2017/18 RAL AUDIT
No Turning Back: RAL Audit Opinion, This Way Up or the Highway
Roads Agency Limpopo (RAL), the road infrastructure implementing agency for Limpopo Province that was in an abysmal state of governance, leadership and mismanagement between the 2010/11 and 2013/14 financial years, has retained an unqualified audit opinion it achieved in the 2016/17 financial year for 2017/18.
This is contained in a detailed audit report of the Auditor-General of South Africa (AGSA) to the Limpopo Provincial Legislature on the audited financial results of RAL for the year ended 31 March 2018.
An unqualified audit opinion (with findings) is “when financial statements give a true and fair view in accordance with the reporting framework used for the preparation of the statements”. It is only a level lower than the clean audit, the base for the holy grail of clean administration.
RAL has been on the up in terms of independent audit outcomes, since it was effectively returned from being placed under Section 100 administration between 2011 and 2014 after a tumultuous period of lack of leadership, mismanagement and systematic failure of corporate governance. RAL previously resided in the erstwhile Limpopo Department of Roads and Transport, one of the five provincial government departments affected by that watershed intervention.
In the 2012/13 financial year, RAL got a disclaimer from the office of the AGSA. This is the worst possible
“INTERNAL CONTROLS WERE IMPROVED AND BAD APPLES … WERE ROOTED OUT.”
"RAL HAS BEEN ON THE UP IN TERMS OF INDEPENDENT AUDIT OUTCOMES, SINCE IT WAS EFFECTIVELY RETURNED FROM BEING PLACED UNDER SECTION 100 ADMINISTRATION."
verdict from the AGSA, and it is described as a “mess”. That disclaimer was followed by two consecutive adverse audit outcomes for the 2013/14 and 2014/15 financial years, a verdict that still left much to be desired.
The AGSA audits public entities on three aspects; namely financial statements, annual performance reports (reporting on predetermined objectives) and compliance with legislation.
Though the AGSA audits entities on an annual basis, the performance of RAL over the years has been a sustained one.
Since the first Board of Directors postadministration was appointed in 2014 and subsequently the Chief Executive Officer (CEO) in 2015, a turnaround strategy for the Agency was put in place.
According to RAL CEO Maselaganye Matji, the immediate priority in those early years was to stabilise the Agency. “The crucial executive management and senior level positions in the Agency that had been vacant were filled with enthusiastic, ethical and skilled recruits,” he says.
The Agency’s further investment in human capital sees internal staff enrolling for senior degrees, and those completing their respective programmes are doing so with flying colours. And the morale at the Agency has never been better. (Story on page 27)
“I’d also like to take this opportunity to thank all members of staff for their hard work and dedication.”
Internal controls were improved and bad apples that sought to circumvent and compromise internal supply management policies were rooted out.
“Supply chain management (SCM), which led to irregular procurements, and fruitless and wasteful expenditure, was as a result of lack of these internal controls,” says Mr Matji.
Given the fact that RAL is a leading service delivery road infrastructure Agency in Limpopo Province, naturally the battle for the share of its limited financial resources is highly contested as it often advertises multimillion-rand projects.
This, while dealing with historical legacy of R1.6 billion in irregular expenditure dating back to 2007 and striving to address road infrastructure backlog while redoing the poorly executed projects that resulted in numerous Bermuda roads.
The Special Investigation Unit (SIU), the AGSA’s report noted, is currently investigating “matters pertaining to supply chain management as well as project related expenditure that arose from 01 January 2009 to 20 April 2018”, the outcome of which is yet to be finalised
It is in this context that it is important to understand where and how far the Agency has come to grasp the vision of what it seeks to be, when scaremongering terms like ‘backlog’, ‘irregular expenditure’, ‘billion’, ‘million’, etc are thrown about.
And what an unqualified audit opinion means for an entity such as Roads Agency Limpopo, with its troubled past.
RAL operates under a constrained budget for the province it serves. For the 2018/19 financial year, RAL had been allocated a budget of R988.9 million by the Limpopo Department of Public Works, Roads and Infrastructure for operational costs, and upgrading and maintenance of roads. To put it in context, at current estimates, RAL will need R160 billion to upgrade and maintain the entire road network in Limpopo.
To this end, since 2015, RAL adopted a Strategic Partnership Approach as part of ongoing success of the multifaceted 2015 – 2020 turnaround strategy for the Agency.
“The objective of this approach - one of the focus areas of the turnaround strategy - is to create partnerships with the private sector partners relevant to or benefiting from the Limpopo Provincial road infrastructure network to help augment the Agency’s constrained budgetary and financial resources for the upgrade and maintenance of Limpopo roads,” says Mr Matji.
The amounts raised in that respect are now hovering on the impactful R500 million mark. Backlogs still exist. But a visible dent is being made in the battle against road infrastructure in the province, particularly in mining districts such as Sekhukhune and Waterberg.
“This has enabled RAL resources to be rechanneled to deliver road infrastructure in areas that need it the most such as Muyexe, one of the poorest villages in the country.”
On the governance front, the prompt will to implement the action plan to address unresolved findings raised by the AGSA in the annual audits has enabled the Agency not to regress if not to achieve an improved audit opinion.
According to the AGSA, to achieve a clean audit – which the Roads Agency Limpopo is now targeting -“matters reported by the external and internal auditors should receive timeous management attention. And internal controls address key areas such as leadership, financial and performance management, and governance.”
RAL had been quick off the mark in this regard, and Mr Matji has thanked the Board, for the support they give to management. (Story on page 10)
For the full AGSA report on the audited financial results of RAL, visit www.agsa.co.za