‘Frivolous’ spending costs state R1bn
by Penelope Mashego and Khulekani Magubane,
2015-11-26 05:46:48.0
THE auditor-general Kimi Makwetu has once again laid bare the extent of wasteful and irregular spending by the state after on Wednesday reporting that it lost R936m in the 2014-15 financial year to fruitless and wasteful expenditure from R1.2bn the previous year.
In his latest audit report, Mr Makwetu says the state spent R32m trying to contain the wastage by cancelling irregular contracts or contracts of nonperformers.
Poor spending choices are a concern as the economy slows down and the Treasury has promised tighter controls on the budget.
Earlier this month, Judge Dennis Davis warned of a tax revolt in reaction to state corruption and unwise spending.
The state was spending more than it was receiving in tax revenue, the judge warned.
Irregular expenditure — defined as money spent without complying with the law — amounted to R25.7bn, the report said.
That, however, was a huge improvement on the R62bn recorded previously.
Mr Makwetu said "deficiencies" were not tackled fast enough and managers did not take his recommendations to heart, so there was only a slight overall improvement in the 468 national and provincial departments and entities audited that spent slightly more than R1-trillion.
He highlighted a lack of leadership in stemming the problem. The problems are numerous.
Barely a third (28%) got clean audits.
Unqualified audit opinions with findings declined 2% from 237 (50%) in the previous year to 224 (48%).
Education, Health and Public Works — which together spend about a third of the national budget through 30 entities — had the worst outcomes. Only three of the 30 entities, achieved clean audits.
"There should be a focus on these departments to ensure a meaningful movement towards accurate, accountable and transparent financial and performance reporting," Mr Makwetu said.
Overall, more than half (54%) did not submit reports of an adequate quality, although this was a slight improvement on last year.
Only a third did not have findings against them relating to compliance with the Public Finance Management Act.
Mr Makwetu said nearly a third had problems with supply chain management, making up a large component of the irregular expenditure.
The auditor-general said it was important that investigations into the irregular expenditure be conducted. "The key driver for these findings continues to be auditees that do not follow competitive or fair procurement process," read the report.
Mr Makwetu said there was a decrease in unauthorised expenditure, but that the problem persisted because of slow responses by management to implement and improve financial controls.
"Once again, the absence of follow-up and real consequence around these transactions at a number of auditees creates more vulnerability for the control weaknesses to be taken advantage of, resulting in possible and significant losses to the fiscus."
Democratic Alliance spokesman for co-operative governance and traditional affairs Kevin Mileham concurred with the auditor-general’s view that political will among national and provincial government officials was sorely lacking.
"I think the auditor-general is rightfully quite upset with the lack of progress. The follow-up on last year’s audits have not been complied with. Supply chain management has been a recurring scene in the audit outcome reports and we have heard promise after promise that this will be dealt with," Mr Mileham said.
Overall, 131 auditees received unqualified reports with no opinions, 224 got unqualified with opinions, 68 were qualified with findings, three were adverse with opinions, 14 got disclaimed reports with findings and 28 still have not submitted their reports.
A qualified opinion means that the auditor-general found misstatements for specific amounts in the financial statements, or that there was insufficient evidence for him to conclude that the amounts were not materially misstated.
An unqualified opinion means that the statements give a true and fair view and comply with reporting requirements.
Limpopo, the North West and Gauteng received adverse reports with findings for some of their entities, meaning that the misstatements represent a large portion of their financial statements. The provincial units that got adverse opinions include Gauteng’s G-Fleet management, Limpopo Road Agency and the North West’s Madikwe River Lodge.
Kimi Makwetu. Picture: KEVIN SUTHERLAND/SUNDAY TIMES
THE auditor-general Kimi Makwetu has once again laid bare the extent of wasteful and irregular spending by the state after on Wednesday reporting that it lost R936m in the 2014-15 financial year to fruitless and wasteful expenditure from R1.2bn the previous year.
In his latest audit report, Mr Makwetu says the state spent R32m trying to contain the wastage by cancelling irregular contracts or contracts of nonperformers.
Poor spending choices are a concern as the economy slows down and the Treasury has promised tighter controls on the budget.
Earlier this month, Judge Dennis Davis warned of a tax revolt in reaction to state corruption and unwise spending.
The state was spending more than it was receiving in tax revenue, the judge warned.
Irregular expenditure — defined as money spent without complying with the law — amounted to R25.7bn, the report said.
That, however, was a huge improvement on the R62bn recorded previously.
Mr Makwetu said "deficiencies" were not tackled fast enough and managers did not take his recommendations to heart, so there was only a slight overall improvement in the 468 national and provincial departments and entities audited that spent slightly more than R1-trillion.
He highlighted a lack of leadership in stemming the problem. The problems are numerous.
Barely a third (28%) got clean audits.
Unqualified audit opinions with findings declined 2% from 237 (50%) in the previous year to 224 (48%).
Education, Health and Public Works — which together spend about a third of the national budget through 30 entities — had the worst outcomes. Only three of the 30 entities, achieved clean audits.
"There should be a focus on these departments to ensure a meaningful movement towards accurate, accountable and transparent financial and performance reporting," Mr Makwetu said.
Overall, more than half (54%) did not submit reports of an adequate quality, although this was a slight improvement on last year.
Only a third did not have findings against them relating to compliance with the Public Finance Management Act.
Mr Makwetu said nearly a third had problems with supply chain management, making up a large component of the irregular expenditure.
The auditor-general said it was important that investigations into the irregular expenditure be conducted. "The key driver for these findings continues to be auditees that do not follow competitive or fair procurement process," read the report.
Mr Makwetu said there was a decrease in unauthorised expenditure, but that the problem persisted because of slow responses by management to implement and improve financial controls.
"Once again, the absence of follow-up and real consequence around these transactions at a number of auditees creates more vulnerability for the control weaknesses to be taken advantage of, resulting in possible and significant losses to the fiscus."
Democratic Alliance spokesman for co-operative governance and traditional affairs Kevin Mileham concurred with the auditor-general’s view that political will among national and provincial government officials was sorely lacking.
"I think the auditor-general is rightfully quite upset with the lack of progress. The follow-up on last year’s audits have not been complied with. Supply chain management has been a recurring scene in the audit outcome reports and we have heard promise after promise that this will be dealt with," Mr Mileham said.
Overall, 131 auditees received unqualified reports with no opinions, 224 got unqualified with opinions, 68 were qualified with findings, three were adverse with opinions, 14 got disclaimed reports with findings and 28 still have not submitted their reports.
A qualified opinion means that the auditor-general found misstatements for specific amounts in the financial statements, or that there was insufficient evidence for him to conclude that the amounts were not materially misstated.
An unqualified opinion means that the statements give a true and fair view and comply with reporting requirements.
Limpopo, the North West and Gauteng received adverse reports with findings for some of their entities, meaning that the misstatements represent a large portion of their financial statements. The provincial units that got adverse opinions include Gauteng’s G-Fleet management, Limpopo Road Agency and the North West’s Madikwe River Lodge.
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