The firm of auditors that conducted a forensic probe into Ntsika, the government’s small business promotion agency, has released a statement, effectively shielding the agency from the allegations published recently in the Mail & Guardian.
The M&G reported two weeks ago that an audit by Gobodo Forensic and Investigative Accounting had uncovered a sorry tale of financial mismanagement, discrimination against staff, inefficiency and sheer management incompetence at Ntsika.
The M&G article also said that the audit report painted a gloomy picture of widespread misconduct, poor management controls, failure to adhere to statutory obligations and tax violations. Ntsika sources blamed the agency’s CEO Lefa Mallane’s management style for problems.
This week Mallane gave the M&G a copy of a letter from Gobodo Corporate Governance Services (GCGS) to Ntsika chairperson Mashudu Ramano.
The letter was written by GCGS’s director Theo Nell, who says GCGS, not its associate firm of Gobodo Forensic and Investigative Accounting, conducted the probe, but that ”none of the reports contain findings that indicate all-pervasive weakness in the overall control environment within Ntsika”.
And, in an apparent attempt to defend Ntsika, Nell adds that his audit firm seeks to distance itself from the M&G report, regrets the report was used to ”tarnish” the agency’s image, and wants ”to place on record certain very important inaccuracies and misleading aspects contained in the M&G report”.
Nell does not, however, refute the specific findings — the key element of the M&G story — which include:
” Statutory regulations not adhered to;
” Changes in policies and procedures prior to board approval;
”Non-adherence to tax legislation;
”Inadequate reconciliation of leave;
But these findings, Nell says, should not, unless specifically indicated, be viewed as a breakdown of overall control or poor management.
The audit firm said the Ntsika board ”is free to disclose the contents of this letter for the purpose of refuting the M&G report conclusions”.
”The use by the M&G of expressions such as ‘widespread misconduct’ and ‘poor management controls’ testifies of a poor understanding of accepted internal audit reporting conventions”.
”None of our reports contain this conclusion; explicitly or by implication. On the contrary, our report executive summaries acknowledge improvements in controls,” Nell said.
Nell also said that the report, parts of which were leaked to the M&G, was not the final report and had contained a number of draft findings ”management had not been able to respond to”.
”We believe that the Ntsika board has been comprehensively apprised of our final report assessment of the status of Ntsika controls through the consolidated report submitted under our logo in June 2002.”
But part of the report in the M&G’s possession is titled Final Report for Ntsika Enterprise Promotional Agency. It bears the logos of both GCGS and Ntsika, is dated March 2002 and was signed by Nell. It reads: ”All the findings have been discussed with management and there were no disagreements of fact, except where indicated in the detailed findings.”
All these findings were followed by ”management comments”, raising questions about Nell’s assertion that Ntsika management had not been able to respond to the findings published by the M&G.
The detailed report and its findings, including GCGS’s document, can be downloaded using the link at the top of this page.