.

There was no value for money on the Isipingo retail developmen­t project.

The Auditor-General also found there was no bidding process for the appointmen­t of suppliers for the general overhaul and upgrade of services.

These contractor­s have been paid more than R2.8bn.

The SIU probed the matter and cases were referred to the National Prosecutin­g Authority.

In another finding, the auditor-general said there was no competitiv­e bidding process for the awarding of contracts for the supply of drones to the value of R3.2m. Officials found guilty of irregulari­ties in this process were dismissed in June last year.

There were other findings relating to other contracts that were irregularl­y awarded by Prasa. Maluleke said she did not include informatio­n on projects that have been halted or delayed.

“Prasa has extensive property, plant and equipment under constructi­on, which include delayed or halted projects. Contrary to the requiremen­ts of GRAP 17, the following informatio­n was not disclosed in the accompanyi­ng financial statements for the group: property, plant and equipment under constructi­on that is taking a significan­tly longer period to complete than expected, including reasons for any delays,” said Maluleke.

“As disclosed in note 25 to the financial statements, material losses of R9.4bn were recognised as a result of the impairment of property, plant and equipment.”

Maluleke said Prasa lost R14.8m due to cybersecur­ity attack.