AG calls for stringent controls at SAA after flagging R22bn in irregular expenditure
THE AUDITOR-GENERAL (AG) has recommended the strengthening of controls at SAA in a bid to ensure credible financial statements after flagging more than R22 billion in irregular expenditure for the financial year ended March 31, 2018.
The office of the AG said yesterday that SAA’s accounting authority and management should take note of the weaknesses highlighted in the 2017/18 audit report, especially in dealing with instability, vacancies, compliance with procurement legislation and basic financial management disciplines.
Briefing the Standing Committee on Public Accounts (Scopa), AG deputy business executive Fhumulani Rabonda said the audit outcome of SAA had remained stagnant with a qualified audit opinion with findings of predetermined objectives and compliance with legislation.
Rabonda said that SAA’s subsidiary, Mango Airline, regressed to a disclaimer due to lack of evidence to support the going concern assumptions.
He said the majority of the irregular spend SAA incurred to date was due expired contracts or no contracts in place, as well procuring without complying with the supply chain management policy.
“In 2016/17, the financial statements of SAA disclosed irregular expenditure of R126 million,” Rabonda said.
“When we did the audit the following year there was a lot of irregular expenditure that was identified that related to previous years, and that is why there was an adjustment to 2016/17 of about R11.9bn.
“So irregular expenditure that was incurred in the 2016/17 financial year was over R12.1bn.
“In the year 2017/18 there was an additional R9.9bn incurred in irregular expenditure, bringing the total irregular expenditure balance as of today to R22bn.
“However, this balance we qualified on it on the basis of incompleteness. That means that it is not complete as management has not fully undertaken the process of quantifying irregular expenditure.”
Rabona also added that SAA incurred R40m and R130m in fruitless and wasteful expenditure for both 2016/17 and 2017/18 financial years, respectively.
He said there was no value for this expenditure and it was incurred in vain, with the closing balance now at R24.8m.
“We also highlight two areas which the disclosure makes. The first is that R130m has been written off as irrecoverable and also there was also R12.9m that was removed as recovered,” he said.
“We were able to get information that the R130m was indeed irrecoverable. It related to penalties and interest charged by Sars back in the day, and when management did an investigation system error that caused under provision of VAT and Sars charged penalties and interests.”
“But the R12.9m declared as recovered is part of the qualification because we could not get any supporting information that it was recovered.”
AG business executive Zolisa Zwakala said it had taken them a long time to conduct SAA audits as the airline had been a business in transition as it went through business rescue in 2019, before it was privatised.