The auditor-general (AG) has qualified the financial statements of the corruption-plagued Passenger Rail Agency of SA (Prasa) for 2016-17.

The statements were tabled in parliament on Monday, a year after their due date.

The qualification related to the accounting for irregular expenditure, which amounted to R20.3bn for the year, R5bn higher than the previous year’s figure of R15.3bn.

The AG said there was “significant doubt” about Prasa’s ability to continue as a going concern because while its assets of R13.5bn exceeded its liabilities of R10.2bn by R3.3bn, the majority of cash reserves were committed for capital expenditure.

Operating expenses

The agency made a loss of R928m in 2016-17 on revenue of R2.9bn compared with the 2015-16 loss of R554m on revenue of R3.3bn.

Operating expenses over the year climbed by more than R1bn from R9.2bn to R10.6bn.

Adding to its revenue were an operational subsidy of R5bn and other sources of income of R3.4bn.

The financial statements were qualified because the AG said the Prasa group “did not have any adequate system for identifying and disclosing all irregular and fruitless and wasteful expenditure, and there were no satisfactory alternative procedures that I could perform to obtain reasonable assurance that all irregular and fruitless and wasteful expenditure had been properly recorded”.

No effective steps were taken to prevent irregular and fruitless and wasteful expenditure as required by the Public Finance Management Act.

Procurement processes did not follow prescripts and no disciplinary action was taken against officials who incurred or permitted irregular expenditure of R5.3bn identified in prior years.

The AG found that the financial statements contained a significant number of material misstatements that were partly due “to a lack of financial discipline of staff involved in financial reporting”.

Interim chair Khanyisile Kweyama noted in her statement that a sizeable number of Prasa’s capital expenditure projects had been subjected to forensic investigations. Others subjected to litigation had been either reviewed or set aside.

This negatively affected capital expenditure.

In 2016-17 the forensic investigations had exposed Prasa to increased irregular expenditure and fruitless and wasteful expenditure.

Kweyama also highlighted the governance and leadership instability in the 2016-17 financial year, which the new board was attempting to address.

“The board will furthermore attend to the uncertainty relating to the going concern by ensuring that an appropriate operating and financial model is developed to ensure financial viability and sustainability of Prasa.”