SABC slated for incomplete disclosure of irregular expenditure
Rampant disregard of supply chain management laws identified as the leading cause
The public broadcaster has once again earned itself a qualified audit opinion from the auditor-general for the 2020-21 financial year.
This was because of the SABC’s failure to disclose fully particulars and details of transactions that were identified as irregular expenditure.
As such, the auditor-general reached an inconclusive finding that the SABC incurred irregular expenditure to the tune of R2.8bn in the financial year, albeit based on an incomplete disclosure.
“The public entity did not include particulars of all irregular expenditure in the notes to the consolidated and separate financial statements in the prior years, as required by a section of the Public Finance Management Act,” read the auditor-general's reasoning for the qualified opinion, contained in the SABC's 2021 annual report.
“The irregular expenditure incurred was the result of payments made in contravention of supply chain management legislation and regulations. The public entity did not implement adequate procedures in the past to identify and record all instances of irregular expenditure from prior years and possible impact of these transactions on the ongoing multiyear contracts concluded in those years.”
Because of the incomplete disclosure, the auditor-general was forced to go with the stated amount of R2.8bn, which paints a false picture that irregular expenditure was reduced from R5.3bn in the prior financial year.
The impact of Covid-19 restrictions and subsequently extensions were felt in the 2020-21 financial year.SABC
The auditor-general was also not pleased that the public broadcaster failed to show “evidence that disciplinary steps were taken against some of the officials who had incurred and/or permitted irregular expenditure”.
Key drivers of the incomplete yet still high irregular expenditure were caused by the SABC:
- Making payments to suppliers without valid contracts resulting in procurement processes that are not yet finalised.
- Manipulating emergency procurement where no need for it arose.
- Issuing purchase orders without obtaining the minimum number of quotations as required by the supply chain management policy.
- Awarding bids without advertising for the minimum number of days as required by the same policy.
- Procuring goods and services through the quotation process whereas the policy requires goods and services above R2m should follow the competitive bid process; and
- Awarding contracts to suppliers without obtaining original tax clearance certificates or confirming the tax matters of the suppliers prior to awarding.
The annual report further revealed that the corporation's net loss continued to rise, standing at R530m for the period under review, up by R20m from the previous year.
Revenue collection was also shrinking, down by 12% from the 2019-2020 financial year.
Advertising revenue tanked by more than R740m.
“Advertising revenue declined by 18% due to the depressed economy compounded by the effects of the Covid-19 pandemic, lack of marketing and declining audiences.”
Falling advertising revenue was a bloodbath in the commercial and Fortune 4 radio stations while it was the African languages stations that saved the day with improved results whereas television lost R600m worth of adverting revenue compared to the prior year.
This while 82% of TV licence holders persist in evading payment.
“Overall, 2.2-million TV licence holders managed to settle their fees in full or in part against a known database of 10.3-million television licence holders.”
The good news for the SABC, the report shows, was the improvement on expenses that reduced by 10% from the prior year after a total of 877 permanent workers left through retrenchments effected last year.
Another positive was the reduction in fruitless and wasteful expenditure.
The SABC board and management told parliament that had it not been for Covid-19, theirs would be financials to smile about.
“The impact of Covid-19 restrictions initially imposed on March 26 2020, and subsequently extended, were felt in the 2020-21 financial year.
“The long-term impact of Covid-19 restrictions, especially a third wave together with negative economic conditions remains uncertain. However, the board will closely monitor and respond to these.”