Barely three months into operation, state-owned entity (SOE) Broadband Infraco has already fallen foul of governance and procurement regulations.
Infraco was formed about five years ago, when government combined Eskom and Transnet's ICT infrastructure, with the aim of providing a backbone that would aid in reducing the costs of communication in SA.
SA's first long-distance open-access carrier network was officially opened to the South African market in November last year.
However, the ideals of the organisation have come under strain, after a revealing Deloitte audit report exposed shortcomings relating to internal control processes in the company's procurement and contract management environments.
The SOE has conceded that the findings of the report are correct and are under investigation.
Media reports, quoting the document, cite the following statements made in the report by the director of risk advisory at Deloitte, Zama Dlamini: “Although there are set policies, procedures, guidelines and processes to effectively effect the contract management process, we noted in many instances that these are not complied with, unintentionally or otherwise.”
Dlamini adds that “roles and responsibilities have been defined, but it appears that there is disregard of these governance structures and/or communication breakdown between different business units, which, at the end, exposes [the] company to undue risks”.
“Inaccurate contract management reporting, due to incomplete, invalid and inaccurate information from the register, such as terminated contracts not removed from the register. Maintenance of contracts and related information is not adequate as access to the documentation is not restricted.
“There is no clear communication between the end-user departments and the commercial unit in terms of contract management, thus [the] end-user at times make contractual decisions that change the terms of contracts without knowledge of the commercial unit,” she adds.
Infraco responds
The SOE acknowledges the report, arguing that it has established and approved procurement policies, procedures, guidelines and practices.
The company and the board's audit and risk committee make use of internal audit processes to check compliance against these policies and procedures in the normal ongoing course of business.
“As a result, Broadband Infraco appointed Deloitte in 2010 to conduct an internal audit to determine the extent of any non-compliance to these procedures,” states the entity.
Broadband Infraco concedes that the internal audit report highlighted shortcomings and it acknowledges the need for these to be addressed.
“The board of Broadband Infraco and the company are already in the process of taking every possible action to correct non-compliance with internal controls and to protect the assets of the company. The necessary sanction will be taken against any accountable person(s) found to be responsible for this non-compliance,” notes the SOE.
“Broadband Infraco also wishes to state that Deloitte has previously conducted an audit of potential conflict of interest and were satisfied that all interests had been declared and that those involved had recused themselves during the pertinent deliberations of the board and its sub-committees,” concludes the SOE.
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Infraco is a go
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