JOHANNESBURG - Audit firm Deloitte yesterday rejected the allegations by Finance Minister Malusi Gigaba that the firm had not been independent and objective in its forensic report it had conducted for Treasury on the Integrated Financial Management System (IFMS) and that Deloitte stood by the findings of its forensic report.
Gigaba yesterday told legislators that the Treasury was dissatisfied with the forensic investigation work done by Deloitte into the IFMS and said that he had asked the Independent Regulatory Board for Auditors (IRBA) to investigate Deloitte for “shoddy” work.
Gigaba, who along with the Treasury’s management were appearing before the Standing Committee on Public Accounts (Scopa) to account for the multi-billion rand payment system, said that questions arose with regard to the conduct of Deloitte and charged that the audit firm had not conducted itself professionally.
He further said Deloitte had sought assurances that it be guaranteed future Treasury contracts before starting a probe into the Treasury’s concerns with the roll out of the IFMS.
“I have directed the director-general (DG) to write to the Irba to report the matter officially and request the IRBA to institute an inquiry as to whether the conduct of Deloitte was consistent with the professional conduct required of an audit firm.”
“Given the contents of the email they sent to the department's deputy director general for corporate service and the report that they submitted and the grounds on which that report has been wholly rejected by us, which saw us taking a resolution that we will not pay for shoddy work for what we believe is work that could have been done better,” charged Gigaba. The audit firm was appointed by the Treasury last year to look into the failure of the department to implement the IFMS. The delays in the implementation of the project and the costs that were already incurred prompted the Treasury Audit Committee to ask the Internal Audit Committee to perform a review of the 2014/15 IFMS payments.
The internal audit results indicated that no reliance could be placed on the internal controls to mitigate risks. The report had a total of 54 findings and 49 of the findings had a catastrophic risk rating while five findings had a high-risk rating. The Audit Committee presented the results of the review to the then DG and formally requested the appointment of an independent forensic investigation.
Lwazi Bam, the chief executive at Deloitte, said, “Deloitte has received communication from National Treasury indicating that the draft investigative report submitted by Deloitte does not meet National Treasury’s standards of quality. However, no comment has to date been received on the detail contained in our report.”
“Deloitte has since responded to National Treasury requesting that National Treasury indicate what aspects (if any) contained in the draft report is or are in dispute and that Deloitte be afforded a reasonable opportunity to review and address areas of disagreement as per the provisions of the Service Level Agreement signed by both parties,” Bam said.
Bam further dismissed allegations that the firm was conflicted when it conducted the investigation and said it had sought clarity on any perceived conflict of interest from National Treasury and emailed the Deputy Director General of National Treasury’s Corporate Services on 3 March 2017 requesting National Treasury’s view on any perceived conflict of interest.
“At the time the email was sent (3 March 2017), the forensic investigation was substantially complete as reported in the preliminary report and those findings remained the same in the draft report, which was submitted to National Treasury for comment.”
Gigaba said yesterday, “96% of South Africa’s audit market is dominated by four multi-national firms, and some of these in the 96% have up to 120 years contracts. I fail to believe that I can remain independent while I have a 120-year contract with you.”
The Treasury said that it had spent R1.2bn on the IFMS project with no tangible deliverables, with the state IT agency, Sita, having spent R280m of the bounty and Treasury having spent R769m. Treasury said the project, which was started more than 10 years ago, would still take years to be implemented. The department said it had since stopped all payments towards the project until a new forensic investigation had been conducted.
The IMFS was first mooted in 2005 with the aim of integrating human resources, payroll, financial and supply chain management functions in the public services sector, in order to significantly cut costs. However, the department’s DG Dondo Mogajane admitted to legislators that there were lapses in governance that lead to the first version of the program failing and a second one being embarked on, but that implementation of the project was expected in the 2021/22 financial year.
He insisted that the project would still be completed under the original R4.3bn budget. If the IRBA does institute an inquiry into Deloitte, this will mark a second big audit firm to be investigated by the regulator this year. KMPG is currently under investigation after it was accused of flouting regulation in its audit of a company owned by the Gupta family.
- BUSINESS REPORT