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As the Passenger Rail Agency of South Africa continues to chug its way out of its financial and governance troubles, Auditor General Kimi Makwetu gave the struggling state-owned entity a disclaimer of opinion in its 2018/19 annual report, saying management had not properly accounted for assets, fare revenue and other financial information.
A disclaimer is given when the auditee gives insufficient documented evidence in its financial statements or elsewhere for the Auditor General to give an audit opinion. The audit report reflects the standing for both Prasa as a group and its subsidiaries as operators.
Prasa's annual report was tabled in Parliament this week after delays spanning longer than a year, while the new board came to grips with the financial impact of years of mismanagement.
"Because of the significance of the matters described in the basis for disclaimer of opinion section of this auditor's report, I was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated and separate financial statements," said Makwetu.
Makwetu added that it was not possible to get enough appropriate audit evidence that management had properly accounted for property, plant and equipment information, in line with the requirements of generally recognised accounting practice.
"This was due to the inadequate state of accounting records, including the lack of a credible fixed asset register and the non-submission of information in support of these assets.
Assets and fare revenue
"Some assets were not recorded in the asset register, while others were recorded but their existence could not be verified," Makwetu said.
Makwetu noted material inconsistencies between the amounts disclosed in the financial statements for the adjustment to the capital subsidy and grants. He said during 2018, he could not get sufficient audit evidence for fare revenue or confirm the revenue by alternative means.
As a result, he could not determine whether any adjustment was necessary to fare revenue stated at R1.3bn and R1.8 bn for the controlling entity and economic entity respectively.
"My audit opinion on the financial statements for the period ended 31 March 2018 was modified accordingly.
"My opinion on the current year financial statements was also modified because of the possible effect of this matter on the comparability of the fare revenue for the current period," Makwetu said.
Irregular spend
Makwetu said the group did not have adequate systems to identify or disclose all irregular expenditure. As a result, he could not determine the full extent of the adjustment needed to the balance of irregular expenditure stated at R26.2bn (R23.4bn in 2018).
Makwetu also could not determine the full extent of the adjustment needed to the balance of fruitless and wasteful expenditure stated at R333m (R1bn in 2018) for the controlling entity and at R383m (R1bn in 2018) for the economic entity.
