Government tolerates tender non-compliance - Auditor-General
Johannesburg - The auditor-general this week found there was a “general tolerance” for lack of compliance in government departments after she announced there was more than R50 billion of irregular expenditure that took place in the last year.
She also found that nearly R7bn of that irregular expenditure was related to the overpricing for goods and services, suppliers not delivering or goods being of poor quality.
Auditor-general Tsakani Maluleke, released her first general report of audit outcomes for the national and provincial departments as well as their entities for 2019/2020 this week.
In her presentation during a virtual media briefing, Maluleke flagged the serious lack of accountability and consequence management, weaknesses in basic internal controls, and a general tolerance for lack of compliance and transgressions.
She found that irregular expenditure for the year was R54.34bn - a reduction from the R66.9bn in 2019.
Unauthorised expenditure was flagged at R18.12bn, and fruitless and wasteful expenditure at R2.39bn.
These figures excluded Transnet and Eskom, as they were not audited by the AG.
Maluleke also said that there were still public officials who were doing business with the government.
Where irregular expenditure resulted in a financial loss, it constituted “material irregularity”.
She reported that by the end of February this year, 75 material irregularities were found in government departments amounting to an estimated R6.9bn.
This, she said, was mainly related to non-compliance with legislation.
Maluleke identified four main categories of material irregularities, including procurement where there was the overpricing of goods and services or the supplier did not deliver; expenditure management such as overpayment for goods, goods of poor quality received and late payment resulting in penalties.
She also flagged revenue management where revenue was not billed and debt not recovered, and resource management where no benefit was derived from cost, and assets were not being safeguarded which resulted in theft.
While she reported some signs of improvement in the national and provincial government audits, Maluleke said there were serious weaknesses in basic internal controls.
Overall, only 26% of auditees (111) received a clean audit, 69% materially did not comply with legislation and only 36% fully complied with supply chain management.
Irregular expenditure amounted to R54.34bn, but there was missing or incomplete information which Maluleke said could mean that the irregular expenditure could have been higher.
Twenty-one auditees received disclaimed or adverse opinions on their financial statements, 55 public entities incurred expenditure in excess of revenue and 44% of public entities did not comply with supply chain management legislation.
She also remarked that the financial health of departments continued to be “alarming” and that numerous departments had insufficient funds to settle liabilities.
She said that 87% of departments had claims against them totalling R147.12bn and that some were forced to use next year’s budget to pay current year’s expenses and claims.
In addition, the AG said it could not audit R2.08bn worth of contracts due to missing or incomplete information.
“There have been transactions that have gone through the books, through the bank account, a payment has happened but then you cannot find the document that confirms how the tender was run.
“That tells you that something is wrong and that it is a discipline on document management but also a discipline on doing that of what you can account for,” she said.
Maluleke called on executive authorities and coordinating departments to pay specific attention to state-owned entities, struggling public entities and the key service delivery departments.
In Gauteng, there was no movement from the previous financial year as the four auditees that improved were offset by the four that regressed.
The AG said that “inadequate monitoring of preventative controls and insufficient consequence management resulted in a stagnation”.
Five auditees in KwaZulu-Natal improved their audit outcomes while one regressed.
Maluleke said there were progressive trends visible in the province but greater discipline was required in implementing basic preventative controls.
The Western Cape continued to produce the best results with 70% clean audits.