Clean audit for Armscor


South Africa’s public sector involvement in defence and the defence industry comes under the Parliamentary spotlight soon with the tabling of three annual reports.

The three entities that will table annual reports are (in alphabetical order) Armscor, Denel and the Department of Defence and Military Veterans (DoDMV). Included in the DoDMV report are the separate annual reports of the Department of Military Veterans (DMV), the Military Ombud and the Castle of Good Hope (Casteel de Goede Hoop).

Ahead of the tabling of its annual performance statement Armscor, in an undated memo from the CEO’s desk, updated staff on its annual audit outcome.

The memo, circulated during the third week of October, notes 14 of 19 performance indicators approved by the Armscor board as part of a three year corporate plan, were achieved during the “Armscor audit process” with one partially achieved.

As far as service level agreements (SLAs) are concerned the State-owned and funded defence and security acquisition agency achieved 11 of 12 set goals.

“The Auditor-General completed the audit of Armscor’s annual financial statements and compliance to legislation for the 2019/20 financial year and issued a clean audit report,” chief executive Solomzi Mbada writes Armscor personnel thanking all concerned for “this excellent achievement”.

With an eye on the pending public release of the latest Armscor annual report, defenceWeb posed a number of questions to the SOE (state-owned enterprise) regarding unauthorised spending as well as spend on disciplinary and other personnel matters.

In a response, provided by Mbada, irregular expenditure totalling more than R21 million in two consecutive financial years was admitted to.

“Armscor incurred R9 700 000 of irregular expenditure during 2016/17 and R12 093 000 during 2017/18. This was drastically reduced to R3 743 000 during 2018/19,” according to the response.

Expenditure classified as “fruitless and wasteful” is another item featuring in the annual reports of government departments and entities as well as SOEs.

Armscor is no different and while the numbers are not as much as was irregularly spent, the total for the 2016/17 and 2017/18 financial terms was close to R2,6 million. This was made up of R810 000 in 2016/17 and R1 789 000 in 2017/18 with another “drastic reduction” the following financial year down to R190 000.

The Erasmusrand-headquartered defence and security acquisition agency did not respond to questions concerning disciplinary action and its cost. This is apparently included in the figure of R149 million spent on professional fees in the 2018/19 financial year.

Instead of answering questions pertaining to how much was paid to law firms and number of disciplinary actions brought, Armscor said “various entities are engaged whenever professional services as required”. This included law firms for disciplinary matters against employees, labour and civil litigation “for and against Armscor”.