The auditor-general of South Africa has expressed serious concerns over internal control deficiencies at Air Traffic and Navigation Services (ATNS), a state-owned entity responsible for securing the country's airspace. The AG's report highlights that revenue records at ATNS are not accompanied by an audit trail, compromising the integrity, completeness, and accuracy of the underlying revenue data. This has led to a disclaimer opinion on the company's financial statements. ATNS is a critical entity that manages 6-10% of the world's airspace, spanning South Africa and large portions of the southern Indian and Atlantic oceans.
In the year to end-March, ATNS recorded 303,034 billable movements, up from 287,760 the year before. The company's regulated revenue increased by 18.9% to R1.8 billion, mainly due to increased domestic market movements. However, the AG's office found significant deficiencies in the design and operating effectiveness of information technology general controls. These deficiencies left auditors unable to rely on system-generated reports and automated controls used in the processing and recording of revenue transactions. The AG's report also noted unexplained deletions of revenue-related records, which raises serious concerns about the accuracy and completeness of revenue data.
The AG's report stated that the unexplained deletions of revenue-related records indicate that revenue-related records can be removed from the system without sufficient preventive or detective controls. This increases the risk that valid aircraft movements and related billable transactions may be omitted, altered, or inappropriately excluded from the billing process and financial records. The AG was unable to confirm the accuracy and completeness of revenue data by any other means, and consequently, was unable to determine whether any adjustment relating to revenue, stated at R2 billion in the financial statements, was necessary.
The difference between the R1.8 billion and R2 billion can be explained by ATNS having 87.7% of its business regulated, while 12.3% of it is not. The AG's report also noted that the entity's financial statements do not provide sufficient and appropriate evidence that revenue from contracts with customers for the current year has been properly accounted for. This is due to the status of accounting records, which raises concerns about the accuracy and completeness of revenue data.
ATNS is responsible for providing safe, expeditious, and efficient air traffic management, communication, surveillance, and navigation infrastructure in South Africa. The entity plays a critical role in ensuring the safety of air travel in the country. In response to the AG's concerns, ATNS spokesperson Khulu Phasiwe said that the entity acknowledges the seriousness of these findings and accepts responsibility for ensuring appropriate oversight of the organisation's control environment.
Phasiwe added that ATNS is attending to the concerns raised by the AG and is monitoring the implementation of the audit improvement plan through its governance structures. The entity plans to modernise its systems to minimise manual interventions, which is a long-term initiative. Clear corrective actions, timelines, and performance targets have been established to address the underlying deficiencies. Phasiwe also noted that with the exception of the revenue-related matters identified by the AG, the financial statements fairly reflect ATNS's financial position and performance for the period under review.
The AG's disclaimer opinion on ATNS's financial statements highlights the need for the entity to improve its internal controls and accounting practices. The entity's management has a critical role to play in ensuring that the necessary corrective actions are implemented to address the AG's concerns. The South African government and other stakeholders will be watching closely to ensure that ATNS takes concrete steps to improve its financial management and accountability.
Key points
- The auditor-general's report highlights significant deficiencies in ATNS's internal controls and accounting practices.
- ATNS's revenue records are not accompanied by an audit trail, compromising the integrity, completeness, and accuracy of revenue data.
- The entity plans to modernise its systems to minimise manual interventions and address the AG's concerns.
