AG drops bombshell on Necsa finances
Makwetu makes damning findings against energy corporation, says money matters in disarray
AUDITOR-GENERAL (AG) Kimi Makwetu has made damning findings against the Nuclear Energy Corporation of South Africa (Necsa), finding its finances in disarray.
In his audit report, tabled as part of the entity’s annual report in Parliament last week, Makwetu said he could not obtain supporting documents on the entity and its subsidiaries’ finances for the financial year ending in March 2019. “I was unable to obtain sufficient appropriate audit evidence to provide a basis on these consolidated and separate financial statements,” he said.
In January, the board of Necsa resigned en masse after a strained relationship with Mineral Resources and Energy Minister Gwede Mantashe.
Makwetu said Necsa did not submit its financial statements for auditing purposes within two months after the end of the financial year, and that the financial statements were not submitted in accordance with the prescribed financial reporting framework.
Makwetu put the blame for the state of the entity’s finances squarely on the previous board and senior management. “The accounting authority did not exercise adequate oversight regarding compliance and regulations and related internal controls which resulted in instances of non-compliance with applicable laws and regulations,” he said.
“Senior management did not prepare accurate annual financial statements and a performance report that were supposed to be evidenced by reliable evidence, resulting in a disclaimer of audit opinion,” he said.
Makwetu also said there was no supporting documents that the board fulfilled its responsibility for the preparation and fair presentation of the financial statements. “Written representations in this respect were not provided,” he said. The entity did not have adequate systems of internal control in place, he added.
“Consequently, I was unable to determine whether any adjustments were necessary to the consolidated financial statements as a whole.”
The annual shareholders’ compact was not concluded in consultation with the executive, and a corporate plan was not submitted to the director-general of the Department of
Energy, the Auditor-General said.
Pulane Kingston, then acting chairperson for the previous board, said the annual report was presented against the backdrop of significant challenges, mainly of a financial, leadership and management nature faced by the entity.
“It is important to note that the current Necsa board was appointed by the minister of energy in December 2018, and has only effectively been in place for the last three months of the period under consideration,” Kingston said in the annual report’s foreword.
“The board recognises that Necsa has been experiencing increasing pressure on its financial, human and infrastructure resources due to historical financial challenges thus impacting on its sustainability.
“This is further exacerbated by the combined effect of rising operating costs, a declining government grant in real terms and pressure on its nongrant revenue streams,” Kingston wrote.
Acting group chief executive Ayanda Myoli said key turnaround initiatives required for Necsa’s sustainability have been identified as part of a recent strategic planning process.
“Sluggish, albeit improved, economic growth is expected to continue, not only negatively impacting on commercial revenue but also constraining the support that can be provided by the government.
“In addition, political and legal challenges to the growth in the South African nuclear industry will need to be navigated,” he said.