Auditor-General: government wasted R22 billion during Ramaphosa’s term

Government wasted R22 billion in President Cyril Ramaphosa’s current term due to wasteful expenditure and irregularities, as well as suspected fraud and corruption, according to the Auditor-General.

This includes R7.62 billion in wasteful expenditure over the past five years, as well as R14.34 billion in financial losses due to 240 cases of non-compliance, suspected fraud and irregularities, placing an added and unnecessary burden on government finances.

The Auditor-general cited poor payment practices, the government getting no benefits from money spent, unfair procurement processes, neglected maintenance, and poor planning.

According to the 2022-23 general report for national and provincial departments, their entities and legislatures that auditor-general, Tsakani Maluleke, tabled in parliament today there was, however, “an overall improvement” in the audit outcomes for national and provincial government and public entities.

She pointed out that more than R386 billion of government guarantees are exposed to state-owned enterprises (SOEs) borrowing programmes at a time when they reported poor growth, unsustainable operational challenges and high debt-servicing costs. Several also seem to be at risk of defaulting on their debts.

In addition, state departments have R113 billion in claims against them of which R68 billion is in the health care sector. When these claims are paid, the money comes from funds budgeted for service delivery.

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Overall improvement, especially over past financial year, Auditor-General says

However, Maluleke said there was an overall improvement in the audit outcomes of departments as well as public entities, while more auditees improved their audit outcomes each year of the administrative term (2019 to 2024) than regressed.

In 2022-23, the net improvement was 37 auditees (9%), the biggest movement over the four-year period. The provincial government showed a net improvement of 44 (27%) and the national government a net improvement of 34 (15%).

She explained that her office can only finalise and report on an audit in time if it receives the financial statements as well as the performance report for auditing by the legislated date of 31 May of each year.

This time there were 31 audits outstanding at the time of the report. “Of the 26 audits we reported as outstanding in our previous general report, either due to the auditees submitting their financial statements late or not at all, or due to delays during the audit process, 12 had still not been completed at the time of this report, while the 2022-23 audits of another 19 auditees were also outstanding.”

Maluleke said she is concerned that some of the auditees failed to submit financial statements for auditing as required by law for a number of years and called on parliament to pay significant attention to these auditees as this translates to a lack of transparency and accountability.

The entities that did not submit financial statements are the SAA group, the North West Transport Investments Group, Denel Aerostructures, Costal TVET College, the Compensation Fund, the National Student Financial Aid Scheme (NSFAS) and the Unemployment Insurance Fund. Alexkor, Prasa and the Taletso TVET College submitted their financial statements late.

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Clean audits are important – Auditor-General

Maluleke again emphasised the importance of a clean audit, which shows that an auditee’s financial statements and performance report offer a transparent and credible account of its finances and performance against the set targets.

The 147 auditees (35%) that achieved clean audits in 2022-23 managed 16% of the R3,10 trillion expenditure budget in national and provincial government. In addition, the 162 auditees (39%) that received unqualified audit opinions with findings managed 48% of the budget.

“It is commendable that these auditees, who make up 74% of the auditee population, are able to publish credible financial statements, which is a positive development that must be encouraged. This augurs well for accountability,” Maluleke says.

She commended the 53 auditees (36%) that managed to retain their clean audit status over the administrative term through practices such as institutionalising and monitoring key controls and having all role players in the accountability ecosystem committed to fulfilling their monitoring, governance and oversight roles.

Maluleke also acknowledged the 37 auditees that are very close to obtaining a clean audit and only need to address one finding on either the quality of their financial statements or performance reporting.

Overall, the number of auditees with disclaimed audit opinions decreased, but Maluleke warned that if any of the 31 auditees with outstanding audits also received disclaimed opinions, the improvement in this area would be less significant. Nine of these audits were subsequently finalised, with an additional two auditees receiving disclaimed audit opinions.

These 193 high-impact auditees generally have poorer audit outcomes than other auditees and struggle with performance, financial and infrastructure management, Maluleke says. Auditees from this group also account for 48% of all outstanding audits and 65% of all modified audit opinions.

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High-impact auditees not doing too well

In total, 139 of the 193 high-impact auditees were required to report on their performance in 2022-23. Those excluded were the 50 technical and vocational education and training colleges, the Property Management Trading Entity, Water Trading Entity and Commission on Restitution of Land Rights.

The Auditor General raised material findings on the reported performance information of 127 (42%) of these auditees, as well as material findings on compliance with key legislation at 76% of the 178 auditees with completed audits.

Despite some encouraging signs of improvement, Maluleke says auditees with the greatest impact on the lives of South Africans and government finances, referred to as ‘high-impact auditees’, are lagging behind on financial and performance management disciplines, placing further pressure on government finances. These high-impact auditees comprise departments, public entities and state-owned entities collectively responsible for 85% (R2,64 trillion) of the expenditure budget.

“They contribute to delivering health services, skills development and employment, infrastructure development, safety and security, water and sanitation, energy and environmental and financial sustainability,” Maluleke says.