AG jolts officers into action, saves millions

Auditor-General Tsakani Maluleke said she was required to report on how she applied powers that were given to her in terms of the Public Audit Amendment Act. Picture: Thobile Mathonsi/Independent Newspapers

Auditor-General Tsakani Maluleke said she was required to report on how she applied powers that were given to her in terms of the Public Audit Amendment Act. Picture: Thobile Mathonsi/Independent Newspapers

Published Nov 6, 2023

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Auditor- General Tsakani Maluleke said her office had found that issuing material irregularity notifications to accounting officers often jolted them into action to address irregularities and transgressions they should have dealt with previously.

“In 86% of cases, nothing was being done to address the material irregularities we identified until we issued the notifications.

Through the material irregularities process, accounting officers have taken action, leading to financial losses totalling R511.76 million being prevented, already recovered or in the process of being recovered,” Maluleke said.

She was briefing the standing committee of the auditor general on Friday on the material irregularities in the local government sphere during the 2021-22 financial year.

Maluleke said she was required to report on how she applied powers that were given to her in terms of the Public Audit Amendment Act.

“If we are to get the full benefit of having used these powers of enforcement, we must make sure we have responses by all players in the ecosystem,” she said, referring to officials, audit committees, the council, Provincial Treasury and Cogta, among others.

Maluleke’s office had from April 2019 until January 2023 identified and notified accounting officers of 268 material irregularities.

“The material irregularities we identified were caused by non-compliance with legislation and suspected fraud that resulted in, or is likely to result in, material financial losses and significant harm to the municipalities and the general public. The nature of these material irregularities reflects the areas in which municipalities and municipal entities are most vulnerable to loss, misuse and harm. We have highlighted the weaknesses in these areas for a number of years, including in our general and special reports.”

The material financial losses were most often caused by weaknesses in the procurement and payment, resource management, and revenue management processes, as well as by interest and penalties charged due to late payments.

“We estimate the total financial loss of the 194 material irregularities that involved a material financial loss to be R5.19 billion, with R1.6 billion of that being lost by municipalities that invested in VBS Mutual Bank.”

According to Maluleke, there has been an encouraging shift in response with many local government auditees now responding more swiftly to address the material irregularities raised by her office.

Of the 57 resolved material irregularities, 19 were resolved by the auditees submitting outstanding financial statements.

The other 38 material irregularities, including 13 relating to VBS, were resolved by preventing or recovering R124,36 million in financial losses and implementing consequences for those responsible.

Her office issued 13 material irregularities where municipalities suffered material financial losses totalling R1.6bn due to the liquidation of VBS.

Maluleke also said although the 95 material irregularities where appropriate action was being taken have not yet been fully resolved, accounting officers have made good progress in addressing the issues raised.

“If accounting officers and authorities, supported by their political leadership, fulfil their legislated responsibilities and commit to taking swift action when we notify them of any material irregularities, there is no need for us to use our remedial and referral powers.

However, when they do not deal with material irregularities with the required seriousness, we do not hesitate to use these powers. In 61 cases where accounting officers did not appropriately address the material irregularities we reported to them, we used our expanded mandate to include recommendations,” she said.

Cape Times

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