The Auditor General has found R23 million in irregular expenditure and R36 million in accounting errors at the National Lotteries Commission (NLC)
The National Lottery Commission (NLC) has regularly boasted of having a clean audit record, despite the organization having been plagued by corruption in recent years.
But the NLC’s 2020/21 annual report and the Auditor General’s (AG) audit tell a different story, revealing more than R23 million in irregular spending and R36 million in accounting errors made in previous years.
The report should have been completed last year, but was delayed due to inaccuracies in the BNC’s financial statements. It was finally completed in February this year, when the AG issued a qualified audit opinion.
This followed lengthy correspondence between the AG and the NLC, which had disputed some of the findings.
The MA does not audit what grant recipients do with the money they receive. Most of the corruption committed by NLC leaders, as revealed by GroundUp and the Limpopo Mirror, took the form of deals routed through some of the NLC grant recipients.
The NLC also received a qualified audit, linked to a technical surveillance in 2017/18.
A high-level NLC delegation, which included the commissioner, chairman of the board, chief financial officer and chief legal officer, found themselves in trouble in 2020 after DA committee member, Mat Cuthbert, challenged them over a claim of six clean audits in a row, during a meeting of Parliament’s Trade, Industry and Competition Committee in 2018.
After hastily speaking to other members of the NLC delegation, CFO Xolile Ntuli backtracked and said, “The six tell us we are hitting 100% of targets.”
According to the latest AG report for the 2020/21 financial year, NLC management has been asked to correct “material misstatements” found in the financial statements. Most of these errors have been corrected, but the NLC failed to include the necessary information on over R23 million of irregular expenditure, resulting in a qualified audit opinion.
A qualified audit opinion means that the AG has concerns about the accuracy of the financial statements and departure from generally accepted accounting practices, but not to the point of requiring an adverse opinion or a disclaimer of opinion.
According to the AG, the NLC “made payments in breach of supply chain management requirements, resulting in irregular expenditure of R23,410,550”. The NLC had procured goods and services “without obtaining the required price quotations” and “without issuing tenders and/or deviations”, the AG concluded.
The AG’s report reads: “The accounting authority failed to effectively oversee financial reporting and legal compliance and related internal controls. Further, management failed to review and monitor financial reporting requirements as well as compliance with applicable legislation.
The notes to the financial statements include lists of “prior period errors”: transactions that were incorrectly recorded in previous years and discovered in the current year.
These include R4.3 million of accrued charges not recorded in error and R1 million of accrued charges mistakenly included in the 2019/20 financial year. In addition, R9.6 million of withdrawals were not accounted for between 2017 and 2020. In total, R36 million of accounting errors from previous years are included in the 2020/21 financial statements.
In 2020/21, the NLC also settled a VAT debt of R900,000 for imported services purchased between 2015 and 2020.
Trade and Industry Minister Ebrahim Patel mentions in his contribution to the NLC Annual Report 2020/21 that the AG has “identified a number of internal controls and compliance deficiencies that the authority accountant failed to effectively oversee financial reporting and legal compliance. These need to be addressed by the Board as a matter of urgency.
But the NLC Commissioner, Thabang Charlotte Mampane, writes in her contribution to the same annual report that “although the NLC has taken into account the recommendations of the AGSA and implemented action plans to improve the future results of the audits, we continue to seek the clarity of the respective practice notes and the rationale for the change in interpretation of the related practice notes. – Moneyweb