More than half a trillion rand has been irregularly spent since 2006 by national, provincial and municipal governments.
This unabated — and increasing — irregular expenditure, combined with the lack of action on potential fraud and corruption, and the continued disregard for the findings of the Auditor General’s office has given birth to the new powers of that office.
These new powers will begin to give the auditing office more bite. They include memorandums of understanding with law enforcement, the Public Protector and the Competition Commission, amongst others.
This week the national leader of audits, Alice Muller, explained that the main thrust of the law would be centered around material irregularities. This means that auditors will calculate how much money has been lost if a contract did not go through proper processes.
“This entails any non-compliance with, or contravention of legislation, fraud, theft or a breach of a fiduciary duty that is identified during an audit that could result in a material financial loss, the misuse or loss of material public resources or cause substantial harm to a public sector or the general public,” Muller explained.
Once the auditor has worked out how much the loss is from the irregular expenditure, the accounting officer in the municipality will be asked to take action.
“Our main aim is to recover money that has been lost and we need to be able to prove that there is likely financial loss,” said Muller.
The Auditor General’s office will now be able to refer material irregularities to law enforcement for further investigation, take binding remedial action and issue a certificate of debt to the accounting officers — which include Directors General at government departments and municipal managers — for failure to implement remedial action and recover financial losses.
But the implementation of the law will roll out in phases. For instance, the 2018/19 national and provincial audit report showed that, from 12 completed audits, there were 28 material irregularities that were identified.
These cost the state R2.81-billion.
According to the Auditor General, the Free State department of human settlements had the highest number of material irregularities. One of those followed from a contract where contractors were paid for projects that were not completed, with R32.9-million lost.
The Gauteng health department lost R148.9-million because it failed to invite competitive bids before awarding a contract for information technology infrastructure, despite there being cheaper alternatives.
Similar stories of rampant corruption are myriad. But, for the first time, the state is focusing on quantifying how much money must be recovered. Crucially, accounting officers must now do something about the money lost while they are in charge.
According to Muller, early next year they will release the municipal audits where nine entities will be investigated for material irregularities. These include the cities of Cape Town, Ethekwini, Tshwane and Nelson Mandela Bay.
“But I don’t think we will get the audit done on time in Nelson Mandela Bay after we had to evacuate our staff after the threats,” said Muller.
Two weeks ago it was reported that officials from the auditor-general were threatened and they had to be removed for their safety. They have not returned.
Muller explained that with the new laws they are not leaving anything to chance and they will continue to take precautions when they send the auditors to do their work, especially now that they will have more powers to bring back the money.