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Board orders NetOne forensic audit

by Lloyd Gumbo
11 Mar 2016 at 05:46hrs | Views
The NetOne board has resolved to undertake a forensic audit into the operations of the Government-owned mobile operator, after revelations that the firm could have been prejudiced of millions of dollars through underhand dealings in the procurement of hardware and software materials.

The Herald last month exposed the shenanigans that were unearthed by the newly appointed chief finance officer, Mrs Sibusisiwe Ndlovu, who presented them to the NetOne board in December last year.

A letter that was written to Information Communication Technology, Postal and Courier Services Minister Supa Mandiwanzira by NetOne board chairperson Mr Alex Marufu on February 12, 2016 seen by The Herald reveals a number of irregularities that characterised payments of goods and services.

"The newly appointed chief finance officer (CFO) found that the processes in the finance department had been lax compared to what is generally accepted," said Mr Marufu.

"Payments made to suppliers were being made with little attention being paid to reconciliations, some suppliers were paid and there was no attempt made to ensure that the services they were paid for were delivered, suppliers were being paid in advance for services that in some instances would never be delivered."

Mr Marufu cited some of the companies that benefited from the laxity in the finance department including a contract with Gemalto for the One Wallet system, Bopela that was into cellphone towers.

"The contract (Gemalto) was designed in such a way that the provider of the system earns four cents for every registered subscriber on the system, even though very few, if any, were actually using the system.

"The system product was poorly marketed, an agent network was non-existent, the system itself did not work efficiently and as a result was bringing virtually no revenue to the organisation.

"On the other hand, NetOne was faced with demands from Gemalto to pay support fees adding up to over $500 000 compared to revenue generated of only October 2015 of $904," said Mr Marufu.

On Bopela, Mr Marufu said Mrs Ndlovu noted that several "rush" payments were being made to the company despite the fact that it had no contract with NetOne.

"The company was involved primarily in the construction of cellphone towers, but had also been paid two payments of $40 000 each for provision of service to sign up to 500 000 youths as NetOne subscribers, which service had not been delivered.

"Prior to the arrival of the CFO, suppliers would be paid on statement and no attempt was being made to reconcile these statements to invoices and in turn the invoices to goods delivered. The CFO insisted on a reconciliation of the statements for fuel delivery, even though she was under pressure from the chief executive officer (Mr Reward Kangai) to pay a supplier Redan Fuels, an amount of $183 000.

"On reconciling the amount, it was found that the amount due to Redan was only $87 000 which was duly paid. The balance would only be paid once invoices were provided and these reconciled to product received by NetOne," said Mr Marufu.

He said Mrs Ndlovu was also receiving several calls from PowerTel threatening to cut off services for the failure by NetOne to pay for services.

"Investigations showed that PowerTel was owed far less than the $400 000 they were claiming was due, after reconciliations were done and technical department confirmed which circuits were being leased compared to what was in the statement.

"This underlined the need to reconcile and confirm receipt of service before rushing to make payments based on statements and the threats of switching off.

"The CFO expressed concerns at payments that were being made for cellphone tower rentals. In some cases contracts were being backdated and in other payments were being made for rentals as far into the future as 2021.

"A payment of $14 400 was made to Richwood Sports Club for rental of a cellphone tower site from 1 June 2015 to 1 June 2021. In addition to this being a prepayment, an increase in rental was offered at a time when the organisation was looking at reducing the cost of site rentals," said Mr Marufu.

The board chairperson added that Mrs Ndlovu also noted bank reconciliations that were not being cleared on time with some dating back as far back as 2013.

He said this posed a financial risk to the organisation as there was risk of duplicate payments.

In the report, Mr Marufu also confirmed earlier reports by The Herald that Mr Kangai was against the employment of Mrs Ndlovu on a full-time basis after she gave birth during her probation.

He said findings she presented to the board at the meeting on December 6, 2015 impressed the board.

"Subsequent to this meeting, the chief executive officer produced a report for the attention of Rtd Brig- General Nyanungo, the deputy chairman of the board and chairman of the Human Resource Committee, whose import was that the CFO should not be appointed to a permanent position because amongst other things, she had failed to disclose that she was pregnant and she had no knowledge of the cellphone industry.

"The deputy chairman dissuaded the CEO from further distribution of this report and promised to take the matter with the full board at the next full board meeting in March 2016.

"Although she is still on probation, an urgent meeting of the board on 12 February 2016 resolved that on fully serving her notice period, she should be confirmed onto permanent staff," said Mr Marufu.

He said after receiving the report, the board deliberated on actions to take going forward.

"With the concurrence of the minister, the board decided to undertake a forensic audit. The board listed a number of areas that would be part of the initial focus. These included: the integrity of the payment system, collection of debtors, the airtime distribution system, payment of salaries and allowances, acquisition and management of base station sites and suppliers of interest , for example, Bopela.

"The board is of the opinion that NetOne could potentially be the leading State-owned entity in terms of contribution of taxes and dividends to Government. The organisation has not been able to live up to this role as a result of a combination of ineptitude, incompetence, a lack of focus on the commercial aspects of the business and possibly criminal behaviour.

The board is committed to getting to the root of all these and the restructuring of the organisation, which is now complete, has proved to be invaluable in providing the board with the information it requires to be able to act decisively.

The continued support of the Honourable Minister of Information Communication Technology, Postal and Courier Services and his staff would make this a much easier task to accomplish," concluded Mr Marufu.

Efforts to get comments from Minister Mandiwanzira and Mr Marufu were fruitless.

Source - the herald