Johannesburg – Auditor General Kimi Makwetu has said a review of his office's powers by Parliament could enable it to refer auditees for investigation and possibly take legal action against those who have diverted public funds.
The AG on Wednesday released its financial report for the country’s national and provincial departments, as well as government entities for the 2016/17 financial year.
A total of 422 departments and entities were audited, 37 more than the 385 auditees in the 2015/16 financial year. Among the report's key findings was that irregular expenditure had increased by 55% to reach R45.6bn
During his address Makwetu said that his office’s powers were being reviewed by Parliament. “Putting a review of powers before Parliament is not a small step,” he said.
Currently the Public Audit Act only allows the AG to audit and report on what he finds, with no obligation to take his findings further.
“We do not have power to dismiss people as an audit office, nor do we have power to do all other things. We are doing our bit to shine light on many areas that are in the dark,” he said.
Makwetu explained that if his office's mandate were to change, the AG may then be able to refer auditees for investigation to get to the root of irregular spending, diverting public funds or negligence.
Follow the money
While the AG does not have the capacity to investigate, other institutions like the Special Investigating Unit and the Public Protector are empowered to investigate, he said.
Speaking to Fin24 on the sidelines of the briefing, Makwetu used an example of referring a transaction of R1.5m for investigation.
Even if R1m is found to be legitimate, the AG can still chase the remaining R500 000 from the auditee through a legal process as a mechanism to restore money to the fiscus.
When asked how the timeline of such an investigation would impact financial reports, Makwetu said that nothing could, in principle, be done about delays in investigation. “If it takes long, then it means the person being investigated is not cooperating. There is nothing we can do about it.”
The larger issue was resources to conduct the investigations. “We have tried through engagement with Parliament to secure resources upfront and to give them to independent institutions to do investigations,” said Makwetu.
In its report the AG redflagged irregular expenditure of R45.6bn by 265 auditees. The provinces of KwaZulu-Natal, Free State, Limpopo and the Eastern Cape were the main contributors to the increase in the irregular expenditure.
The sectors with the highest amount of irregular expenditure were health (R11.8bn), transport (R6.4bn) and education (R6.1bn).
During his address Makwetu said that the true figure for state-linked irregular expenditure could be as much as R65bn, as some auditees were still being audited, while other auditees had not disclosed the amounts of irregular expenditure.
Over the past four years irregular expenditure has amounted to R128bn. The main driver of irregular expenditure was non-compliance with supply chain management processes, he said.
The ANC issued a statement on Thursday calling the increase in irregular spending “shameless” and a “brazen disregard” for accountability and commitment to clean governance.
The governing party also said that steps should be taken to recover the irregular expenditure from liable parties. “Continuing deterioration in the audit outcomes of state owned companies requires decisive leadership and urgent action by the responsible ministries and departments,” said ANC national spokesperson Zizi Kodwa.
The Organisation Undoing Tax Abuse (OUTA), meanwhile, in a statement also raised concerns over the audit outcomes. “This is a serious concern to OUTA, as it signifies a government which is lacking in discipline and financial hygiene when managing the public’s taxes,” said the group's chairperson Wayne Duvenage.
OUTA wants Finance Minister Malusi Gigaba to take strict disciplinary action against executives who have allowed irregular expenditure to “balloon” as much as it has. “Failing this, the Minister and those who abuse their authority will be held accountable by the people,” said Duvenage.
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