The Nuclear Energy Corporation of SA (Necsa) incurred R128-million in irregular expenditure in its 2015 financial year because it failed to comply with the government’s preferential procurement regulations‚ the auditor-general has found.
The annual report of Necsa‚ which processes nuclear material and undertakes research and development in the nuclear field‚ was tabled one year late in Parliament on Tuesday.
Necsa management and its board are currently being investigated by a task team appointed by Energy Minister Tina Joemat-Pettersson. The investigation related to “serious mismanagement”‚ the auditor-general said in his report‚ included in the annual report.
The board has been wracked by division and court battles with CEO Phumzile Tshelane put on a suspended suspension last year. No mention of these post-budget developments were made in the annual report.
The auditor-general’s report‚ which was included in the annual report‚ said the full extent of the irregularities was only quantified by the end of March 2016. The Necsa board condoned the irregularities.
Despite the auditor-general’s reservations‚ Necsa received an unqualified audit opinion on its financial statements‚ reports Business Day.
The auditor-general noted that management did not take effective steps to prevent irregular expenditure and fruitless and wasteful expenditure. Noncompliance could have been prevented had compliance been properly reviewed and monitored.
The auditor-general also cast doubt on the going-concern status of the state-funded entity‚ which made a R21m net loss in the 2015 financial year.
Necsa responded to the auditor-general’s remarks‚ saying although preferential procurement regulations were not fully adhered to‚ all bidders were treated equally and without prejudice and that the tender process was fair‚ equitable‚ transparent and in compliance with the Constitution.
No financial misconduct took place‚ no losses were incurred and the Treasury had advised that the relevant section of the regulations was ambiguous.
Necsa and the auditor-general have been in a prolonged dispute as to who is responsible for decommissioning and decontamination of old nuclear facilities‚ with Necsa arguing that this was a Department of Energy liability.
However‚ in March the department obtained a legal opinion from senior counsel that advised that Necsa and not the department was liable for these costs and that the state was legally bound to fund these.
This means that Necsa has to recognise this liability in its financial statements even though Tshelane says the decommissioning and decontamination may commence only in 2030 or later. He said the recognition of this liability had had a R209m negative effect on the equity of Necsa in the 2014-15 financial year.
“The recognition of this liability‚ which was calculated from incorporation‚ will have no impact on the company’s and the group’s current and future cash flows until 2030‚ except for a dedicated fund that has to be created for these liabilities‚” Tshelane said.
The annual report noted that the state’s obligation to fund the decommissioning and decontamination costs could not be recognised as an asset on Necsa’s books without Cabinet approval and that discussions were under way to obtain such approval.
The state funded Necsa to the tune of R580m in 2015 and R599m in the current year.