Government flushes another R14 billion down the drain
During the sixth administration, unqualified audit opinions increased across provincial and national departments, while adverse, disclaimed, qualified, and outstanding audits decreased.
While this is good news, irregular expenditure—particularly in supply chain management (SCM)—remains a major issue in South Africa’s public sector, and over R14.3 billion in financial losses were recorded due to material irregularities.
These losses range from payments for goods and services simply not being received, unfair and uneconomical procurement, revenue not billed, assets not being safeguarded, or getting no value for money on spending thanks to the ineffective use of resources.
A big issue of interest and penalties on late or non-payment was also flagged.
During the same period, R43.49 billion was spent in violation of financial management regulations.
Additionally, R10.34 billion was found to be fruitless and wasteful expenditure, while there was R38.83 billion worth of overspending of budgets.
This was revealed by Auditor-General (AG) Tsakani Maluleke in a briefing before the parliamentary Standing Committee on Public Accounts (Scopa) on 26 November 2024.
Maluleke was unpacking the latest audit outcomes for provincial and national departments and entities governed by the Public Finance Management Act.
She said that the audit outcomes over the term of the previous (sixth) administration—the focus period of the report—“show an improvement in the ability of national and provincial governments to transparently report on their finances and performance.”
Around a third of the 415 auditees (142) covered received clean audits, which means that they have credible financial statements, a useful, reliable performance report and no material noncompliance with key laws and regulations.
These 142 (up around 50% from the previous administration) accounted for R266.28 billion/R2.07 trillion of the state’s expenditure budget for national and provincial government.
This improvement was attributed to better financial disciplines, increased stability in financial units, and improved reviews by internal audit units, audit committees, and provincial treasuries.
Maluleke believes a substantial number in this category may well move to the clean audits group if they keep improving their systems.
“Just over 40% (168) of auditees obtained an unqualified audit opinion with findings. This is not a desirable outcome, and auditees should not remain comfortable in this category” said Maluleke.
Although their financial statements might be unqualified, the material findings on performance mean that their performance reports are not credible.
“The material findings on compliance signal a disregard for legislation or significant lapses in control. They could easily lose the unqualified status due to these remaining challenges in their control environment,” said Maluleke.
The rest of the categories consist of qualified audits with findings (58), adverse audits with findings (four), and disclaimed audits with findings (five).
As many as 38 entities were not audited for this period, a sharp rise from eight in the previous audit period.
Overall, the AG said that the good news is that the outcome quality of performance reports and plans used for oversight purposes also improved, largely due to reviews by relevant authorities, standardisation of indicators in some sectors, and responses to previous audit findings and recommendations.
Areas of concern
While there were many instances of success, there were also prevalent failures.
High-impact auditees, which are those that have the greatest impact on the lives of South Africans and on government finances, lagged behind other auditees in terms of audit outcomes.
These include auditees involved in the delivery of services. Together, these auditees were responsible for approximately R1.6-trillion (77%) of the expenditure budget of national and provincial government in 2023/24.
“When auditees, especially high-impact auditees, do not properly manage their performance, finances, and infrastructure, this directly affects the delivery of key government programmes that are intended to improve the lives of South Africans and to alleviate hardships stemming from tough economic conditions and poverty.”
Maluleke cautioned that there was an urgent need to accelerate disciplines for quality performance planning, monitoring and reporting at the auditees that have the biggest impact on South African lives and on government finances.
There were also high levels of material findings on compliance with key legislation.
This was particularly pronounced in areas such as the prevention of unauthorised, irregular, fruitless and wasteful expenditure, the management of procurement and contracts, expenditure management, strategic planning and performance management, and consequence management.
Infrastructure delivery and maintenance also showed concerning results.
Of the 143 audited infrastructure projects, 86% had issues, including delays, poor construction quality, and projects that were never put into use after completion.
IT systems modernisation and protection faced notable risks, with 79% of the 203 auditees showing weak IT controls.
Cybersecurity concerns were even more alarming, with 70% of 77 auditees having significant vulnerabilities.
Financial oversight also continues to be a challenge, with 41% of auditees reporting deficits totalling R69.33 billion caused by poor payment practices and wasteful procurement.
Over 30% of auditees did not comply with consequence management regulations, and most unresolved irregular expenditures from previous years persisted.
A total of 292 material irregularities (MIs) were found, leading to an estimated R14.3 billion in financial losses and harm to public sector institutions and citizens.
In many cases, no corrective action was taken, prompting the Auditor-General to step in in 18% of cases.
Going forward
The AG said that it is important for the current administration, made up of the GNU, to push back hard against unaccountability.
“Improved service delivery and the responsible use of the limited funds available will only be possible when we have capable, cooperative, accountable and responsive institutions that deliver on their mandates.”
“I urge all role players in the accountability ecosystem, particularly those with direct control over service delivery, to work deliberately and with urgency towards a heightened level of accountability, transparency, integrity and improved service delivery for all South Africans,” said Maluleke.
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