Slight improvements in SOE audits are no reason to celebrate, new AG Tsakani Maluleke warns

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Auditor-General Tsakani Maluleke.
Auditor-General Tsakani Maluleke.
  • Auditor General Tsakani Maluleke says a total deficit of R64.95 billion was incurred by the 29% of public entities.
  • Maluleke said there were 21 public entities that disclosed uncertainty about whether they will be able to continue as a going concern.
  • She said while audit outcomes improved for 66 auditees, audit outcomes for 35 auditees regressed.

Auditor General Tsakani Maluleke said while there were marginal improvements in the audit outcomes of national and provincial government departments as well as their entities, the improvement were not nearly enough to reverse the negative financial trend many auditees have been tracking for years.

Maluleke was releasing her first comprehensive audit outcome report as Auditor General since assuming the position last year.

The report seeks to assess procurement and financial management at government departments and state-owned entities (SOEs) against the standards of the Public Finance Management Act (PFMA).

With Eskom nursing a more than R460 billion debt hole, SAA under business rescue, Denel unable to pay salaries consistently, the Land Bank's liquidity troubles and the SABC retrenching staff to ease its costs, the state of government-owned companies has left much to be desired for some time.

The audit report found only 26% of auditees (111) that managed to produce quality financial statements and received a clean audit, a slight improvement from the 23% (93) of the previous year.

"These auditees represent 17% of the expenditure budget of R1.7 trillion at national and provincial government," Maluleke said.

She said 74% of the auditees received unqualified audit opinions on their financial statements, compared to 71% in the previous year. The number of auditees that submitted quality financial statements increased to 49%, which Maluleke said was still very low.

SOEs not winning

Regarding state-owned entities, the audit outcome report said SOEs disclosed significant doubt in financial statements about their ability to continue operating as a going concern in the foreseeable future.

"In some cases, the financial statements were not reliable enough to analyse due to adverse opinion. Some SOEs ended the year in deficit. Some annual financial statements were not submitted as result of business rescue procedure," the report said, referring to SAA.

The report said a number of SOEs - including Trans Caledon Tunnel Authority, Denel, the Land Bank, Safcol and the Independent Development Trust - completed their audits well after the cut-off date while the audits of the Post Office and Nuclear Energy Corporation of SA were still in progress.

The report said while Transnet ended the year with a profit of R3.9 billion, Eskom ended year in a deficit of R20.5 billion as the power utility disclosed that there was significant doubt in financial statements about its ability to continue as a going concern. Transnet's irregular expenditure stands at R56.2 billion, while Eskom's is at R11.17 billion.

Maluleke said there were 21 public entities that disclosed uncertainty about whether they will be able to continue as a going concern, including the Road Accident Fund, SAn National Roads Agency, Property Management Trading Entity and a number of provincial public entities.

"There are also key public entities that are similarly under financial pressure. A total deficit of R64.95 billion was incurred by the 29% of public entities whose expenditure exceeded their revenue. About 92% of the total deficit is related to the Road Accident Fund," Maluleke said.

Maluleke said the financial statements of 17 public entities were not reliable enough for financial analysis, including the Passenger Rail Agency of SA.

Maluleke said the audit outcome report found that while audit outcomes improved for 66 auditees thanks to the filing of crucial vacancies and the improvement of internal controls, audit outcomes for 35 auditees regressed.

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