AG questions Prasa's future as mismanagement, burnt trains take their toll | Fin24
 
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AG questions Prasa's future as mismanagement, burnt trains take their toll

Oct 17 2018 11:07
Khulekani Magubane

Auditor General Kimi Makwetu has given the Passenger Rail Agency of South Africa a qualified audit opinion on its 2017-18 annual report and financial statements, saying he is uncertain Prasa can continue as a going concern.

The report was finally tabled to Parliament after several delays in its finalisation, following years of financial difficulty and questions over the entity’s governance.

Besides recovering from instances of past mismanagement, Prasa is also facing incidences of damaged carriages and passenger infrastructure, with each incident costing the agency millions.

Inadequate disclosure

Makwetu said in his audit report that the group did not have adequate systems for identifying and disclosing all irregular and fruitless and wasteful expenditure.

There were also no satisfactory alternative procedures to ensure all such expenditure had been properly recorded to the separate and consolidated financial statements, he said.

As a result, he could not determine to what extent the balance of irregular expenditure declared had to be adjusted.

Irregular expenditure was stated at R23.4bn for the entity, compared to R19.6bn in 2017; and R24.2bn for the group, compared to R20.3bn for 2017.

Fruitless and wasteful expenditure, Makwetu said, "could not be justified as stated at R1bn (2017: R988m) for the entity and R1bn (2017: R992.2m) for the group".

He was unable to obtain sufficient evidence that management had accounted for property, plant and equipment in accordance with international auditing standards, Makwetu added.

This was due to inadequate status of accounting records, he said, including the fixed asset register and the non-submission of information to support these assets. He was unable to verify the assets by alternative means, he said.

This meant he was unable to confirm whether adjustments were needed for the property, plant and equipment stated at R40.3bn and R40.5bn for the entity and the group, respectively; and operating expenses stated at R9.7bn and R10.4bn for the entity and the group, respectively.

Major losses

Makwetu raised material uncertainty of Prasa’s ability to continue as a going concern.

"The entity and the group incurred a net loss of R829m and R924m, respectively, during the year ended 31 March 2018. While the group’s current assets exceeded current liabilities by R7bn, the majority of cash reserves are committed for capital expenditure," he said.

Makwetu also raised material misstatements in the financial statements documenting several transactions aimed at meeting the agency’s operational objectives.

The report itself details that in July a motor coach and a trailer were torched, costing Prasa an estimated R9.8m. Also in July, two motor coaches and four plain trailers were completely burnt. One plain trailer was partially damaged at an estimated cost of R21m.

At Cape Town Station in the same month, four coaches were burnt at an estimated cost of R5.5m.

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