Millions of rands of international donor funds intended to be used by the Red Cross Society in KwaZulu-Natal to provide succour for children debilitated by HIV/Aids have disappeared.
A damning independent audit by KPMG Services, commissioned by the British Red Cross Society (BRCS), which has been funding the £200 000-a-month project since 2000, has just come to light. It paints a gloomy picture of the local chapter of the Red Cross.
The Mail & Guardian is in possession of a copy of the report. Inefficient financial control and systems — a malaise that seems to run throughout the entire organisation — appear to be at the root of the problem.
The report states that for the period ending February 2003, expenses amounting to R1 465 699 from the BRCS ”could not be substantiated by any supporting documentation” (all calculations were done at an exchange rate of R14 to £1).
For the period ending February 2004, an amount of R1 287 868 from the BRCS could not be accounted for. The Red Cross reconfigured its economic year and for the period ending December 2004, R577 638 could not be accounted for, while R251 600 was spent on a choir festival that ”cannot be determined to be expenses incurred that relate to HIV/Aids”, noted the audit. In just more than two years, an amount of R3 331 207 could not be accounted for.
The audit report also warned against cross-funding (using donor money from one organisation to plug financial holes in projects funded by another), noting that, since the period ending December 2005, funds from the BRCS bank account were being transferred to other projects ”without adequate explanation”.
In addition, the organisation had no fixed-assets register; there was general inefficiency among staff dealing with finances; there was haphazard collection of documentation recording donations; and guidelines stipulating the collection of tender quotations were not adhered to. Between February and December 2004, work amounting to R391 734 was given out without a tender process.
A Red Cross source said that then financial manager André Kammies resigned seven months after the release of the report in March 2006.
The source said the audit and recommendations from a BRCS review of South African Red Cross Society (SARCS) finances were ”swept under the carpet and not made public knowledge within the Red Cross”.
”Nothing much has changed within the organisation when it comes to accountability for money spent, which is a pity because in this case we are talking about money that should have been spent on children — the vulnerable suffering from Aids,” the source said.
The bulk of the millions unaccounted for appears to have been spent on salaries and expenses incurred at the national office. The audit noted: ”Not sure why this could not be substantiated.”
For the R1 465 699 that went missing during the period ending February 2003, for example, the audit stated that ”80% of this amount relates to expenses incurred at national office, 47% relates to salaries”.
The revelations are merely the latest in a litany of financial irregularities that have plagued the non-profit organisation. In 1998, the M&G exposed the quashing of another report that detailed maladministration, corruption, negligence, racism and nepotism within the SARCS.
In 2006, a British Red Cross Society review of the South African chapter’s finance and finance development programme noted the ”continued failure by the SARCS to implement recommendations made by the BRCS in 2004 and to fully reconcile its accounts”.
Startlingly, the British review noted that ”the fact that a general ledger is not maintained across the organisation and that bank and other key reconciliations are not performed” were of ”critical concern”.
Red Cross KwaZulu-Natal provincial manager Derick Naidoo said he was unaware of the KPMG audit, but that the ”intensive” HIV/Aids programmes, which include providing home-based care for HIV/Aids sufferers and school clothing for children, were running successfully. ”We have just had our international donors triple their funds to us,” he said.
Tellingly, the BRCS, said Naidoo, now sends funds directly to the KwaZulu-Natal Red Cross rather than through the national office.
Despite repeated attempts the M&G was unable to reach the Red Cross secretary general, Mike Tainton, for comment.