General: AG takes dim view of Eskom record-keeping

Eskom is not only failing to keep SA’s lights on, but it also cannot even produce a register for auditing purposes, reports TimesLIVE. The AG told Parliament this week that it was difficult to determine the true state of Eskom’s finances and in particular its irregular expenditure because of poor record-keeping. This meant auditors could not test compliance with legislative requirements. ‘We wanted to test proper procurement processes to ensure that fair, transparent processes are being followed but we couldn’t do that because documentation is not there,' said Siyakhula Vilakazi on behalf of the AG. Eskom received a qualified audit opinion for the 2020/21 financial year, in the main due to its irregular expenditure. The AG said the entity was continuing to enter new contracts which did not comply with policies and other legislative requirements. Auditors could also not get any evidence of Eskom investigating the source of recent irregular expenditure or whether disciplinary action had been taken against offending employees.

Vilakazi said record-keeping at the parastatal was so weak that auditors could not reliably test compliance with tender rules or certify the internal finding that irregular expenditure had dropped to R11.7bn over the past financial year as correct. ‘When, as management, you have an issue, but you do not have documentation, so you do not know how this issue arose, it then becomes a challenge to come up with an action that could actually address the issue at hand,’ he told MPs. A Mail & Guardian report notes that Vilakazi said the auditors selected samples of instances where the Public Finance Management Act had been flouted but did not find evidence that either an investigation was conducted to determine the root cause or that steps were taken against implicated employees.

Another concern raised in the Scopa briefing was Eskom’s plan to tackle its debt. Vilakazi pressed the committee to ask Eskom how it plans to settle R152bn in debt and R125bn in interest over the next five years. He warned that without new tariffs and government help, Eskom would fall short. ‘What are Eskom’s plans to settle these amounts? Do they involve ensuring cost-effective tariffs are paid by customers? What about government help?’ Vilakazi queried. Business Day reports that the National Energy Regulator (Nersa) last month ejected Eskom’s latest pricing proposal and told it to submit a new one, based on a new Nersa pricing methodology, which at the time had not been finalized. Auditors found Eskom’s flouting of supply management prescripts caused most of the R32bn in irregular expenditure during the reporting period. It racked up a further R4.4bn in fruitless and wasteful spending by the close of the 2021 financial year. Vilakazi suggested Eskom is so lax in holding non-paying customers to task that this could be likened to a financial irregularity. ‘We are talking about money that is not recovered from the customers, money that can be used to address some of the challenges that we are facing currently as far as the performance of Eskom power stations are concerned,’ he said.

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