Deloitte Bares Weaknesses in Infraco’s Internal Controls
Despite the existence of policies and implementation of guidelines for managing contract processes within Broadband Infraco, compliance with the set rules has been very poor, according to the audit report of Deloitte conducted in 2010.
Infraco, a South African state-owned entity (SOE), has been created by the SA government in 2005 through the merger of Eskom and Transnet’s ICT infrastructure to provide a backbone to help reduce communication costs in South Africa. Three months after its establishment, regulations over procurement within Infraco have started leading astray.
In November 2010, Infraco has officially started trading in the South African market. However, an audit report released by Deloitte revealed a lack of compliance with internal control processes of Infraco’s procurement and contract management.
The “roles and responsibilities have been defined, but it appears that there is disregard of these governance structures and/or communication breakdown between different business units, which, at the end, exposes Infraco to undue risks,” said Zama Dlamini, Deloitte’s director of risk advisory in South Africa.
Deloitte’s audit report went on to reveal further shortcomings in the internal controls of Infraco such as inaccurate reports of contract management, invalid registration information involving contract terminations that have not been detached from the register, inadequate maintenance of contracts and loose access to documentations.
Dlamini said there has been “ no clear communication between the end-user departments and the commercial unit in terms of contract management” that subsequently resulted in the decisions of the end-user changing the terms of contract without the commercial unit knowing this.
Infraco has admitted shortcomings as revealed by the audit report. The SOE added that its board of directors has already addressed the flaws by conducting a probe into any non-compliance that took place within Infraco to impose the necessary sanctions against any individual involved.