Cape Town - Auditor general Kimi Makwetu has identified the fact that more and more state and provincial departments are contesting audit outcomes without substance, with some even threatening his office with legal action, as a concerning trend in 2015/16 audit processes.
Briefing Parliament’s Standing Committee on Public Accounts (Scopa), Makwetu noted that contestations and pushbacks on audit outcomes without substance are on the increase. “This makes for a very unpleasant exercise to conduct audit exercises,” he said, “as this is an accountability process, not legal”.
Makwetu said it is concerning that there has been little change in the audit outcomes at state and provincial departments. “There has been little improvement at an overall level of getting the basics right. Less than half of the auditees had good basic principles in place.”
In addition, there has been no improvement in audit opinions on financial statements, information provided has been generally unreliable and non-compliance with legislation and regulation remains high.
“There are also signs of financial distress at a number of state and provincial departments,” Makwetu said. “More auditees incurred deficits. Some departments are funding cash shortfalls from the next year’s budget, while a high number of departments have poor revenue management abilities and can’t pay creditors within the required 30 days.”
Turning to irregular expenditure, Makwetu said 92% of such spending occurred because departments did not comply with supply chain management legislation.
“Irregular expenditure, however, does not necessarily mean that money was wasted or that fraud was committed,” he pointed out. “It’s rather an indicator of non-compliance which requires investigation into whether it was an unintended error, negligence, or done with the intention to work against the necessary requirements.”
In the 2015/16 financial year, the highest contributors of irregular expenditure were:
- Prasa: R13.9bn;
- KZN Health Department: R2.5bn;
- Gauteng Human Settlements Department: R2.3bn;
- Gauteng Roads and Transport Department: R2bn;
- Mpumalanga Health Department: R1.9bn; and
- National Department of Water and Sanitation: R1.7bn.