Lodged by: Moffet Mofokeng
Article: Can of financial worms at Prasa
Author of article: Moyagabo Maake and Loni Prinsloo
Date: 26 June 2014
Respondent: Sunday Times
Prasa complains about a story in the Sunday Times, headlined Can of financial worms at Prasa, published on 27 October 2013.
Mofokeng says that the following statements in the story were inaccurate and unnecessarily damaging to the parastatal:
· Financial mismanagement appeared to be rife; management appeared not to be doing much to fix it and, instead, was blaming Treasury for failing to fund some of its projects;
· It failed to report cases of financial misconduct; it did not purchase goods and services in accordance with supply chain policy; it allowed employees to work more than the maximum overtime allowed by labour legislation; CEO Lucky Montana did not take reasonable steps to prevent irregular, fruitless and wasteful expenditure; 89% of its planned targets for the 2012/13 financial year were not achieved; and
· It overspent its personnel budget for the month of June by R1.3-million and for the year to June by R5-million – reportedly due to unbudgeted overtime; bargaining unit employees received a collective R57-million in share bonus incentives during the first and second weeks of August, which did not appear on pay slips; cars in its fleet were routinely abused, sometimes with full knowledge of management; and company petrol cards were routinely used for personal vehicles.
The story, written by Moyagabo Maake and Loni Prinsloo, said that financial mismanagement appeared to be rife at Prasa, “but the transport parastatal appears not to be doing much to fix it”. Instead, it reportedly blamed Treasury for failing to fund some of its projects. The story mentioned several “examples” of “financial mismanagement”.
The story read: “Financial mismanagement appears to be rife at…Prasa, but the transport parastatal appears not to be doing much to fix it. Instead, the utility has hit back, blaming the Treasury for failing to fund some of its projects.”
Prasa complains that these statements falsely, inaccurately – and deliberately – portrayed it as being in disarray and led by incompetent managers. Mofokeng argues that the journalists either used an unreliable source, or did not properly verify their information, or selectively quoted from their data.
The outcome of these accusations will be determined by the arguments that follow, save to quote the following from its annual report:
“In its current form and at current patronage levels, Mainline Passenger Services [MLPS] is clearly unsustainable. PRASA has embarked on the acquisition of 88 new locomotives but this will require major overhaul in the nature of MLPS operations in the short-term. The Treasury decision to discontinue funding for long-distance rail services is simply irrational and does not have any basis in law and/or transport policy. The result is a further deterioration in the asset and is contributing to more passengers shifting from rail to road transport. This requires urgent review.” (emphasis added)
Some ‘examples’ of ‘mismanagement’
The following sentences are in dispute: “A management report earlier this year on Prasa said that it failed to report cases of financial misconduct, did not purchase goods and services in accordance with supply chain policy, and allowed employees to work more than the maximum hours of overtime allowed by labour legislation. It is also found that…Montana did not take reasonable steps to prevent irregular, fruitless and wasteful expenditure, and that Prasa failed to achieve 89% of its planned targets for the 2012/13 financial year”.
The journalists continued: “This stands in stark contrast to the parastatal’s annual report, which says that it managed to achieve only 52% of its targets. Prasa also appears to have either understated or failed to disclose wasteful expenditure, capital commitments and debt – collectively valued at more than R3.2-billion – in its financial statements. Instead, its annual report had only a general statement on the financial statements not being prepared in accordance with legislation, due to misstatements of disclosure items that were subsequently corrected by auditors.”
Mofokeng complains that these statements falsely and inaccurately suggested that Prasa and the Auditor-General had cooked and/or manipulated the facts in their books. He argues that not only was this an “assassination” of the integrity of the AG, but that it also suggested there had been a gross violation of the “forthright and frank spirit through which Prasa engaged and continues to engage with the AG’s office”.
He also states that the reporters did not properly verify their information, and calls it “a criminal act of misinformation”.
Smuts refers me to Prasa’s Management Report, dated 31 March 2013:
Under the headline Part D – Findings on compliance with laws and regulations, the following statements were made (on page 9):
· Prasa did not submit reports of financial misconduct cases laid and concluded during the financial year as per the requirements of Treasury Regulations;
· Goods and services were not always acquired in accordance with the requirements of Prasa Supply Chain Management policy;
· Employees worked more than the maximum hours overtime allowed without Ministerial determination as required by the Employment Act; and
· The CEO did not take reasonable steps to prevent irregular, fruitless and wasteful expenditure, as required.
On page 8, under the heading Part C – Conclusion on the annual performance report, and the subheading Achievement of planned targets, it said: “Of the total number of 56 targets planned for this year, 39 targets were not achieved during the year under review. This represents 89% of total planned targets that were not achieved during the year under review. This was mainly due to the fact that indicators and targets were not suitable developed during the strategic planning process.”
Under the heading Section 2: Matters relating to the Auditor’s report – Part A: Misstatements in the consolidated financial statements (page 5), the collective amount was indeed more than R3.2-billion, as stated in the story.
In its annual report, Prasa said that of the total number of 56 targets planned for the year, 29 were not achieved. “This represents 52% of total planned targets that were not achieved during the year under review.”
Smuts also denies the assertion that the story suggested that Prasa and the AG cooked the books, and calls this allegation a “wilful misreading of the story”.
The only reasonable conclusion to come to, is that the story accurately and fairly reflected the content of the official documents at its disposal.
More such ‘examples’
The text read: “For the month of June, Prasa overspent its personnel budget by R1.3-million. It also overspent on personnel by almost R5-million in the year to June. Its variance analysis states this was due to unbudgeted overtime. Bargaining unit employees received a collective R57-million in share bonus incentives, which are reflected on employee bank statements but omitted from their payslips… Cars in its fleet are routinely abused. A shop steward was given a car to travel from Cape Town to a funeral in East London, contrary to Prasa’s funeral transport policies, and with full knowledge of management; and company petrol cards are routinely used for personal vehicles.”
Mofokeng complains that these statements are so false and deceptive that Prasa is left with only one conclusion – “that the intention of the Sunday Times was not to report objectively as is required in terms of section 2.1 of the SA Press Code”.
Smuts refers me to Prasa’s performance results for the month ending 30 June 2013 (the reference to R3.1-million and almost R5-million), stating that its variance analysis was due to unbudgeted overtime.
The newspaper adds that it saw a pay slip of an employee and corresponding bank statements. “The incentive payment appears on the bank statement but not on the payslip. We are not willing to make these documents available as it will expose the employee.”
Smuts also provided me with documents from an SAPS investigation into the abuse of fleet cars and petrol cards. “Management, at least at junior level, was aware of the abuse.”
Again, the story accurately and fairly reflected the content of the official documents at its disposal.
The complaint is dismissed.
Our Complaints Procedures lay down that within seven working days of receipt of this decision, either party may apply for leave to appeal to the Chairperson of the SA Press Adjudication Panel, Judge Bernard Ngoepe, fully setting out the grounds of appeal. He can be contacted at Khanyim@ombudsman.org.za.