These are alleged to amounting to more than a R1-billion.
The Mail & Guardian has seen the copy of Thuli Madonsela's letter dated July 6 2012 in which she confirms that the allegations made by the transport union were serious and required investigation.
Earlier this year, the M&G published the allegations against Prasa, but the company denied any wrongdoing.
"After careful assessment of the complaint, I have determined that the allegations warrant a preliminary investigation focusing on work already done by other agencies mentioned in your complaint," Madonsela said in the letter.
In a dossier submitted to Madonsela, Satawu alleges, among other things, that Prasa's group chief executive, Lucky Montana, is responsible for wasteful expenditure, fraudulent activities and the violation of the Public Finance Management Act and the National Treasury Act.
The union also claims that a number of multimillion-rand tenders at Prasa were awarded to close associates of its staff without following proper tender procedures and supply chain management policies.
It also alleges that a company owned by one of the board members, whose name is known to the M&G, advised the rail company on the current rolling stock recapitalisation programme.
The programme entails the acquisition of a new fleet of passenger rail coaches over a 20-year period at an estimated cost of R137-billion, which covers the trains and new depots and signalling equipment, among other critical infrastructure projects.
Prasa's management has dismissed the allegations by Satawu, including claims that some of its senior staff members and executives were lining up to benefit from the government's rolling stock fleet renewal programme.
Prasa's spokesperson, Tiro Holele, said he had not been informed by the public protector of any intention to conduct a preliminary investigation.
"Prasa respects the office of the public protector and will welcome any inquiry into Prasa by the public protector.
"However, Prasa finds it disturbing that the M&G would be informed of an investigation and Prasa would hear of it from the M&G," said Holele.
"Prasa would like to state categorically that the board commissioned a reputable independent audit firm to probe the allegations and determine whether there was a prima facie case to the allegations made by the Satawu president.
"The report found the allegations to be baseless and false and the board was satisfied with and accepted the findings."