The Auditor-General SA (AGSA) has called on the National Lotteries Commission (NLC) management to implement proper controls to ensure grants are allocated appropriately and in compliance with the application guidelines.
Management must also provide regular training for supply chain management (SCM) officials to ensure understanding of and compliance with SCM regulations and relevant legislation.
Presenting the NLC’s audit outcomes for 2023/24 before the standing committee on public accounts (Scopa) in parliament, AGSA senior manager Aphendule Mantiyane said the NLC had received a qualified audit outcome for 2023/24, as it had since 2020/21.
The main qualification area was the allocation of grants, said Mantiyane. The NLC had a budget of R1.5bn, expenditure of R571m and underspending on grants amounted to R957m.
The NLC has been involved in allegations of corruption, spurring President Cyril Ramaphosa to sign a proclamation in October 2020 authorising the Special Investigating Unit (SIU) to investigate corruption at the commission.
That application gave the SIU authority to investigate “maladministration” in the NLC from January 2014 to October 2020. The investigation has led to the preservation of assets valued at R344m, including a R27m Pretoria mansion allegedly owned by former NLC chair Alfred Nevhutanda and bought with lottery funds.
Last month Nevhutanda approached the courts to review and set aside the proclamation, claiming Ramaphosa did not apply his mind properly when he signed the proclamation.
At the Scopa briefing on Tuesday, Mantiyane said three material irregularities had been identified by March 31 2024. They related to payments made for the construction of the Motheo Sports Complex that was never delivered; payments made for the construction of eDumbe Old Age Home that was never completed; and a payment made for the provision of professional services for the completion of eDumbe Old Age Home construction that was never finished.
Mantiyane said grants were allocated to beneficiaries despite the conditions outlined in the grant agreement not being met. In the prior year beneficiaries were allocated grants even though grant agreements had not yet been signed.
The auditor-general was not pleased with the quality of the NLC’s financial statements, with Mantiyane noting: “Management did not prepare regular, accurate and complete financial and performance reports that are supported and evidenced by reliable information as material misstatements were identified on the annual financial statements and annual performance report.”
She said financial statements were not prepared in accordance with Generally Recognised Accounting Practice (Grap); irregular expenditure was not investigated; effective steps were not taken to prevent irregular expenditure; and there was noncompliance with SCM regulations and prescripts.
“Inadequate quality financial statements may impact the ability of the entity to manage its operations efficiently,” Mantiyane said.
“Due to underspending in the grant funding budget, funds meant for beneficiaries to implement projects, such as social development initiatives, were not allocated. This resulted in the entity being unable to deliver fully on its mandate for the year.”
The AGSA recommended that the NLC, which is dogged by high vacancy rates in key divisions such as distribution agency, legal, finance, ICT, enterprise risk, and internal audit and risk, conduct surprise project site verifications to ensure effective project monitoring and “incorporate an element of unpredictability”.
The commission needed to implement a thorough review of annual financial statements to ensure accuracy, completeness and fair presentation, among other things.
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