Nedlac finances a mess

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IOL nedlac si Herbert Mkhize (28408030) INLSA Former Nedlac CEO Herbert Mkhize

The latest annual report of the National Economic Development and Labour Council (Nedlac) has lifted the lid, albeit only partially, on irregular spending by the forum that brings together the government, labour, business and communities.

Irregular expenditure of R979 542 was incurred in the 2011/12 financial year, however the annual report states that this amount was “not deemed the final figure”, as a forensic audit had not been finalised before the annual report’s completion in late July.

The irregular expenditure related to contraventions of supply chain management requirements. “The individual was put on precautionary suspension and subsequently resigned,” the annual report states.

This is the first time concrete evidence of irregular spending has emerged in the wake of months of rumours as the forensic audit instituted by Nedlac in May remained a closely guarded secret. It’s understood that those close to the forensic investigation were made to sign confidentiality agreements.

Nedlac CEO Alistair Smith told The Sunday Independent he did not want to comment on the details of the forensic audit report, but confirmed that the irregular expenditure involved had risen to more than R1 million by the time the audit was completed. The report would first go to the Labour ministry, after which the auditor-general, Terence Nombembe, would be briefed, he said.

Smith said the problems had slipped into the system over years, but said steps had been put in place to arrest this.

Labour Minister Mildred Oliphant told The Sunday Independent that she did not want to react on the basis of rumours but on facts, and would do so after studying the forensic audit report.

It is understood that the forensic audit, which the annual report noted cost R160 000, was presented to the minister on Friday afternoon, after Nedlac’s annual summit.

Smith was appointed CEO half-way through the financial year in October 2011 when he took over from Herbert Mkhize, who had been at the helm since 2003.

Contacted for comment as the irregular expenditure occurred under his watch, Mkhize told The Sunday Independent “it would be difficult for me to make any comment because I’ve not seen anything”.

“I have not been approached… At the moment I’m totally in the dark.”

According to the Labour Department, Mkhize has been acting as a special adviser to Oliphant since at least February this year.

It has also emerged that Nedlac is without a permanent chief financial officer (CFO). At a parliamentary briefing in June it emerged that CFO Umesh Dulabh had resigned in November last year, according to Parliamentary Monitoring Group (PMG) records. Ronell Maartens is currently the acting CFO.

However, the reason for Nedlac receiving a qualified audit opinion for the 2011/12 financial year – the first such finding in recent years – is not related to the discovery of irregular expenditure.

There was insufficient “audit evidence” for expenditure of R836 332, according to independent auditors SizweNtsalubaGobodo Incorporated.

“We were unable to confirm the validity of this expenditure by alternative means,” they said.

The independent auditors noted weaknesses in that the council did not implement proper record keeping to ensure complete, relevant and accurate information was available.

It also did not exercise oversight to ensure compliance with the law, while the internal audit unit was inadequately resourced to be able to function properly.

The annual report also shows that Nedlac failed to achieve 63 percent of its targets.

Smith told The Sunday Independent that corrective steps were being taken. The focus now was on “collective ownership and leadership” within Nedlac and to more aggressively facilitate engagement between partners.

Earlier, during his address to the summit, Smith said it had been a “challenging” year for Nedlac at an organisational level, but that there had been progress in tightening financial controls and that work was under way with the National Treasury and the Labour Department to align performance objectives.

Smith told delegates it would be short-sighted to heed calls for Nedlac’s closure, as some commentators had suggested amid questions over Nedlac’s relevance. Instead he said Nedlac should recommit itself to its founding values and foster strong social dialogue.

Sunday Independent


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