MPs scrutinise Aguma’s dubious audit contracts
Parliament’s inquiry into mismanagement at the SABC has thrown the spotlight on questionable audit contracts entered into by acting CEO James Aguma, who has spent tens of millions of rand hiring private firms to do work that his own staff are paid for.
Business Day has seen some of these contracts and their supporting paperwork. The documents and the inquiry’s final report released on Tuesday cast doubt on Aguma’s efforts to deal with the auditor-general’s finding against the SABC of a staggering R5.1bn cumulative irregular expenditure between 2014 and 2016.
On Wednesday, during a grilling by Parliament’s standing committee for public accounts, Aguma tried to defend his decision to hire audit firm SekelaXabiso to identify the root causes of the irregular expenditure.
Since 2014, the SABC has contracted SekelaXabiso eight times without going out to tender, at a total cost of R33m, mostly to deal with irregular expenditure. The R5.1bn irregular expenditure over three years constitutes a very large portion of the corporation’s budget, which has annual revenue of about R7.9bn.
Aguma told MPs the contracts were necessary because the SABC lacked the required skills, despite employing about 25 people meant to do the job.
The parliamentary inquiry’s report cited evidence of irregularities in awarding contracts to SekelaXabiso under the heading “questionable transactions”.
The report concluded “the SABC was well equipped to provide the services procured from SekelaXabiso”. Despite this, the SABC signed another contract with SekelaXabiso in December 2016 to do the same work.
The inquiry also flagged irregularities with contracts Aguma had signed with another audit firm, PwC. The standing committee had requested minutes and transcripts of board and subcommittee meetings at which decisions to procure the services of both audit firms were taken. Aguma hired PwC, without going out to tender, to draw up a fixed asset register and deal with tax queries.
Internal documents show SABC staff had queried why Aguma had approved PwC’s fees ballooning from R185,000 to R10m without an audit trail or proper contracts. PwC declined to comment this week, citing client confidentiality.
During the inquiry’s December hearings, the SABC’s former head of risk and governance, Itani Tseisi, told Parliament that concerns had been raised with the board over “identified risks” emanating from contracts awarded irregularly “and with little regard for [supply chain management regulations]” to
SekelaXabiso and PwC. The report cited “oral evidence” from the SABC’s former head of procurement, Madoda Shushu, of “circumvention of supply chain processes and regulations” in appointing SekelaXabiso to “assist with resolving irregular expenditure”.
Asked about the allegations, the audit firm said it could not comment as the SABC’s supply chain processes “are executed internally by SABC management, which we as SekelaXabiso were not privy to”.
“We were engaged on the irregular expenditure project from 2015-16 financial year.
“Thus far, we have executed the project in accordance with the mandate and scope assigned to us and SABC management accepted our key engagement deliverables,” it said.
“We cannot comment on the specifics of the scope and interventions as that is at the discretion of the SABC.”
In his written response, submitted to the committee last week, Aguma defended hiring the audit firms, saying “the SABC’s finance department was inadequately resourced” and citing “the urgency presented by the SABC’s history of irregular expenditure”, the report said.
However, the SABC has been well aware of looming irregular expenditure findings for several years and Treasury rules do not allow bad planning to be used as an excuse to deviate from normal procurement processes.
The SABC has declined to comment on the contracts.
WE WERE ENGAGED ON THE IRREGULAR EXPENDITURE PROJECT FROM THE 2015-16 FINANCIAL YEAR