• The Auditor-General has found 23 million rand in irregular expenditure and 36 million rand in accounting errors at the National Lotteries Commission (NLC).
  • The NLC has regularly boasted that it has a track record of clean inspections.
  • The Minister for Trade and Industry said the council must urgently address the deficiencies in compliance.

The National Lottery Commission (NLC) has regularly boasted of a clean audit track record, despite the organization being mired in corruption in recent years.

But the NLC Annual Report 2020/21. and an audit by the Auditor-General (AG) tells a different story, revealing more than 23 million rand of irregular expenditure and 36 million rand of accounting errors made in previous years.

The report was supposed to be completed last year but was delayed due to misstatements found in the NLC’s financial statements. It was finally completed in February this year, when the AG issued a qualified audit opinion.

This followed extensive back-and-forth correspondence between the AG and the NLC, who contested some of the findings.

The AG does not check what the grantees do with the money they receive. Much of the corruption perpetrated by the NLC leadership, as revealed by GroundUp and Limpopo Mirror, was in the form of transactions conducted through some beneficiaries of NLC grants.

The NLC also received a qualified audit related to technical supervision in 2017/18.

The NLC’s high-level delegation, which included the commissioner, chairman, chief financial officer and head of legal affairs, was left in 2020 after DA committee member Matt Cuthbert challenged them for claiming six consecutive clean audits during a parliamentary committee meeting. trade, industry and competition in 2018.

After a hasty conversation with other members of the NLC delegation, Finance Director Xali Ntuli backtracked and said: “Six references that we will achieve 100% of the targets.”

According to the AG’s latest report for the 2020/21 financial year, NLC management has been asked to correct “material misstatements” found in its financial statements. Most of these errors were corrected, but the NLC failed to include the required information on irregular expenditure of more than 23 million rand, which led to a qualified audit report.

A qualified audit opinion means that the CEO has doubts about the accuracy of the financial statements and the departure from generally accepted accounting practices, but not to the extent that an adverse opinion or a disclaimer of opinion is required.

According to the AG, NLC “made payments in breach of supply chain management requirements, resulting in irregular expenditure of R23,410,550”. The NLC procured the goods and services “without obtaining the necessary price proposals” and “without inviting competitive proposals and/or rejections”, the AG found.

The AG’s report said: “The accounting authority did not exercise effective oversight of financial reporting and legal compliance and related internal controls. In addition, management did not adequately review and monitor financial reporting requirements and compliance with applicable laws.”

The notes to the financial statements include lists of “prior period errors”: transactions that were incorrectly accounted for in prior years and discovered in the current financial year.

This includes 4.3 million rand in accruals that were erroneously not included and 1 million rand in accruals erroneously included in the 2019/20 financial year. In addition, withdrawals of 9.6 million rand from 2017 to 2020 were not taken into account. In total, the 2020/21 financial statements included R36 million in accounting errors from previous years.

In 2020/21, the NLC also settled VAT liabilities of R900 000 for imported services purchased between 2015 and 2020.

Trade and Industry Minister Ebrahim Patel mentions in his contribution to the NLC’s 2020/21 annual report that the AG “identified a number of internal control and compliance weaknesses that the accounting body did not monitor effectively in relation to financial reporting and legal compliance. They should be resolved by the Council as a matter of urgency.”

But then NLC Commissioner Thabang Charlotte Mampan writes in her contribution to the same annual report that “while the NLC has accepted AGSA’s recommendations and is implementing action plans to improve future audit results, we continue to seek clarity in the relevant practice notes and the rationale for changing the interpretation of the relevant practical notes”.

Mampane resigned in August.

The head of the lottery is resigning
Philemon Letvaba from the lottery resigns under a cloud

The NLC is currently under investigation by the Special Investigations Unit (SIU) and the Hawks. This comes after an ongoing investigation revealed how top management and some board members of the NLC misused the funds for personal purposes.

© 2022 GroundUp.

This article was first published on Groundup here.

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