/ 3 November 2023

Billions still lost through bad accounting, says auditor general

Tsakani Maluleke
Auditor-General, Tsakani Maluleke.

Auditor general Tsakani Maluleke on Friday told MPs the ongoing failure of government entities to respond swiftly to auditing red flags meant the state was unable to recover vast sums in financial losses.

Speaking to parliament’s standing committee on the auditor general, Maluleke said it was troubling that with the vast majority of material irregularities (MI) detected by her office, there had been no prior action by the accounting authorities of the departments concerned.

“No actions were being taken to address the matters we raised in at least 82% of cases,” she said. 

“What we are saying [is] the matters we raised, it took an MI for an accounting officer to act on something they should have been acting on anyway. Which is a point around how we have got to get accounting officers to act quickly when things are being picked up, either by internal audit or by AGSA [Auditor General of South Africa].”

She said the estimated financial loss for matters flagged by her office came to R12 billion in 2022. Of that sum, R1 billion was recovered and returned to the state.

“You have lost R12 billion, you can only collect R1 billion. That is what happens because we take too long to deal with matters. It is great for Team SA that we can demonstrate the impact of our powers,” Maluleke said.

“But if we are considering that we are in a season where we are all worried about efficiency of spend and resource protection, it is definitely much better to prevent problems in the first instance and then to act quickly when things go wrong, so that you are not waiting for so long that your ability to collect what is due to you or to recover losses is constrained.”

Maluleke was speaking two days after Finance Minister Enoch Godongwana mooted a reconfiguration of the state in the medium-term budget policy statement to curb waste in public spending. 

She said although the number of public entities that recorded clean audits had increased to 30%, it should be noted that these were smaller bodies that collectively received only 6% of the budget for bodies that fall under the Public Finance Management Act (PFMA).

“Our concern was that it is the smaller entities, the smaller budgets, where you see the prevalence of clean audits,” Maluleke said.

“Then the bigger departments, the ones that have the greatest impact from a service delivery point of view, they are the ones that struggle to compile financial statements and run their affairs in a way that is characterised by transparency and accountability.

“The state-owned entities, they are the ones that still struggle to get to clean audits and even unqualified [audits].”

It meant that there was “a long way to go” before one could say that the PFMA budget is characterised by proper financial management and accountability. Her aim was to ensure that, by 2030, the percentage of public entities that can be described as doing harm instead of good, had been reduced to 10 at most.

“At the moment where we sit, we have got 52% that are doing harm.”

Maluleke said there has been no improvement when it came to the affairs of local government. In 2020-21, only 16% of the country’s 257 municipalities were given a clean audit by the AGSA.

“The metros are not doing as well as they should, and that was crucial given their impact on the budget but also their impact on the number of households that they serve.”