Irregular government expenditure understated, says auditor-general

Auditor-general Tsakani Maluleke says irregular expenditure by national and provincial government departments increased by 34% in the 2020/2021 financial year to R167bn, indicating the flouting of supply chain laws when making decisions. 

While R167bn in irregular expenditure is alarmingly high, this is not a true reflection and could be even higher due to some government departments and entities not having completed their financial statements for audit by the auditor-general’s office. 

“For as long as there are those auditees who can’t give us a confirmation as to the completeness of that number [irregular expenditure], what we must assume is that the number will be higher had they reported it in a way that is credible,” Maluleke said on Wednesday. 

Irregular expenditure refers to spending by government departments that is not in line with legislation but it does not mean the funds were wasted or that fraud was committed. 

For the period under review there were 88 auditees including state-owned rail agency Prasa and the National Students Financial Aid Scheme (NSFAS) that did not confirm the completeness of their irregular expenditure, Maluleke said.  

Cash-strapped Prasa, which incurred irregular expenditure of R29bn, remains one of the biggest contributors to the national figure, according to the auditor. It is mostly caused by its non-compliance with supply chain management regulations. The NSFAS was responsible for R77,49bn of the total R167bn irregular expenditure, mainly because it did not consult with the minister on the funding rules and eligibility criteria for student bursaries. 

Maluleke tabled the outcomes of the audit findings in parliament on Wednesday. 

“In reality, irregular expenditure could be even higher, as 30% of auditees were qualified because the amount they disclosed was incomplete and/or they had incurred irregular expenditure, but the full amount was not known. We were also unable to audit R2.14bn worth of contracts because the information was missing or incomplete,” she said in the report.” 

The auditor-general noted that there has been an incremental increase in government departments and entities receiving clean audits  “due to significant effort and commitment by the leadership, officials and governance structures”.

There are 115 auditees (48 departments and 67 public entities) that obtained a clean audit outcome, compared to 109 in the previous year. Together, these auditees are responsible for 19% of the R1,9-trillion expenditure budget managed by national and provincial government. 

“While we are yet to see the progressive and sustainable improvements required to realise an overall change in outcomes, we note and acknowledge the efforts of the many accounting officers and authorities that seek to instil a culture of good governance, accountability and discipline in the system,” Maluleke said. 

maekot@businesslive.co.za