No clean audit status for Armscor

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Just over three months ago a “delighted” Armscor said it received an unqualified audit finding from the Office of Auditor General, Tsakani Maluleke.

A somewhat different take came to light when Maluleke presented the 2020/21 consolidated general report on national and provincial outcomes last week.

Referring specifically to Armscor, the State-owned entity residing in Minister Thandi Modise’s Department of Defence and Military Veterans (DoDMV), Maluleke’s report states “the entity regressed from a clean audit status in the previous year due to a lack of internal controls for in-year and year-end reporting”.

Her report goes on to state Armscor’s “financial systems are fragmented and require manual interventions”, increasing “the risk of misstatements in financial statements”.

“The process to collate and consolidate information from different financial systems was extremely time-consuming, adding to time constraints for adequate reviews. As a result, we (the Office of the Auditor General) reported a non-compliance finding on the quality of the financial statements the entity submitted for auditing.”

Maluleke’s report paints a different picture to the one sketched by Armscor chief executive Solomzi Mbada in September.

He was quoted in an official Armscor statement as saying; “Impeccable corporate governance processes have been a hallmark which enabled the entity to maintain a track record of unqualified audits year-after-year even amid a pandemic”.

Challenges faced by the defence and security acquisition agency, including legacy IT (information technology) systems, did not prevent Armscor “attaining its strategic objectives”.

The Auditor General annual report details 425 of 670 departments and public entities fine-tooth combed by Maluleke’s formidable team of auditors, chartered and forensic accountants as well as other financial analysts.

While not pointing to any specific government department or entity, her report makes mention of red flags repeatedly raised and seemingly ignored.

“This signals some improvements seen may not be sustainable or may not translate into the strong financial and performance management disciplines auditees need to deliver on their mandates.

“As a result, the lived experiences of citizens do not yet reflect improvements seen in audit outcomes of national and provincial government.”