Departments of health, education, housing and public works flunk 2021 audits

Along with most of South Africa’s state-owned entities.
High levels of fruitless and wasteful expenditure continue, with 224 auditees losing a total of R1.72bn in the year. Image: Shutterstock

The South African Institute of Chartered Accountants (Saica) and the Auditor-General South Africa (AGSA) hosted a panel discussion on Friday, February 4, on the outcomes of the Public Finance Management Act (PFMA) 2020/2021 audit outcomes.

Panellists included Natashia Soopal (Saica senior executive: public sector and enabling competencies), Bongi Ngoma (AGSA head of audit), Mkhuleko Hlengwa, chair of the Standing Committee on Public Accounts (Scopa), Lindy Bodewig (National Treasury chief director), and Wayne Duvenage, CEO of the Organisation Undoing Tax Abuse (Outa).

The AGSA is responsible for carrying out annual audits of national and provincial government departments, municipalities and municipal entities, and certain public entities.

Audit outcomes

Every year AGSA has to contend with the late submission of annual financial statements, poor quality financial statements, pushback from auditees on audit findings, as well as poor record-keeping by the auditees.

Only 117 of 425 (27%) auditees received a clean audit (2020: 109 out of 418; 26%).

State-owned entities (SOEs) as well as the key service delivery departments of health, education, housing and public works are lagging behind.

Of 15 SOEs that were audited, only one received a clean audit.

Four received unqualified audits with findings.

Irregular expenditure reported in the financial statements increased to R166.85 billion (2020: R109.82 billion).

High levels of fruitless and wasteful expenditure continue, with 224 auditees losing a total of R1.72 billion in the current year.

The AGSA was unable to audit R2.14 billion worth of contracts because information was missing or incomplete, while 69% of auditees materially did not comply with legislation (2020: 71%).

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The poor financial management of the key service delivery departments of health, education, housing and public works directly affects their ability to deliver services to citizens. There are no consequences for contractors who don’t perform. Further, contractors are not paid on time.

Provincial health departments did not keep adequate records to defend themselves in medical negligence claims – and paid out R1.76 billion for such claims, while the estimated settlement value of unpaid claims at year-end was R124.15 billion.

A massive 92% of auditees had a weak IT control environment, 81% had weak IT security controls, 62% had weak disaster recovery controls, and 63% had weak IT governance practices. This while cyberattacks on government are on the rise, as government systems become more automated. 

Scopa chair not impressed

Hlengwa voiced his concern over the lack of consequence management, actions taken against responsible officials, and the absence of political will.

He said Scopa submits reports to the president, but there are reports going back many years that have not been addressed.

He said this laissez-faire attitude towards consequence management emboldens the enablers of corruption.

Speaking on the skills deficit, he cautioned that the people who loot know what they are doing, and therefore the skills base must be able to match them. He added that ensuring accountability requires enforcement, and stressed that the anti-corruption task team must be resurrected.

He mentioned that tenders are the bane of supply chain management, and that the government must clamp down on or relook the current tender system. More must be done to protect auditors and whistleblowers.

Scopa has collaborated with various law enforcement agencies, including the Special Investigating Unit (SIU), the South African Police Services’ Directorate for Priority Crime Investigation (the Hawks), and the National Prosecuting Authority of South Africa (NPA) to follow up on cases investigated.

“Cadre deployment is wrong,” said Hlengwa. “Employment on the basis that a job has been secured for you is wrong.”

Outa angry

Duvenage said the AGSA report reads like a horror story.

“If these were listed companies they would be delisted.

“The trust deficit gets wider, and our tax money gets used and abused.

“What we need to emphasise is that it is not good enough if 27% of auditees have clean audits, we need 100%.

“Even if we add the 31% [of clean audits with findings], it is diabolical – it is outrageous.”

Bodies such as the SIU and Scopa must be ruthless in performing their duties against the accounting officers, he said.

Duvenage asked why the lack of consequence for bad management continues, why many individuals are simply suspended on full salary, and why many who are found guilty move on to other positions.

Duvenage also mentioned the worrying trend of many departments raising their own revenue, for example, the Department of Transport charging for drivers’ licences.

“These are additional taxes” and departments are building their own empires, he said.

He added that a lot of money flows into departments, away from treasury oversight – “they throw money at people”; CEOs of departments can earn salaries go up to R10 million. “It goes from bad to worse.”

Duvenage said the country needs more oversight, transparency, and more accountability.

He turned to Saica’s Soopal and said there has been so much errant behaviour by chartered accountants – and that there are more Anoj Singhs out there.

Anoj Singh (former Transnet CFO) appears to be the only CA(SA) implicated in state capture who has been stripped of the CA(SA) designation).

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We should be having an honest discussion, as a nation, on the benefits and drawbacks of the total privatization of all spheres of government.

If the government finds it unnecessary to interfere in the market for groceries, why do they find it necessary to have a monopoly in the market for electricity, rail transport, port services, policing, municipal services, home affairs, etc? That old line that the government can do it cheaper has been debunked long ago and the fact that new solar can be supplied at 30% of the cost of Eskom power proves the point.

Someone may say that the state provides affordable policing, while those same people buy the services of private security firms.

The government monopolies will be defended by communists, deployed cadres, Cosatu members and state captures of course. The arms of the state are the tentacles of the Tripartite Alliance parasite that extracts the lifeblood of the taxpayer and the economy for the benefit of the looters. This parasite will furiously defend its monopoly in looting.

Didn’t we all know this? The question is, what is going to be done by the esteemed President Cyril Ramaphosa to drag the country out of the swamp?

…. and Mr Duvenage says that: “Even if we add the 31% [of clean audits with findings], it is diabolical – it is outrageous.”

But this is pretty much a “Bachelors Degree pass”, so are we surprised? Add cadre-clique deployment into the mix and we have, taraaaaa!!! a failed state!

Ugh.

The problem is – nobody can expect the monster alligator that got fat on BEE projects, to drain the socialist swamp.

… and the next problem is, how to get rid of it and with what would it be replaced?

Well, I would say exactly the same actions as he has carried out to deal with other crises, corruption and bungling; exactly nothing in case you’ve been dozing. The ANC hyena does not change his pots.

~60% increase in irregular expenditure and no accountability or consequence for it. It is a joke. Where is the clampdown on corruption we have been promised?

There will be a commission of enquiry to explore the feasibility of that ongoing process, with the valuable input of relevant stakeholders. Sigh ….

For goodness sake, stop employing people based on BEE guidelines but rather on their experience and credentials. BEE policies are racist and destructive…as these results have now shown!

End of comments.

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