Pattern of wasteful expenditure as audit regression increases

According to Auditor General Kimi Makwetu, audit results for national and provincial government departments and their entities have regressed overall, with the number of clean audits decreasing to 23% at a national level.

The number of clean audit outcomes at the national level last year was 30%.

The AG released the 2017-2018 general report on the audit results on Wednesday. In his report, Makwetu said he had noticed a pattern over the last four years with “more audit outcomes regressing than improving”. The reason for the decline, according to Makwetu, was the slow, or lack, of implementation of recommendations made by his office.

“In our previous reports, we said the slow response by management to our messages was the main root cause of poor audit outcomes, but our experience over the past year is that management at 28% of the auditees with poor audit outcomes are just not responding at all,” said Makwetu.

In his report, Makwetu noted that unauthorised expenditure by provincial and national governments increased to to R2.1-billion, a 38% rise in comparison to last year. According to the report, 86% of this figure was the result of overspending.

Fruitless and wasteful expenditure increased by over 200% from the last year to R2.5-billion. Irregular expenditure, the report noted, remained high at R51-billion.

Made with Flourish

The government departments with the poorest audits, Makwetu said, were the departments of education, health and public works. This was an issue as these departments were responsible “for just over half of the departmental budgets”, Makwetu said.

He has called for urgent intervention to “prevent the collapse of these key delivery departments”.

Another area of concern was technical and vocational education and training (TVET) colleges. According to the report, of the 48 colleges that were audited, only three had clean audits. Last year, nine TVET colleges reported clean audits.

State-owned entities

Makwetu noted an improvement in the financial health of state-owned entities, but raised concerns that SABC, the Petroleum Oil and Gas Corporation and the South African Post Office may struggle to operate without financial assistance.

Some of the SOE’s audits had not been completed by the cut-off date of September 30 because of delayed financial statements and audits. The delay was attributed to auditees struggling to demonstrate that South African Airways, SA Express, Denel and the South African Nuclear Energy Corporation were going concerns. The 2016-2017 financial statements and audit reports were only completed recently.

Because SOEs play an important role in South Africa, Makwetu asked that they be held to account. In his report, it was highlighted that 10 departments responsible for the SOEs “did not have consistent oversight practices and the majority did not adequately plan their oversight function”.

“The limited improvement in audit outcomes in particular and governance in general, over the years, indicates that accountability mechanisms are not working as they should,” said Makwetu who went onto to campaign for the amendment to the Public Audit Act that President Ramaphosa signed into law on Sunday.

READ MORE: Crackdown on obdurate local councils

Death threats to the AG’s office

The AG’s office has come under threat this past year, with officials facing death threats while conducting an investigation into accounting irregularities in municipalities.

Last month, Makwetu wrote to Parliament detailing how one team had to be withdrawn from working in Emfuleni after one of the officials was shot in the leg.

READ MORE: Auditor General: Irregular spend at ‘all-time high’

In May this year, the auditor-general’s officials stopped auditing the eThekwini Metro’s books after receiving death threats too. 

AG Report 2017-2018 by Mail and Guardian on Scribd

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