Key state departments can’t account for spending

2014-11-26 14:55

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Auditor-General Kimi Makwetu has expressed concern that the departments of health, education and public works, which are key to basic service delivery, cannot “adequately and accurately” account for how they spent 37% of government’s R1 trillion of last year’s budget.

Makwetu was presenting the audit outcomes for all provincial and national departments, including their entities, for the financial year 2013-2014, which ended in March this year.

He also revealed that the reason his office did not pick up on the overspending in President Jacob Zuma’s Nkandla residence three years ago was because auditors could not perform an audit of the spending. This was because documents related to the controversial security upgrades were not available.

Makwetu has warned that unless the departments of health, education and public works pick up their performance and properly control how they spend public money, the national development plan – the state’s blueprint for eliminating poverty, reducing inequality and unemployment by 2030 – would be a pipe dream.

“The main service delivery sectors [departments] are lagging behind, with only six [provincial] departments in the education, health and public works sectors getting it right. This is a red flag for the implementation and monitoring of the national development plan where performance in these sectors is key to its success,” said Makwetu.

He lamented the fact that only 20% of all the 469 provincial and national departments and their entities had “good” leadership at management level that understood their roles and responsibilities and discharged them “effectively”.

Makwetu said irregular expenditure continued to be a serious concern because it increased from R25 billion in the 2012-2013 financial to a staggering R62.7 billion this year. This figure included R29.1 billion from the previous years.

“Such expenditure does not mean that money was wasted or that fraud was committed, but it is an indicator that legislation is not being adhered to, including legislation aimed at ensuring that procurement processes are competitive and fair. It is also an indicator of a significant breakdown in controls at some auditees,” said Makwetu.

Makwetu said it was a major setback that departments continued to hire inexperienced people in crucial positions and singled out chief financial officers who “ran to consultants” at the end of the financial year to help correct their financial mistakes as the biggest culprits to poor financial audit outcomes in government.

He also highlight noncompliance with laws and regulations pertaining to tenders, a lack of consequences for government officials who fail in their financial duties and a lack of political will to change the “habit” of bad management as some of the key issues which, if left unattended, would see the poor audit outcomes continue to affect service delivery and how taxpayers’ money was spent by departments.

Of the 469 departments and entities audited, only 119 received clean audits. This was an improvement of 3% from the 22% of auditees in the previous financial year.

However, only 40 of the 79 public entities that received clean audits had financial control environments characterised by “strong leadership, good governance as well as financial and performance management controls that prevent or detect and correct errors and noncompliance”, said Makwetu.

While Makwetu praised departments and entities that received clean audits as having “managers and leaders who understand their responsibilities and discharge their duties in an effective manner” he was harsh on departments and entities that performed poorly.

A lack of consequences for government officials also meant that officials did nothing to improve their performance because they did not face any consequences for it.

Makwetu warned that unless government officials faced consequences for poor performance, and in particular not following laws and supply chain management prescripts, poor audit outcomes would remain for years to come.

“If you have that situation where nothing happens and you still have the same people who produced the same results of three years ago, the chances are that as long as you do not have consequences you will continue that trend that we are seeing,” said Makwetu.

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