The Land Bank received another grilling in Parliament late last month with MPs taking its executives to task for spending millions on forensic audits and turnaround strategies that yielded no results, as well as a dramatic revelation that Ernst & Young had threatened to resign as the Land Bank’s auditors because of a high risk of fraud.
Democratic Alliance MP Martin Stephens told parliament’s Standing Committee on Public Accounts (Scopa) that & Young had sent a letter to auditor-general Terence Nombembe, the Land Bank and agriculture minister Lulama Xingwana, warning that several conditions would have to be met for it to continue auditing the bank’s books. “The risk of material misstatement of the 2008 financial statements as a result of fraud and error is excessive,” the letter reportedly said. E rnst & Young, which has been the bank’s external auditor for four years, listed several improvements needed for internal controls. These included the involvement of its own forensic auditors in the audit, hiring suitably qualified and skilled senior staff, especially in risk and credit management, finance, treasury and IT, appointing a permanent CEO with banking skills and experience and presenting a “highly convincing plan to stabilise and sustain the bank” approved by the bank’s board. “Systems deficiencies remain a significant concern while capacity constraints, specifically in the finance department, (are) of serious concern,” the letter said. Xingwana told Scopa she had discussed the issues raised in the letter with the AG and Ernst & Young. She expected Cabinet to approve nominations for a full board within a week and was working closely with the Treasury to appoint a permanent CEO, she added. The following day, the Land Bank issued a statement confirming the appointment of auditors Deloittes and Sizwe Ntsaluba, mandated to improve its financial management systems and internal controls. “To ensure that there is adequate internal capacity, additional permanent staff is in the process of being appointed to meet the Land Bank’s needs in this important area,” the statement said. Scopa MPs had also expressed disappointment that the bank kept paying for turnaround strategies without showing visible improvements. Bank officials told Scopa a company had already been paid R4 million to draft the latest turnaround strategy and it was awaiting board approval, with further invoices outstanding. Last month, the Sowetan reported the latest turnaround strategy was drafted by a company called Expose, owned by former agriculture department official Zola Pinda. It’s unclear what banking or business organisation experience Pinda or his company possesses. Pinda told the Sowetan his appointment with the bank was “procedural” and that he had experience “in the agriculture area”. I n 2005, one of the word’s leading business consultancies, McKinsey, was also paid millions for a comprehensive turnaround strategy seen by Farmer’s Weekly. It recommended shutting down regional offices and forming alliances with co-ops to cut costs, beefing up financial controls and improving risk management. Banking sources described it as an excellent strategy that could have turned the bank’s fortunes around years ago, but it was never implemented. Scopa MPs were also informed that the forensic report into financial mismanagement given to Cabinet last September had cost R6 million to compile – taxpayers’ money that may have been spent in vain, as it remains unclear if any action will be taken as a result of its findings. C abinet initially recommended that criminal proceedings be launched against executives implicated in the report. The decision was later rescinded at the ANC’s leadership conference at Polokwane in December 2007, sparking widespread speculation it was being hushed up for political reasons. – Stephan Hofstätter
