Auditor-general bemoans national and provincial audit outcomes

As irregular expenditure soared to R62,6bn,  auditor-general Kimi Makwetu bemoaned the lack of internal controls in many government departments.

Irregular expenditure is that which does not comply with legislation, for example, on supply chain management.

Releasing the national and provincial government audit outcomes for 2018/2019 on Wednesday, Makwetu said the audit results were “disappointing” and called on government leaders to take urgent action to halt the trend, restore accountability, and prevent mismanagement of public funds.

Irregular expenditure by national and provincial departments climbed 23% to R62.6bn in the 2018/2019 financial year from the R51bn the previous year. While unauthorised expenditure decreased by 23%, it remained high at R1.4bn and this figure could increase by R281m once outstanding audits are taken into account.

A total of 223 audited departments lost R849m in fruitless and wasteful expenditure, though this figure could also increase by R758m if outstanding audits are taken into account.

The amount of irregular expenditure could be even higher as about a third of the audited departments received qualified audits as the amount disclosed was incomplete, or it was disclosed that they had incurred irregular expenditure but that the full amount was unknown. In addition the auditor-general’s office could not audit R2.33bn worth of contracts due to missing or incomplete information.

Makwetu said the executive authorities and oversight structures in government do not lead by example in setting the correct tone to “enable accountability, transparency and good governance”.

Only 26% of auditees received clean audits.

Overall the audit outcomes have regressed since 2014/2015 with 80 auditees improving and 91 moving backwards. Included in the report are national and provincial  governments, which consist of 432 auditees including several state-owned enterprises (SOEs).

He highlighted an emerging risk of increased litigation and claims against departments. More than a third of the departments have claims against them in excess of 10% of their next year’s budget.

Financial health improvement

Makwetu said, however, that the financial health of auditees in most provinces either improved or remained unchanged for the period under review. The Western Cape continued to produce the best results; KwaZulu-Natal and North West remained unchanged; Eastern Cape and Limpopo progressed; and Mpumalanga, Northern Cape and Gauteng regressed.

“The overall disregard for financial management laws and regulations is pervasive,” Makwetu said about provincial audit outcomes.

The results of SOEs continued to regress with none of them managing to obtain a clean audit report. Makwetu noted that the financial health of SOEs “remained under significant pressure” and there is significant doubt whether some of them can continue with their operations in future without financial assistance.

ensorl@businesslive.co.za