2017/18 RAL AU­DIT

No Turn­ing Back: RAL Au­dit Opin­ion, This Way Up or the High­way

Mmileng - - Contents -

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

RAL CEO Mase­la­ganye Matji, De­part­ment of Pub­lic Works, Roads and In­fra­struc­ture MEC Nandi Ndalane and RAL Board Chair­per­son Matome Ralebipi, with the sup­port of their re­spec­tive teams, have been in­stru­men­tal in turn­ing around the for­tunes of the Agency.

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