REPORT OF THE AUDITOR-GENERAL
1. AUDIT ASSIGNMENT
The financial statements as set out on pages 20 to 39, for the
year ended 31 March 2000 have been audited in terms of section
188 of the Constitution of the Republic of South Africa, 1996
(Act No. 108 of 1996), read with sections 3 and 5 of the Auditor-General
Act, 1995 (Act No. 12 of 1995) section 28(3) of the Legal Succession
to the South African Transport Services Act, 1989 (Act No. 9 of
1989) and section 12 of the Reporting by Public entities Act,
1992 (Act No. 93 of 1992). These financial statements, the maintenance
of effective control measures and compliance with relevant laws
and regulations are the responsibility of the Corporation's Board
of Control. My responsibility is to express an opinion on these
financial statements and compliance with relevant laws and regulations,
applicable to financial matters, based on the audit.
2. REGULARITY AUDIT
2.1 Nature and scope
2.1.1. Financial audit
The audit was conducted in accordance with generally accepted
government auditing standards which incorporate generally accepted
auditing standards. These standards require the audit to be planned
and performed to obtain reasonable assurance that the financial
statements are free of material misstatement. An audit includes:
- examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements.
- Assessing the accounting principles used and significant estimates
made by management, and
- Evaluating the overall financial statement presentation.
I believe that the audit provides a reasonable basis for my opinion.
2.1.2 Compliance audit
Furthermore, an audit includes an examination, on a test basis,
of evidence supporting compliance in all material respects with
the relevant laws and regulations which came to my attention and
are applicable to financial matters. I believe that the audit
provides a reasonable basis for my opinion.
2.2 Unqualified audit opinion
2.2.1 Financial audit
In my opinion, the financial statements fairly present , in all
material respects, the financial position of the South African
Rail Commuter Corporation Limited at 31 March 2000 and the results
of its operations and cash flows for the year then ended in accordance
with prescribed accounting practice.
2.2.2 Compliance audit
Based on the audit work performed, nothing has come to my attention
that causes me to believe that material non-compliance with laws
and regulations, applicable to financial matters, has occurred.
3. EMPHASIS OF MATTER
Without qualifying the audit opinion expressed above, attention
is drawn to the following matters:
3.1 Uncertainty of state compensation
The State compensation, which is received annually to finance
the operational deficit of the Corporation, is not guaranteed.
State compensation received for the 1999/2000 financial year amounted
to R1 593,7million, which represents 91 per cent of the total
operational expenditure of the Corporation. Under these circumstances
uncertainty exists about the Corporation's ability to continue
operations without curtailment of services and/or reverting to
borrowings to finance working capital commitments.
3.2 Operating results and financial position of the Corporation
and the Group
(a) Accumulated deficit
The net accumulated deficit increased by R243,8 million (R258,3
million in 1998/1999) to R1 555,3 million as at 31 March 2000
(R1 311,4 million as at 31 March 1999), which includes accumulated
depreciation of R1241,7 million (R1 135,9 million in 1998/1999).
(b) Operating results
The operating deficit before state compensation for the financial
year ended 31 March 2000 increased by R160,8 million to R1 814,6
million. The State compensation for this period amounted to R1
593,7 million, leaving a deficit of R220,9 million for the 1999/2000
financial year. Included in the deficit of R220,9 million is depreciation
of R173,2 million (R164,7 million in 1998/1999), not funded by
the State.
(c) Net current liabilities
Net current liabilities amounted to R2 362,7 million as at 31
March 2000, including short-term loans amounting to R2 151,0 million.
Short-term loans have increased by R350,0 million from the 1998/1999
financial year to the 1999/2000 financial year. Short-term loans
represent 85 percent of the total current liabilities.
(d) Cash flow statement
Cash applied to operating activities amounted to R1 418,2 million
for the financial year ended 31 March 2000. This represents an
increase of R210,0 million in cash applied to operations from
the preceding financial year.
3.3 Fixed assets
With reference to paragraph 3.2 of the audit report for the 1998/1999
financial year, control over the timely updating of the fixed
asset register was still inadequate. Although noticeable progress
has been made in this regard, various projects amounting to R6,8
million were still found in the work in progress register, which
showed no movement from the 1998/1999 financial year to the 1999/2000
financial year.
A process has however been implemented whereby currently only
R2,3 million of the above has not been capitalise. The items which
constitute the amount of R2,3 million relate to the period before
the Corporation took over the management of the rolling stock
general overhauls, and it is intended to capitalise the amount
as a separate item, without reference to specific rolling stock
coaches.
3.4 Internal audit and audit committees
The internal audit function as well as the audit committee of
the Corporation were evaluated and found to be operating effectively.
3.5 Post Balance Sheet event: Financial Arrangements Act, 2000
(Act No 64 of 2000)
The South African Rail Commuter Corporation Limited Financial
Arrangements Act, 2000 (Act No 64 of 2000) prescribes, inter alia,
that the power of the South African Rail Commuter Corporation
Limited to borrow money, except for bridging finance, in limited
circumstances, as they existed at 30 April 2000 be taken away.
Furthermore, the state had taken over the total loan obligations,
in total R2 281m, of the Corporation plus interest payable on
the various loans from 1 May 2000 to 31 March 2001. On 2 April
2001 all the liabilities plus interest had been redeemed.
3.6 Extension of time for the completion of the financial statements
In terms of Section 3(3) of the Auditor-General Act, 1995 (Act
No. 12 of 1995), it is a requirement that the financial statements
of statutory bodies be submitted to the Auditor-General not later
than four months subsequent to the end of the financial year.
Extension of time may be granted for the submission thereof in
exceptional circumstances. A request from the Corporation for
the extension of time until 31 October 2000 was granted.
4. APPRECIATION
The assistance rendered by the staff of the Corporation during
the audit is sincerely appreciated.
D.L.T. Dondur
For Auditor-General
Johannesburg
11 July 2001
