Flouting of law and lack of discipline sees KZN record R9.75bn in irregular expenditure - highest in SA
DURBAN - PERPETUAL failure to respect the rule of law and a lack of disciplinary action against errant officials were among the reasons that led to KwaZulu-Natal incurring the country’s highest rate of irregular expenditure, at R9.75 billion, the auditor-general has found.
Failure by the Department of Health to implement disciplinary processes against officials who were alleged to have broken the Public Finance Management Act created a negative financial picture, Auditor-General Tsakani Maluleke said.
While there were overall improvements in the audit outcomes for the financial year 2019/2020 compared with the previous year, widespread failure to comply with legal prescripts, among other factors, continued to trigger the high levels of irregular expenditure, said Maluleke.
The departments of transport, education and health were the major contributors to the irregular expenditure in KZN, which was followed by Gauteng with R7.49bn.
A disregard for compliance with legislation, slow response by management in addressing audit challenges, breakdowns in basic reconciliation and review processes, and poor record management were challenges that remained widespread, she said.
Non-compliance with supply chain management legislation remained unimproved, and at 22% the sorry state was the same as the previous year.
Contributing factors, said Maluleke, included procurement from suppliers without tax clearance, bid documentation that failed to stipulate the minimum threshold for local production and content, failure to obtain three written quotations and the absence of deviation approval.
Although it marks an improvement on the R12.4bn that KZN incurred in the previous 2018/2019 financial year, the AG said irregular expenditure remained a concern as it highlighted a possible risk, adding that management needed to investigate the rationale for deviation from normal procedures.
“At R9.75bn, the irregular expenditure of KZN is the highest of all the provinces – its closing balance of R44.55bn is also the highest of all the provinces,” Maluleke said.
“The KZN departments of health and transport were again unable to clear past qualifications as they did not address audit findings from prior years and disciplinary steps were not taken, as investigations against officials who had transgressed were either not started or not concluded timeously.
“The provincial Department of Health, being at the centre of service delivery, could still not account for its reported performance due to basic lapses in record management.”
Maluleke was alarmed by the R24.4bn in claims against the Health Department, most of which she said related to medical claims that had increased from R20.1bn to R23bn in the previous year.
“This indicates that the department is not implementing adequate steps to prevent claims, thus placing possible further pressure on its finances when these claims become payable.
The AG said the levels of unauthorised expenditure increased as well, with the provincial Department of Education as the highest contributor due to overspending on maintenance costs to repair storm-damaged schools and employee costs relating to fluctuating educator numbers.
Provincial government spokesperson Lennox Mabaso agreed that the medical claims posed a real risk to the health budget, but said some of the expenditure that had been flagged as irregular did have credible reasons.
“Some of the expenditure may need to be regularised to justify why, for instance, we had to deviate from normal supply chain management procedures.
“Some cases may not necessarily point to any stealing of money. It just means management will have to investigate to justify any deviations,” said Mabaso.
“Overall, we are showing huge improvements in terms of audit outcomes in comparison with the previous year,” he said.
Professor Irrshad Kaseeram, a University of Zululand-based economist, said the irregular expenditure implied that about 22% of the total provincial budget suffered from improper record keeping, reporting and compliance according to legislation.
“This is huge relative to national averages. The province needs to take guidance from the AG’s report, and the irregularity can serve as a reference point to assess their future performance,” Kaseeram said.