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AG flags over R1bn irregular expenditure at comms dept

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 13 Oct 2022

The auditor-general of SA (AGSA) says there’s been more regression than improvement in the overall audit outcomes of the entities of the communications department.

The entity exercising oversight of public money indicates the regression can be observed from the 2017/18 to 2021/22 financial years.

The AGSA presented the audit outcomes of the communications portfolio for the 2021/22 financial year in Parliament this week.

With the exception of Broadband Infraco and PostBank, the audit outcomes of the Film and Publication Board (FPB), Sentech, NEMISA, Independent Communication Authority of SA (ICASA), SABC, Universal Service and Access Agency of SA (USAASA), State IT Agency (SITA), SAPO and Universal Service and Access Fund (USAF) were tabled before Parliament’s communications and digital technologies committee.

AGSA’s Andries Sekgetho, head of the unit overseeing the communications and digital technologies portfolio, revealed that five institutions regressed, with only two showing signs of improvement.

Sketchy balances

USAF and USAASA − entities considered critical in the roll out of the broadcasting digital migration (BDM) project and set-top boxes (STBs) − did not fare well.

Sekgetho indicated that for the second consecutive year, USAF obtained a disclaimer in terms of its audit outcomes.

“When we looked at the financial statements and a number of material balances, we could not obtain the necessary supporting evidence.

“Unfortunately, these balances that relate to the roll out of the STBs, for example, we couldn’t get the appropriate listings and schedule to confirm the inventory balances at year-end.

“We also didn’t receive proper comfort or supporting evidence with regards to the goods and services balances; in other words, how much they’ve paid their contractors in respect to the work done in the roll out of the [STBs].

“There are quite a number of balances that are impacted and they’re quite material and significant…where we experienced limitations, it then resulted in the disclaimer.”

In the case of USAASA, concerns arose in regards to a technical matter in the current financial year.

“There was a receivables balance where the disclosures did not meet the financial reporting framework, which I’m confident they’ll be able to turn around going forward.

“All indications are that they should be able to address this regression going forward, with the implementation of an effective audit plan.”

The DCDT, which oversees the entities and leads the country’s ICT agenda, should be one of the institutions that find it easier to achieve a clean audit outcome, said the AGSA.

However, the department seems to be grappling with performance reporting challenges, in relation to the roll out of the BDM project.

The communications and digital technologies department − together with ICASA, NEMISA and Sentech − obtained unqualified audits with findings for the 2021/22 financial year.

The above-mentioned made material adjustments to their tabled financial statements, resulting in the unqualified audit opinions.

The SABC, USAASA and SITA obtained qualified audit opinions. Like USAF, the SAPO obtained a disclaimer in terms of its audit outcomes.

Khumbudzo Ntshavheni, minister in the Department of Communications and Digital Technologies.
Khumbudzo Ntshavheni, minister in the Department of Communications and Digital Technologies.

On the entities’ financial health, the AGSA’s audit report shows irregular expenditure is the main contributor.

According to the findings, every entity, except for the FPB, had material misstatements on the financials received for auditing.

SAPO, USAASA, SABC and SITA are still struggling to prevent irregular, fruitless and wasteful expenditure.

It further reveals that irregular expenditure for the current year – that which was incurred during the year under review – is sitting at R1 billion, while it was R1.5 billion in prior years.

“The top contributors are SAPO, SITA and SABC,” it was revealed.

“In the case of SITA, it still has services rendered after the contract expiry date, invalid extension of contracts and the payments made to suppliers, which were not tax compliant.

“With SAPO, the irregular expenditure of R238 million mainly relates to cash-in-transit and cash supply contracts, where National Treasury did not approve the contract extension.

“For the SABC…they have figures that are still under assessment, as well as DCDT – the R30 million they still need to investigate and determine if it is irregular or not.”

Commendable audit

On an opposite note, the FPB was the department’s only entity that was commended for achieving a clean audit outcome for the year under review.

The FPB’s best practices included proper reviews of financial statements submitted for audit.

Sekgetho commented: “From our point of view, we [AGSA] are happy they were able to account for all their financial matters in a complete, reliable and accurate manner,” he stated.

“They were also able to observe key legislation as and when they were executing their activities; in other words, procurement and SCM legislation.

“We also commend the fact that they were able to report credibly, reliably and accurately, in terms of their reported performance information. This assessment is based on what they have reported, which is the performance report and we did not find any material problems in that regard.”