Auditor-general Kimi Makwetu. Picture: BUSINESS DAY
Auditor-general Kimi Makwetu. Picture: BUSINESS DAY

Irregular spending by the national and provincial governments is continuing to rise‚ albeit at just 1%‚ from R45.3bn in March 2017 to R45.5bn in March this year.

This is according to a report presented to a joint meeting of the standing committees on public accounts and appropriation on Wednesday by Auditor-General Kimi Makwetu‚ in which he detailed the audit outcomes of more than 434 government entities for the 2017-2018 financial year.

Makwetu reported that the number that received clean audit outcomes — those who accounted properly for public funds — had declined during the period under review and had been doing so for the past four years.

The AG told MPs that of the 295 departments and entities that received unqualified audits‚ only 99 (or 25%) obtained such audits with no findings, while 196 were unqualified audits with findings.

“The current year‚ in terms of clean audits‚ has shown an all-time low in terms of which we have only 99 from 129 departments that have clean audits‚ so the level of clean audits has unfortunately regressed‚” said Makwetu.

“There are reversals of audits outcomes that were achieved in the previous year as well as the year before. So we’ve got a whole 75% of departments and entities that still need to do a significant amount of work to be able to produce reliable financial statements that are without qualifications.”

Makwetu said the bulk of the R45bn irregular expenditure was incurred by departments such as water and sanitation‚ correctional services‚ provincial departments of health in KwaZulu-Natal and Gauteng; and roads and public works in the North West and the Free State.

State-owned enterprises

The SABC (R571m)‚ Airports Company SA (R544m), and arms maker Armscor (R12m) contributed to the irregular expenditures incurred by state-owned enterprises (SOEs).

Makwetu said the figures were likely to rise and that the financial statements of other SOEs, such as SAA and its subsidiaries, and Denel have still not been filed. He did not expect them to paint a rosy picture, saying poor procurement management and the submission of erroneous financial statements were the root causes of irregular expenditure.

Makwetu also revealed that they could not conduct an audit of government tenders to the tune of R6.4bn due to missing or incomplete documents‚ while tenders amounting to R265m were related to government employees‚ in breach of legislation.

The AG also reported to parliament that there was an increasing tendency among government departments to squabble with his staff about their audit findings.

“The audit environment has become one of major contestation‚ and we do not shy away from those contestations because they enrich the final outcome. But there are those outliers who are contesting the audit because they don’t like [the results]‚ not because they’ve got evidence to support their assertions. Sometimes people can’t live with the fact that one plus one is two‚ sometimes they want it to be a different answer.”

Committee chair Themba Godi said the state of financial management in the government would not improve until cabinet ministers started taking action against errant officials. He said this was the reason why the Public Audit Act had been amended: to make the recommendations of the AG legally binding in the same way those of the Public Protector are.

“We seem to be running away from the real culprits‚ the ministers and the directors-general. Those are people who must act‚ and we are always moving around them,” said Godi. “The reason we have this amendment to the audit act is an admission that the ministers and the directors-general are not doing their work as per the Public Finance Management Act.”