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State blows R26.4bn in spree

Auditor General Terence Nombembe. Photo: Leon Nicholas

Auditor General Terence Nombembe. Photo: Leon Nicholas

Published Oct 20, 2011


The Auditor-general has uncovered billions of rand in unauthorised, irregular and fruitless and wasteful expenditure in the audit of government books for the 2010/11 financial year.

Auditor-General Terrence Nombembe and his team identified a whopping R26.4 billion in such spending – up from R22.4bn in the previous year – which includes instances of tender processes being ignored or subverted, friends and relatives of public servants participating in government procurement and a lax attitude to monitoring how taxes are spent.

National and provincial government departments and state entities had themselves reported R12.4bn in their annual reports.

The audit, however, found a further R14bn in unauthorised, irregular and fruitless and wasteful expenditure.

Irregular expenditure (R18.5bn) at national departments accounted for the lion’s share of such spending.

Presenting the consolidated audit findings for the national and provincial governments to Parliament’s standing committee on public accounts (Scopa) on Wednesday, deputy auditor-general Kimi Makwetu noted that a staggering 76 percent of departments and 55 percent of public entities had engaged in “uncompetitive or unfair procurement processes” in the period under review.

Thirty-four percent of departments awarded contracts to “officials and their close family members” and 30 percent were found to have “inadequate contract management” in place.

And these figures included only those departments where similar issues had been identified in previous audits, prompting the auditor-general to investigate them for such transgressions this time.

The latest public spending figures come exactly one week after the Special Investigating Unit told MPs that up to 20 percent – or between R25bn and R30bn – of the government’s procurement budget went down the drain each year as public servants stuck their fingers in the till, overpaid for products and services, or simply failed to monitor how public money was spent.

Auditors also expressed concern that three national departments and their provincial equivalents, which together accounted for about 70 percent of all state expenditure – health, education and public works – had failed to achieve a single clean audit among them.

Sixty percent of the health departments received qualified audits, while 20 percent were given unqualified audits with adverse findings.

The remaining 20 percent failed to provide sufficient information for the auditor-general to express an accurate audit opinion on the state of their books, thereby earning the worst possible verdict – a disclaimer.

The situation at education departments was not much better, with half of them receiving qualified audits, 40 percent financially unqualified audits with adverse findings and 10 percent disclaimers.

Among the public works departments, 30 percent received qualified opinions, 50 percent unqualified with matters raised, and 20 percent disclaimers.

“It is clear that there are no clean audits in that area where the bulk of (government) expenditure occurs,” said Makwetu.

“Over (the past) three years, it is clear that what we expect (to have been) an improvement is not coming to be.

“If 70 percent of (government) resources are going in this direction – education, health and public works – then maybe the (auditing) effort also needs to be driven towards that direction, where there are more and more problems.”

The auditors pointed out that only 8 percent of all national departments had achieved the ideal audit outcome – an unqualified opinion with no matters raised – while 25 percent had been given a disclaimer or a qualified audit opinion.

Makwetu did have a few kind words for the national government and nine provincial legislatures, half of which achieved unqualified audits with no adverse findings.

The other half received unqualified audits opinions with adverse findings.

The accounting category of “capital assets” is the biggest contributor to audit qualifications, according to the report, with 22 percent of all qualifications relating to these.

Other causes include poor management or accounting of “current assets” (9 percent), Unemployment Insurance Fund (11 percent), liabilities (9 percent) and “other disclosure items” (13 percent).

Scopa chairman Themba Godi said the government appeared to be taking “one step forward and two steps back” when it came to financial and performance management.

*Unauthorised expenditure: expenditure that has not been budgeted for, is contrary to the conditions of an allocation from another sphere of government, or is spent in the form of a grant not permitted by the Public Finance Management Act.

* Irregular expenditure: expenditure other than unauthorised expenditure incurred in contravention of or not in accordance with the requirements of the Public Finance Management Act, the State Tender Board Act or the government’s own supply chain management policies.

* Fruitless and wasteful expenditure: expenditure that was made in vain and would have been avoided had reasonable care been taken.- Political Bureau

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