Govt to probe SOE ‘milking’
The public enterprises ministry has directed all public enterprises to furnish it with information on legal and/or audit expenditures, which have skyrocketed in recent times.
17 September 2021 | Local News
The public enterprises ministry is tightening its grip on state-owned enterprises (SOEs) which it says have in recent years become cash-cows for audit and law firms.
The unregulated payments to audit and law firms have been noted as a concern by the ministry.
Internal calculations done by Namibian Sun found that five SOEs spent at least N$25 million on audit and accounting services related to forensic probes between 2016 and 2018.
In some cases, the recommendations contained in the reports were ignored when they were perceived not to be in the interest of those who commissioned them.
Some of the big spenders include the National Petroleum Commission of Namibia (Namcor), Namibia Airports Company (NAC), Telecom Namibia and TransNamib.
Namibian Sun has documents detailing how controversial diamond entity, Namibia Desert Diamonds (Namdia), paid a private law firm over N$2.2 million between March 2017 and June 2021 for legal services.
Data shows that some of the payments for audit and legal fees since 2016 include N$3.2 million from Namcor, N$7 million from the NAC, N$6.2 million from Air Namibia, N$6 million from Telecom and N$4.4 million from Agribusdev.
An official of the Law Society of Namibia told Namibian Sun that it was not mandated to regulate legal fees, but that that is established between law firms and clients. Efforts to get official comment from the LSN proved futile at the time of going to press.
The Public Accountants and Auditors Board (PAAB) indicated that the onus rests upon SOEs to ensure that they pay appropriate fees.
“Like in many other jurisdictions globally, there are no standing tariffs, hence this is totally between the client and the service provider. This is purely a supply-and-demand matter,” PAAB’s head of secretariat Zaa Nashandi said yesterday.
The unregulated contracting manner and fees charged by audit and law firms continue to give public enterprises minister Leon Jooste pounding headaches.
He told Namibian Sun this week that although “certain functions have to be outsourced, my concern has been around the appointment of lawyers”.
Jooste warned SOEs to carefully consider the risk-cost benefit of appointments before they are made.
Responding to questions from this publication, the public enterprises ministry last week said legal fees had skyrocketed in recent years.
“The ministry of public enterprises is concerned about the skyrocketing figures that are amounting to millions of dollars. For this reason, the ministry has directed all public enterprises to furnish the information on legal and/or audit expenditures in order to monitor and intervene where necessary,” spokesperson Jonathan Swartz said.
He added that “the outsourcing of legal and/or audit services by public enterprises to private service providers has been a great concern to the ministry as this has a great impact on the public enterprises’ overall budgets”.
According to him, public enterprises were encouraged to minimise spending on legal fees where possible.
“The ministry of public enterprises strongly advises public enterprises to minimise outsourcing legal/audit services except in cases where it is really required. Thereupon, in cases where it is required, we recommend public enterprises to consider the lowest possible bidders,” Swartz said.
Jooste has in the past encouraged public enterprises to become more risk manageable and less reactive to splash out monies to acquire the services of legal and/or audit consultants.
The outsourcing of internal functions has been dogged by alleged mismanagement and fraud, with some SOEs often handpicking firms to conduct audits without going out on public tender.
The situation has been so dire that in 2013 auditor-general Junias Kandjeke announced plans to establish a forensic audit unit to deal with the misappropriation of state resources and other fraud cases.