Defence department’s finances in shambles
Auditor-general hits department once again with a qualified report, citing complete mismanagement of assets
The department of defence has again received a qualified audit opinion, with the auditor-general finding there was complete mismanagement of its assets.
The department oversees the South African National Defence Force, which is responsible for defending SA against external military aggression and plays a key role in peacekeeping missions in Africa.
It has over the years been hit with a string of negative audit reports, ranging from qualified, to disclaimer, which is the worst possible audit outcome. The department received a qualified audit in the previous financial year, after submitting error-ridden financial statements and incurring more than R400m in irregular spending.
The department has a budget of about R48bn for the 2018/2019 financial year, down from R49bn allocated in 2017/2018. It has said it requires more money to avoid losing more of its essential capabilities.
In the department’s annual report, tabled in Parliament this week, auditor-general Kimi Makwetu said he was unable to obtain sufficient appropriate audit evidence for capital assets as the department did not disclose capital work-in-progress for capital projects.
"Consequently, I was unable to determine the full extent of the nondisclosure as it was impracticable to do so."
Makwetu said that he was also unable to obtain sufficient appropriate evidence for tangible capital assets as the department did not have adequate systems in place to record this.
Intangible assets disclosed were overstated, he said, and "consequently, I was unable to determine whether any further adjustments were necessary to the intangible assets stated at [about R3.5bn]".
The department did not maintain accurate and complete records of the contractual information used to determine commitments. This led to commitments being understated by an undeterminable amount,
The auditor-general also issued the department’s special defence account with a qualified audit. The account is generally used for buying weapons and equipment and for funding covert activities.
"I was unable to determine whether any adjustments were necessary to sensitive projects expenditure stated at [close to R358m] … to the financial statements and financial assets stated at R142m."
Defence director-general Sam Gulube said the department would address the asset-management environment and institute consequence management and continue to work with the Treasury on improved defence allocation.
Defence minister Nosiviwe Mapisa-Nqakula has bemoaned the continued decline in the funding for her department, saying the allocation declined in real terms for 20 years by 5% a year to a mere 1% of GDP. She said the appropriate funding level, as articulated in the defence review, would require a steady increase to at least 2% of GDP.
"Some of the countries in Sadc are injecting resources to build their military capacity through acquisition programmes. Conversely, SA is on a path of reduced defence expenditure, placing serious constraints on the effective and efficient execution of the defence mandate, she said.