Auditor-General raises red flags on Prasa finances

The Auditor-General has raised a number of issues on the finances of Prasa. Picture: Supplied

The Auditor-General has raised a number of issues on the finances of Prasa. Picture: Supplied

Published Jan 30, 2024

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The Auditor-General has laid bare the state of finances at the Passenger Rail Agency of South Africa (Prasa), which has been under strain in the last few years with low revenues and a drop in passenger volumes.

The auditor-general gave Prasa a qualified audit opinion.

This comes at a time when Prasa is busy with the revitalisation of some of its stations and railway lines.

In the annual report with audited financial statements Prasa said irregular expenditure has been declining since 2016. But they wanted to address some of the issues around irregular expenditure.

Minister of Transport Sindi Chikunga tabled the report in Parliament. Chikunga had requested an extension from Speaker Nosiviwe Mapisa-Nqakula to table the report later.

National departments and state-owned entities are required by law to table their annual reports with audited financial statements before the end of September.

In the report Prasa said it was addressing the issue of R8.9 billion in irregular expenditure.

“Management is addressing the R8.9bn irregular expenditure yet to be submitted for determination tests. Internal audit is currently conducting a determination test on R9.6bn. Once the process is concluded, the irregular expenditure will be submitted to the National Treasury for condonation. Initiatives to enhance internal controls are being implemented,” said Prasa.

The report also noted corruption regarding an employee who embezzled millions of rands.

An employee who had embezzled R34.5 million was dismissed by the agency. Management had questioned the employee in October last year on the matter.

Out of the R34.5m that was stolen by the employee a total of R9.5m was returned to Prasa. Criminal charges have been laid against the former official.

But the auditor-general, Tsakani Maluleke,said there were no controls in place to prevent irregular, fruitless and wasteful expenditure.

She said she did not evidence that action had been taken against officials implicated in irregular expenditure.

She also found proper procedures were not followed in the awarding of a R1.8 billion signalling contract in the Western Cape.

The auditor-general found discrepancy between what was recommended and awarded in the tender.

“The amount recommended by the Finance, Capital, Investment and Procurement Committee (FCIP) for approval was R1.6bn, while the contract was awarded at R1.8bn. No evidence was provided to justify the difference in amounts of R255.7 million,” said the AG.

“There was also no justification for the difference of R255.7m between the contract value and the value recommended by the FCIP.”’

Maluleke said the Special Investigating Unit was brought in to probe the matter and people who were implicated in the tender were dismissed by Prasa. Some of the officials resigned.

The AG also noted the problem of ghost employees at Prasa.

An investigation found that there were more than 1,500 ghost employees and they were removed from the agency. Prasa saved hundreds of millions of rands after the removal of these employees.

“Prasa did not maintain accurate records of the contractual information used to determine and disclose commitments, as required by the Generally Recognised Accounting Practice (GRAP 1), Presentation of financial statements, and GRAP 17, Property, plant and equipment, respectively. Consequently, commitments, as disclosed in note 31 to the financial statements, were overstated by R1.2bn (2022: R3bn) in the consolidated and separate financial statements,” said the auditor-general in her report.

There was no value for money on the Isipingo retail development project.

The Auditor-General also found there was no bidding process for the appointment of suppliers for the general overhaul and upgrade services.These contractors have been paid more than R2.8bn.

The Special Investigating Unit probed the matter and cases were referred to the National Prosecuting Authority.

In another finding the auditor-general said there was no competitive bidding process for the awarding of contracts for the supply of drones to the value of R3.2m.

Officials who were found guilty of irregularities in this process were dismissed in June last year.

There were other findings relating to other contracts that were irregularly awarded by Prasa.

Maluleke said she did not include information on projects that have been halted or delayed.

“Prasa has extensive property, plant and equipment under construction, which include delayed or halted projects. Contrary to the requirements of GRAP 17, Property, plant and equipment, the following information was not disclosed in the accompanying financial statements for the group: Property, plant and equipment under construction that is taking a significantly longer period of time to complete than expected, including reasons for any delays,” said Maluleke.

“As disclosed in note 25 to the financial statements, material losses of R9.4 billion was recognised as a result of the impairment of property, plant and equipment.”

Maluleke said Prasa lost R14.8 million due to cybersecurity attack.

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