Another year, another (very) bad Eskom audit

The 2020-2021 audit outcomes for embattled power utility Eskom, presented in front of the standing committee on public accounts (Scopa) on Wednesday, has painted a grim picture for the fourth year in a row. 

The audit, overseen by Auditor-General Tsakani Maluleke and conducted by SNG-Grant Thornton, has yet again found a debilitating bout of irregular expenditure. 

Although Eskom said its five-year borrowing programme had decreased by R16.6 billion to R105.3 billion when compared to the previous five-year period, “material misstatements” in submitted financial statements and irregular expenditure still resulted in a qualified audit opinion, with findings. 

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“Effective and appropriate steps were not taken to prevent irregular expenditure,” auditor Siyakhula Vilikazi said. Steps were also not taken to prevent wasteful expenditure. 

Not enough records were made available, investigations into allegations of financial misconduct were not conducted, and “insufficient appropriate audit evidence that construction contracts were awarded to contractors that were registered with the Construction Industry Board” also took place, among other downfalls. 

The main source of irregular expenditure was found to be due to the contravention of supply-chain management prescripts, as detailed below:

• The use of “sole source” or one supplier increased expenditure by R2 billion.

• The incorrect classification as emergency procurement increased expenditure by R1.3 billion.

• Tender processes not being adhered to, and the insufficient delegation of authority saw expenditure increase by R3.9 billion.

• The Preferential Procurement Framework Act pushed it up by R1.3 billion.

• And the breach of more than one commercial requirement increased expenditure by R1.5 billion.

As of 31 March 2021, it was reported that the contract awarded to Econ Oil & Energy, at the recommendation of former chief procurement officer Solly Tshitangano, breached Eskom’s fiduciary duties. 

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A fixed term contractor’s contract was also extended by more than two terms, which also contravenes Eskom procedures and fiduciary duties. 

Eskom also “failed to effect corrective action for identified non-compliance to the National Environment Management Act (NEMA) thereby breaching fiduciary duties.” 

Bogus fuel contract

It was revealed that irregular expenditure incurred last year was restated by an increase of R3 billion, which brings irregular expenditure to a total of R14 billion. 

This, Vilikazi said, was due to a fuel oil contract that was “inappropriately procured through the emergency procurement process” in 2020.

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The inappropriate procurement was, however, only confirmed as irregular expenditure this year. 

This pushed irregular expander up by a further R1.251 million. 

When compared year-on-year, irregular expenditure has gone down. 

“However, the disclosed irregular expenditure is not complete and accurate, as described in the basis of qualified opinion,” Vilikazi continued. 

Compiled by Nica Richards