Durban - KwaZulu-Natal government departments incurred irregular expenditure of more than R17 billion collectively during the 2019/20 financial year, according to reports on the auditor-general's findings that were tabled before the provincial legislature on Wednesday.
The outcomes of the AG’s audit of the financial statements of the provincial departments of Transport (DOT), Economic Development Tourism and Environmental Affairs (EDTEA), the Office of the Premier and the Department of Sport and Recreation were among those presented to the standing committee on public accounts during the Public Finance Management Act 2019 (PFMA) virtual briefing.
Some departments, such as the Office of the Premier, reported an improvement and an unqualified audit report, while others, such as the DOT and EDTEA, were plagued with notes about fruitless, wasteful and irregular expenditure.
The DOT incurred a qualified report with findings of irregular expenditure amounting to R17.84bn and underspent R1.64bn of its budget, due to delays in transport infrastructure projects.
“The department did not record the full extent of irregular expenditure in the notes to the financial statements, as required by section 40(3)(b)(i) of the PFMA,” the AG found.
“This was due to expenditure incurred in contravention of the supply chain management legislation not being detected, recorded and appropriately disclosed in the financial statements. Consequently, I was unable to determine the full extent of the irregular expenditure stated at R17.84 billion in note 31 to the financial statements, as it was impractical to do so.”
The cause of the problem was management’s slow response to address audit findings regarding its supply chain management processes that were raised the previous year.
“The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records, as required by section 40(1)(a) and (b) of the PFMA.
“Material misstatements of immovable tangible capital assets identified by the auditors in the submitted financial statements were corrected and the supporting records were provided subsequently, but the uncorrected material misstatements and supporting records that could not be provided resulted in the financial statements receiving a qualified opinion.”
The AG also raised issues of non-compliance with the PFMA, saying that disciplinary steps had not been taken against some of the officials who had permitted irregular expenditure and “effective and appropriate steps” had not been taken to prevent the irregular expenditure in the first place.
“The full extent of the irregular expenditure could not be quantified. The majority of the irregular expenditure disclosed in the financial statements was caused by poor contract management. Some of the contracts and quotations were awarded to bidders based on pre-qualification criteria that were not stipulated and differed from those stipulated in the original invitation for bidding and quotations.”
The EDTEA received an unqualified AG report with findings and concerns raised regarding fruitless, wasteful and irregular expenditure within the department and some of the entities under its control.
The EDTEA incurred R55.8 million in irregular expenditure, up from R13m in 2018/19, which was related to expenditure occurred in the prior years due to proper procurement processes not being followed. Fruitless and wasteful expenditure to the amount of R839 000 was also reported.
“The shared internal audit unit for departments in the province conducted 18 investigations covering the period 2016 to 2019. The investigations related to allegations of the possible irregularities relating to processes followed in securing departmental district offices, possible mismanagement of funds by a cooperative, fraud and corruption in the local economic development project, and possible irregularities relating to events management expenditure. Six of these investigations were completed and the implementation of recommendations are in progress, while 12 cases were still in progress,” the report said.
The Ithala Development Finance Corporation, Ithala SOC Limited, KZN Sharks Board and the KZN Tourism Authority received unqualified audit reports with findings, while Dube Trade Port Corporation; KZN Growth Fund and the KZN Liquor Authority received unqualified reports. Trade and Investment KZN and Richards Bay IDZ received unqualified reports with no findings.
Irregular and fruitless and wasteful expenditure amounted to R22.4m and R2m respectively at Ithala Soc Ltd; R9.7m and R1.6m at the KZN Sharks Board; R1.7m and R117 000 at the KZN Film Commission; and R6.7m and R213 000 at the KZN Nature Conservation Board. The KZN Tourism Authority recorded R25.8m in irregular expenditure.
The reasons for the irregular, fruitless and wasteful expenditure, ranged from goods being procured without quotations to non-compliance with supply chain management procedures, litigation costs and a salary being paid into an incorrect account.
ANC MPL Sithembiso Mshengu said he wanted to see consequence management being enforced against officials responsible for IFWE.
“Each and every cent of the public's money must be accounted for,” Mshengu said.
DA MPL Francois Rodgers said the irregular expenditure by the DOT was unacceptable.
”If we want to try and build a capable state, the departments must pass the audits of the AG and we must have accountability. A lot of what we see happens year after year. Irregular expenditure happens because officials don’t follow the PFMA, which happens for one of two reasons, either you are stupid or you have an agenda.”
Rodgers said it was time to "name and shame” officials responsible for IFWE and to implement consequence management.
“If they can’t do the job, go,” he said.