Blue IQ blames past CEO

After failing to receive a single clean audit in four years, coming under fire for stalled economic infrastructure projects and wasteful expenditure which ran into the millions, Blue IQ says the departure of its CEO will see the start of a rebuilding process.

Following the latest damning report from the office of the auditor-general, the agency's board has come out firing, saying its former CEO, Nomhle Canca, was solely responsible for its disastrous performance since 2004.

“The board expressed the concern that the former CEO refused, neglected or delayed to comply with the instructions of the audit committee and the board itself. This resulted in Blue IQ incurring irregular expenditure, consistently receiving a qualified audit report from the auditor-general and being exposed to possible sanction from National Treasury for failing to comply with various treasury regulations,” it says.

Canca was suspended in 2008 and later resigned from the agency following a drawn out investigation and labour court case. Parties finally agreed to a full and final settlement out of court.

The board says it is also addressing the high staff turnover at management level and the dismissal of senior executive members. Financial mismanagement, poor governance and dysfunctional operational management are also being investigated.

“Active steps have been taken by the current management of Blue IQ to redirect the organisation to its original delivery mandate, and a focus has been placed on establishing internal controls and processes to ensure improved and efficient governance and financial management,” says the organisation.

Delayed response

The agency maintains that only Canca was responsible for the poor performance. While this was pointed out in the 2005/6 annual report, the board says it only made changes when “the situation continued to worsen”.

In the 2005/6 annual report, the agency was cited for non-compliance with various laws and regulations. The auditor-general noted the monitoring of projects and reviews were inconsistent, resulting in the failure of several projects.

In the annual report for the financial period 2006/7, the auditor-general criticised the monitoring and performance system and non-compliance with governance matters. The tender process for services worth over R15 million were also not followed, while R90 000 of goods and services were not procured correctly.

The auditor-general's report also implicates Blue Catalyst, which focuses on funding innovation and developing commercial opportunities in Gauteng. In 2007/8, irregular expenditure, amounting to R36.7 million, was incurred and Blue Catalyst – a Blue IQ division – was cited for contravening legislation when it issued a guarantee to a fitness equipment company.

In the latest audit, the agency was cited for irregular expenditure of R36 million and fruitless expenditure of R3 million.

Innovation failures

Firoz Cachalia, MEC for economic development in Gauteng, who expressed disappointment at the auditor-general's report, says the department will introduce recovery measures.

In 2006, the audit was unable to verify whether grant payments made to subsidiaries and projects were in line with the set conditions. Also, approved budgets for all subsidiaries and projects were not made available to perform detailed audit procedures.

The poor record points to the performance of the accounting officer, says Blue IQ. The accounting authority must ensure there is “effective, efficient and transparent systems of financial and risk management and internal control for Blue Catalyst”, notes the agency.

The latest report reveals irregular expenses relating to claims from the former CEO. The report uncovers improper expenses incurred by the former CEO, related to travel and other business payments.

A R5 million guarantee was issued in contravention of the Public Finance Management Act, the report also states. A forensic investigation is under way and the “necessary actions will be taken” once it has been completed.

Canca did not respond to requests for comment.

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