State owned regional airline SA Express has until the middle of next month to respond to the minister of public enterprises over the findings of a forensic investigation into its finances, while the Democratic Alliance has asked for a re-audit to include missing information.
In August the SA Express board appointed forensic audit firm SizweNtsaluba to investigate the carrier’s accounting valuation of equipment, a R42 million tax refund claim and allegations that the carrier did not follow the correct procedure on a R3.4 million IT contract, Business Day reports. While the IT contract was apparently signed in 2009, the company letterhead and logo on the document had the names of the current board members. Signature of some company officials were allegedly forged.
Whilst briefing Parliament’s portfolio committee on public enterprises last month, Matsotso Vuso, the head of SA Express’s audit committee, said the carrier would have to write off R16 million from its R51 million profit over the last financial year due to accounting errors. The amount came from unutilised tickets, which should have been written off the 2010-2011 profit.
In the 2010-2011 financial year, SA Express increased its revenue by 5% to R1.75 billion, but after tax profit dropped by 80% to R51 million, over the previous year’s R239 million.
One of the main reasons for the drop in profit was a R35 million impairment resulting from SA Express’s short-lived investment in Congo Express, from which it withdrew last year when it became clear the venture was not viable.
It has also been established that SA Express failed to disclose a R31 million debt owed to SAA for fuel – as the national carrier had not invoiced SA Express by the end of the financial year. However, the SA Express finance department should have been aware of the matter and accounted for it in the books but did not do so as this would have resulted in a further loss for the company.
The forensic audit report was due to be presented to the parliamentary portfolio committee on Public Enterprises today.
“They met with me and they gave me the preliminary report. They have the final report and have asked for some time to study its recommendations before they engage with my team on what must be done,” Public Enterprises Minister Malusi Gigaba said on Friday. Gigaba said he was giving the SA Express board the time they asked for.
“I would be concerned about any alleged irregularities,” Gigaba said, declining to comment on the findings of the report. It would be “premature” to disclose what the investigation had revealed, he told Business Day.
Yesterday Pieter van Dalen, the Democratic Alliance’s Shadow Minister for Public Enterprises, said he would write to Auditor-General Terence Nombembe to request an urgent re-audit of SA Express’ activities.
“The current annual report and financial statements for SA Express’ 2010/2011 performance are…woefully inadequate as they do not reflect all the required information. We need a new report to give us an accurate summary of SA Express’ financial position as of March 2011,” van Dalen said.
“Thus far, all information points to there being serious problems with SA Express’ accounting procedures, which creates ample opportunities for state resources to be misused. It is essential that those responsible are held accountable. A strong signal needs to be sent that state funds belong to the public, and need to be managed with this in mind,” van Dalen added.
At last month’s meeting of the committee Lilian Boyle, chairperson of the SA Express’ board, promised that “we shall get to the bottom of it” and that nothing would be held back. She pointed out that the airline’s auditors had given it a clean bill of health shortly before allegations surfaced.