Financial and asset management at South African Airways is in such a shambles that the auditor-general (A-G) could barely compile an audit report of the struggling national carrier, which incurred a loss of more than R5.5 billion in the previous financial year.
Auditor-General Kimi Makwetu tabled his office’s qualified audit opinion of the airline to the speaker of parliament last week, after SAA failed to comply with legislation, compelling it to submit the report within one month of receiving it.
This, after the airline had initially failed to provide the A-G with their financial records for the 2016-17 financial year in time, delaying the audit process by several months.
The A-G found that SAA failed to review the useful lives and residual values of property, aircraft, and equipment. This means the A-G was unable to determine the value or existence of property which was stated to be worth R4.57 billion during the previous financial year.
Record-keeping at SAA subsidiary SAA Technical SOC Limited, was no better. A lack of evidence of their inventory, and an inability to verify the existence of some inventory items, meant the A-G couldn’t determine the value of inventory stated at R879 million.
When looking at maintenance costs, the A-G found that SAA did not meet the framework for financial reporting. Some maintenance costs were reported for the wrong accounting period, some calculated using incorrect exchange rates, and some calculated as an expense, despite having already been paid for in advance.
What the A-G could determine, is SAA had incurred a total nett loss of R5.569 billion to the year which ended in March 2017, with the airline’s liabilities exceeding their assets by a massive R17.8 billion.
Info: A look at the A-G’s report reveals a horrific picture of mismanagement, and transgressions of good governance principles, which include:
- The use of incorrect exchange rates, when dealing with international transactions, as well as several accounting irregularities.
- Failure to record the airline’s assets into their financial statements.
- Failure to keep proper records of the airline’s technical inventory.
- A failure to maintain records of fruitless and irregular expenditure.