FORENSIC REPORT ANALYSIS: National Arts Council Forensic report professionally produced but still falls short

By Ismail  Mahomed

‘The forensic report into the National Arts Council of South Africa (NAC) was released yesterday. There is no doubt that the report by Mazars is laid out far more professionally than any other forensic report into Department of Sport, Arts and Culture entities. Mazars goes at length to indicate the processes they followed, their limitations and how they deduced specific outcomes but this is far from satisfactory. The shortcoming is not on the part of Mazars but rather on the terms of reference drawn up for the forensic audit by the NAC.

A forensic audit, by rule, is an investigation that examines and evaluates financial records and related documents to seek evidence that can potentially be used in court or to uncover fraud, embezzlement or irregular or illegal activities.

Mazars report lists a number of irregularities in the NAC’s administration of the PESP; and as such Mazar’s makes recommendations for consequence management most notably against the NAC’s CEO Rosemary Mangope and CFO Clifton Changfoot and Senior Projects Manager Ms Eugene Marillier as well as some junior staff and some former Council members (I will address the question about the former Council members who have been implicated in a separate post).

The references to the CEO and CFO in the report is in accordance with points 1.2.3. and 1.2.4. listed under the heading “Scope” of the report which requires Mazars to:

1.2.3. Determine if there has been gross negligence, misconduct, or dereliction of duty in respect of the CEO tasked with the management of the PESP

1.2.4. Determine if there has been any gross negligence, misconduct, or dereliction of duty in respect of the CFO tasked with the management of the PESP.

In arriving at their finding, Mazars do at the outset of the report state specific limitations and qualifications that:

“1.3.2 we were not required to, nor did we undertake an audit or review in terms of international Standards on Auditing or International Standards on Review Engagements; consequently , no assurance is expressed. “

In 1.3.4. Mazars states, “where we had to review and / or analyse any documents in the context of this assignment, we have reviewed and / or analysed documentation which we have been provided and / or which we have obtained and, unless the contrary is stated in this report, we have not performed any procedures to verify and / or authenticate any such documents.”

In clause 1.3.5. Mazars states, “the findings contained herein are based on the work performed to date of this progress report. We cannot confirm the completeness of such information as the potential exists that not all relevant information and documentation was made available to us. Any information or documentation brought to our attention after the date of this report which will affect our findings detailed herein will require our findings to be adjusted or qualified accordingly.”

This forensic investigation is into the administration of a R350 million grant and yet; the NAC has set such weak controls for the Forensic Investigation that the NAC did not require a more fuller assurances of wrong-doing on the part of those that have been implicated or a verification of reports/documentation provided to the forensic auditors.

In the case of the forensic report into the Market Theatre Foundation the entire report was dismissed in a Section 118A Protected Disclosures Hearing as being fabricated and contrived report. The Market Theatre Foundation’s report opened with the disclosure, “We did not check the veracity of the report”. This report was sheer wasteful expenditure on the part of the DSAC and Minister Nathi Mthethwa who had boasted that he was out “to clean house”; and should rightfully have been held accountable for the failings in the Market Theatre Foundation’s forensic investigation and its flawed report.

In the NAC forensic report, Mazars makes recommendations for consequence management against some Council members — one of whom is a highly respected individual with huge integrity in the South African arts sector and who has been honoured on multiple occasions internationally — yet nowhere in the report is there any indication that Mazars had interviewed, engaged or sought information directly from such individuals. There is no doubt that the released report will scathe the integrity of such individuals who are implicated in the report but who have not had the right to reply or to provide alternative evidence or justifications that could have enabled Mazars to alter their findings and recommendations.

The current Council and the DSAC has again not acted with integrity. It should have provided such individuals who have been referenced in the report to have first provided information, evidence and / or justifications to Mazars so that if necessary Mazars could have adjusted their findings to be adjusted or to be qualified accordingly, as stated by Mazars. That such release of the report has taken place without such necessity is once again a blatant recklessness on the part of the DSAC’s failure to run Councils that can act with integrity.

Where the report implicates either junior staff or former Council members the report calls for consequence management against the CEO Rosemary Mangope. This is on the basis that ultimate responsibility for the organisation lies with her. This is not unusual but can however be challenged in consequence management hearings that will likely follow.

Based on the above, CEO Rosemary Mangope was mandated by the MOU between the DSAC and the NAC to be the “duly authorised representative to serve both as liaison officer and project manager between the respective parties and us responsible for the full managing the project to finality”. (clause 4.1.4. Of the forensic report. )

In a functioning organisation any expenditure of such huge amounts would require regular reporting by the CEO to the Council and approvals by the National Arts Council’s audit committee. There were most certainly failures in the NAC’s systems.

In Clause 3.3. of the forensic report, Mazars lists the 14 people that Mazars had interviewed during their investigations. There is no listing of the former Chairperson of the Council being interviewed at all. The Chairperson of Council is appointed by the Minister; and is the Council’s signatory of the Shareholder Compact with the DSAC. He should therefore have been interviewed to ascertain Council’s conduct / failings. Neither is any member of the NAC’s audit committee listed as being interviewed. This is huge oversight. Furthermore, the implicated Council members who have not been interviewed or who only had access to the report yesterday after it was publicly released will unfairly have huge damage to their reputations.

I trust that the arts sector and the media that now has access to this report will engage with it critically before further tarnishing good people’s reputations because of another flawed DSAC process.