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Auditor-General continues to push for accountability

Irregular expenditure and supply chain mismanagement still rampant.
The AG noted that there are still public officials who are doing business with government. Image: Moneyweb

Auditor-General (AG) Tsakani Maluleke presented her first general report on the national and provincial audit outcomes for the financial year ended March 31, 2020 on Wednesday.

Irregular expenditure for the year was R54.34 billion (2019: R66.90 billion), unauthorised expenditure R18.12 billion (2019: R1.65 billion), and fruitless and wasteful expenditure R2.39 billion (2019: R2.36 billion). These figures exclude Transnet and Eskom, as they are not audited by the Auditor-General South Africa (AGSA) .

Read: Slight improvement in SOE audits is ‘nothing to celebrate’

Standout issues

  • Only 26% of auditees (111) received a clean audit;
  • 69% materially did not comply with legislation;
  • Only 36% fully complied with supply chain management;
  • Irregular expenditure amounted to R54.34 billion; there was however missing or incomplete information so the full amount is not known;
  • 21 auditees received disclaimed or adverse opinions on their financial statements;
  • The financial health of departments “continued to be alarming” with many problems, including insufficient funds to settle liabilities and 87% of departments having claims against them totalling R147.12 billion … “continuing [the] trend of using next year’s budget to pay current year’s expenses and claims”;
  • 55 (29%) public entities incurred expenditure in excess of revenue; and
  • 44% of public entities do not comply with supply chain management legislation.

There is a lack of accountability and consequence management, weaknesses in basic internal controls, and a general tolerance for lack of compliance and transgressions.

Material irregularities (MIs)

Irregular expenditure doesn’t necessarily result in a financial loss. However, where it does, and the financial loss is material, this would constitute a material irregularity.

The office of the AG has the mandate to report on MIs, conduct a follow up, and can take binding remedial action if its recommendations are not implemented.

The AG can now issue a certificate of debt to the accounting officer for the failure to implement remedial action if financial loss was suffered.

By February 28, 2021, the AG had provided notifications of 75 MIs which mainly related to non-compliance with legislation. The material financial loss associated with these MIs is estimated to be R6.9 billion.

Four main categories of material irregularities were identified:

  • Procurement: for example, overpricing of goods and services, and the supplier not delivering.
  • Expenditure management: such as overpayment for goods, goods of poor quality received, and late payment resulting in penalties.
  • Revenue management: for example, revenue not billed, and debt not recovered.
  • Resource management: no benefit derived from cost, and assets not being safeguarded (resulting in theft).

The AG in her presentation remarked that there are still public officials who are doing business with government.

Provincial health departments

Medical health claims against provincial health departments were flagged. Each provincial department has a health department.

In 2019/20, total claims against provincial health departments amounted to R105.83 billion. This amount is staggering.

Health departments do not budget for medical negligence claims, hence, paying out these claims puts them in the red.

But the fact that there are so many claims should surely be investigated by government?

Read: Weak systems led to Covid-19 service delivery failures (Dec 2020)

Provincial health and education departments incurred R2.37 billion (79%) in unauthorised expenditure. (There isn’t a separate figure for provincial health departments).

State-owned entities (SOEs)

AGSA does not audit all the SOEs, and has flagged a number of auditees that are in financial stress.

The SOEs that disclosed uncertainty about their going concern status were: PetroSA, the SABC, and three Denel subsidiaries (Densecure, Denel Aerostructures and Denel Vehicle Systems).

“Based on the financial statements of the SOEs where the audits are outstanding, such disclosures were also made by the Independent Development Trust, Denel, the Land and Agricultural Development Bank of South Africa, Pelchem, and the South African Nuclear Energy Corporation.”

Read: Denel hunts for cash with debts falling due (Mar 11)

AGSA considers the following SOEs to be in good financial health (as it did not identify many negative financial indicators): “ … the Development Bank of Southern Africa, the Armaments Corporation of South Africa, the Central Energy Fund, Airports Company South Africa, Land Bank Life Insurance, the South African Agency for Promotion of Petroleum Exploration and Exploitation, and SFF Association NPC.”

The following SOEs had deficits at year-end: PetroSA R5.5 million, the SABC R511 million, the Central Energy Fund R334 million, Komatiland Forests R115 million, Land Bank Life Insurance R44 million, and Land Bank Insurance R39 million.

Read: SABC sheds over 20% of its workforce (Mar 30)

As at March 31, 2020, government had provided financial guarantees amounting to R445 billion to 11 SOEs (including four not audited by AGSA). This included R350 billion issued to Eskom. The total government exposure relating to these guarantees amounted to R374 billion; in other words, these guarantees have been used to obtain further financing.

For the sake of completeness, government guarantees per the 2021/2022 budget had increased to R581 billion, including:

  • Eskom: R350 billion
  • Sanral (SA National Roads Agency: R37.9 billion
  • Trans Caledon Tunnel Authority: R43 billion
  • South African Airways: R19.1 billion,
  • Land and Agricultural Bank of SA: R9.6 billion
  • Development Bank of Southern Africa: R10.2 billion, and
  • Denel: R5.9 billion.

A number of other SOEs have “serious financial health concerns”, including the Road Accident Fund and the South African National Roads Agency.

Leadership must take urgent action

AGSA is fully committed to implementing its enhanced powers without fear, favour or prejudice.

However, the complete eradication of the illicit public official-government business partnership, consequence management and accountability are key to transforming the public sector.

Absolutely crucial though, is that the provincial leadership and provincial legislatures pay attention to improving the audit outcomes in the provinces which are detailed in the report.

Leadership across the provinces should take decisive action.

Read: Auditor-General speaking into the void on local government corruption (Jul 2020)

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quick question: can the anc government distinguish between a million and a billion in financial terms at all???????????

Oh please!

They don’t even know the difference between 1 and -1.

A hundred, two hundred, million thousand. Jacob

Neither is enough, that is all.

Let’s put it this way…anyone working for an SOE today is bound to be caught up in corruption. It’s a way of life there filtered down from the top management right down to the office cleaner. To be employed by an SOE is like being on holiday..no need for accountability or ethics. Of course now the money is running out as is with nearly all African countries. Everyone is going to scramble to filch as much as possible now before being made redundant.

The shocking part is what the reports have not told us, generally in my line of work i find that the saying ” Tip of the Iceberg” is more often than not very much true.

Start with the basics, like Timekeeping of Employees, Service and Material Requesting then look at larger parts like Annual Maintenance Contracts, Supplier Relations Management.

If timekeeping can be corrected and employees held accountable for their attendance most businesses will save between 5 and 15% of their labour/staff costs.
An Example is:
Employee who should be at work for 10 hours with a 1 hour lunch break but arrives just 15min late and leaves 15min early will cost the business 12.5% in paid wages + 18.75% additional wages for anyone who has to work overtime (Paid at 1.5 time the basic rate) to keep the activities up to date.

Come to places like the UAE and you will find that government employees work only 7 hours a day however the are 2 shifts which ensures that services are available for 14 hours a day, no queues and multiple payment methods. I once bought a card at 10pm at night then got vehicle inspection done at 11pm, change of ownership at 11:30pm and got the insurance 15min later.

Government services are critical functions for the supporting of a growing economy, neglecting stops development.

As for the rest of the Article, Justice Delayed is Justice Denied.

The anc must just disband!

Criminal gangs seldom disband. They typically split due to internal wars with people getting killed etc.

If you look to KZN and Mpumalanga, they have already “taken out” some opponents in local governments there.

The horror – the horror …

Why should the AG have to STILL push for accountability?

It’s numbers, black and white no gray areas or what……..

They push for accountability because they are accountants.

I know that but after 27 years they have not got it right with the ANC clowns…..and never will.

For any ANC led provinces, or municipalities this Auditor-General push for accountability will not happen, the ANC cadres are impervious to accountability or consequence management.

I watch them as I watch Jeffrey roaming Northcliff.

From a distance.

Though I think Jeffrey is fairly harmless.

Jeffrey we can trace, we cannot trace the people or the money that the ANC stole.

I appreciate it if government could answer these simple questions:

– What consequences are there for unqualified audits?
– Do any of the wasteful and fruitless expenditures result in fraud cases?
– Why are government positions paid significantly more than the industry average?

This ship is sinking fast.

Speed does not kill, stopping does.
The ANC is like a drunk driver a of vehicle which has he a concrete wall, the vehicle remains intact throughout the collision until it is pushed by wall at which point the driver releases in his drunken state that he needs to steer the vehicle, trying to deal with the situation at hand the driver grabs hold on to anything his hand can touch.

That slow motion outward movement has lasted 13 years now, eventually it will grind to a holt at which point the IMF will be approached for a BAILOUT because the drunk driver never took out insurance. Hi working family are left to not only pick up the bill but also the carnage which is scattered all over.

Accountability is a hated word plus in, a supposed Christian country, you cannot even find one person who admits to mistakes or dishonesty. That tells me the underlying culture stinks.

I am very happy with my municipality. When there are loads of pine needles and sand about to block the drains they send the street cleaners to clean them. Fabulous. Never on a Monday to Friday though. Perhaps on a Saturday at time and a half overtime but mainly on a Sunday or Public holiday these hard working souls are to be seen at double the normal time “overtime rate”. Most probably take sick leave on Mondays to Fridays. Now I would like to say that instead of using staff on a Sunday or Public holiday at double the rate, simply employ double the people so that you need not have anybody work on their “days of rest” but I think that there are most probably enough staff anyway.

The absence of accountability from leadership structures fragments the very structures that are led and breeds a culture of social,racial and economic incohesion. The societal fabric of this country is reduced to rags, worn out by the persistent thuggery and theft in the name of the ANC.

Even terrorist groups like Al-Qaeda and ISIS uphold the grave importance of accountability. Accountability feeds directly into their strength and notoriety as they are engineered to be. Lack of accountability is the lack of strength of a structure/entity/person.

Ingratitude is the pathway to mismanagement. Derived from your ingratitude and lack of accountability is your irresponsibility of our hard earned money oh our dear foe, ANC!

Not even Al Capone, Pablo Escobar or the Colombo family pulled a fraction of this plunder off. I just wonder where does it all go? Panama, Mauritius, Isle of Man, Cayman’s? I strongly suspect there some very high profile lawyers and accountants involved, they certainty can’t do it themselves. Hawks would just need to squeeze those few dozen people to find it all out, but of course not. Our oligarchs must literally be some of the wealthiest people in the world

interesting question. My auditor buddy says the “good” thing about all the looting is it goes right back into the economy. AMG Mercedes, BMWs, bling etc. Nothing seems to be saved, it gets spent immediately. His opinion, not mine.

End of comments.

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