No action taken against SAA officials responsible for R44.5bn irregular expenditure, Parliament told

South African Airways (SAA) has yet to take action against officials linked to the airline’s irregular expenditure over a four-year period.

On Tuesday, officials from the Auditor-General of South Africa (AGSA) presented their findings to Parliament’s Standing Committee on Public Accounts (Scopa), briefing MPs on the financial performance of both SAA and the Passenger Rail Agency of South Africa (Prasa).

SAA entered business rescue in December 2019 and emerged from the process in April 2021.

Meanwhile, Prasa has also faced severe challenges, suffering from years of corruption and mismanagement tied to state capture.

Both state-owned enterprises (SOEs) have been the recipients of significant government bailouts over the years.

SAA’s audit outcome

During the meeting, AGSA executive Fhumulani Rabonda informed the parliamentary committee that audits conducted on SAA were only up until the 2021/2022 financial year, which ended March in 2022.

The audit for the 2022/2023 financial year was still in progress but nearing completion.

“The anticipation is that by latest mid-October, we must be done with the audit for the financial year that ended on 31 March 2023,” he said.

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The audit for the 2023/2024 financial year has not yet begun, as SAA has yet to submit its financial statements to the Auditor-General’s office.

“That’s another backlog that we are dealing with,” Rabonda added.

AGSA senior audit manager Thato Kunene indicated that of the R38.1 billion that SAA received since 2018, R27.6 billion was deposited post the business rescue process.

“Currently, SAA is fully funded by equity. There are no loans; everything has been settled,” the AG official told the committee on Tuesday.

Watch the meeting below:

Kunene also discussed SAA’s audit results over a four-year period, noting that the overall outcome was a disclaimer.

“From our side, we were unable to get sufficient audit evidence to express whether the financial statements can be reliable or not, so that was the biggest stumbling block that we had.

“This was due to the lack of adequate skills and capacity to prepare credible financial statements and to support the audit process.”

“This disclaimed audit opinion paints that SAA has an environment that is failing to implement robust financial management systems and credible records.”

SAA irregular expenditure

According to Kunene, SAA’s irregular expenditure rose from R22 billion in the 2017/2018 financial year to R44.5 billion by the 2021/2022 financial year.

Irregular expenditure is defined in the Public Finance Management Act (PFMA) as “expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation”.

In addition, fruitless and wasteful expenditure increased from R24.8 million to R207 million.

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No action was taken against the officials responsible for the expenditure.

“We could not get sufficient evidence that the investigations were conducted against the allegations of the financial misconduct committed by the officials and that is applicable for the four years.

“We noted that steps were not taken to prevent irregular, fruitless and wasteful expenditure for the four years in question.”

Prasa audit opinion

Meanwhile, Prasa recorded irregular expenditure of R3.8 billion in the 2022/2023 financial year, an increase from the previous year, largely due to noncompliance with supply chain management processes.

Despite this, the entity reached a “major milestone” by receiving a qualified audit opinion.

From 2018/2019 to 2021/2022 financial years, Prasa had consistently been issued a disclaimer by the Auditor-General’s office.

“There was an improvement on the financial side, which was mainly as a result of management taking effort… in making sure that they fixed the asset register,” AGSA corporate executive, Corné Myburgh said.

Additionally, Prasa’s fruitless and wasteful expenditure decreased from R302 million in 2021/2022 to R179 million in 2022/2023.

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