The crisis at the struggling Passenger Rail Agency of SA (Prasa) shows no sign of abating, with the auditor-general issuing a disclaimer on the parastatal’s financial statements for a third consecutive year.
A disclaimer signifies that the company’s accounts cannot be relied on and often suggests the company is in a serious financial state.
Prasa also received a disclaimer in the previous two financial years and a qualified audit opinion the year before as it struggles to get its house and finances in order.
In the company’s long delayed annual report tabled in parliament this week — the original deadline was September 30 2021 — auditor-general Tsakani Maluleke said she was unable to obtain written representations from management that all relevant information and access had been provided as agreed, and that all transactions had been recorded and were reflected in the financial statements.
Prasa has been engulfed in allegations of corruption and mismanagement amid leadership instability for almost a decade. A new board, chaired by former ANC MP Leonard Ramatlakane, was appointed in 2020, but the latest audit points to an entity still in dire straits.
In her report, Maluleke said she was unable to obtain sufficient evidence that management had properly accounted for property and equipment. Moreover, systems for identifying and disclosing irregular expenditure were lacking, and there were no satisfactory alternative procedures that auditors could perform to obtain reasonable assurance that all expenditure had been properly recorded.
Maluleke said she was therefore unable to determine the full extent of the adjustment necessary to the balance of irregular expenditure stated at R28bn (up from R27.3bn the prior year).
The auditor-general was also unable to determine the full extent of fruitless and wasteful expenditure, stated at R385m. Some of the goods, works or services weren’t procured as required by the Public Finance Management Act. Some of the contracts and quotations were awarded to bidders that did not score the highest points in the evaluation process, as required by the Preferential Procurement Policy Framework Act and its regulations. Similar non-compliance was also reported in the prior year.
Prasa also failed to maintain complete governance records, including minutes of meetings of the additional structures implemented after the previous board had been dismissed in December 2019.
Maluleke said Prasa is under constant threat from a security perspective, with the pillaging and destruction of the rail infrastructure continuing largely unabated.
“Not only are trains continuously being vandalised, the rail network infrastructure has also been under consistent attack, stripped of copper cables, railway tracks, signalling equipment and overhead electricity cables, and its facilities across the country continue to be vandalised. This contributed to the declining fare revenue amounts, poor financial performance and allowed for the vandalism to continue,” she said.
In the annual report, acting CEO David Mphelo said the onset of the Covid-19 pandemic intensified the underlying problems at Prasa. The hard lockdown had forced the company to suspend long-distance rail and services, depriving it of fare revenue for three months in 2020.
Vandalism and theft of infrastructure continued to disrupt operations, Mphelo said. “Dire socioeconomic conditions because of rising unemployment, coupled with the hard lockdown, and the encroachment of informal settlements on the operating tunnel are among the factors that contributed to the alarming rate of incidents,” he said.
“Security elements are embedded in all aspects of Prasa’s recovery programmes: precious metals with high scrap value will be replaced with equivalent materials of less or no scrap value.”
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