There are doubts about 12% of audited government departments’ and entities’ ability to continue as a going concern, including Eskom, which had a deficit of R20.5 billion at the end of the 2019-’20 financial year.
Auditor-General Tsakani Maluleke was worried that the Auditor-General of South Africa’s (AGSA) calls for action were “simply not heeded”.
On Friday, AGSA provided the Standing Committee on the Auditor-General (SCOAG) with a high-level briefing on the 2019-’20 audit outcomes for national and provincial departments and their entities.
Maluleke said there were signs of improvement, but she was concerned that these were not the progressive and sustainable improvements required.
AGSA found widespread weaknesses in basic internal controls and little movement towards investing in preventative controls.
This and the prevalence of recurring findings and weaknesses mean the assurance being provided by senior management and accounting officers should be improved.
AGSA audited 427 departments for 2019-’20. Out of these, 111 obtained clean audits – an improvement on the previous year’s 98 (out of 424).
Out of the 427, 173 auditees obtained unqualified audits with findings, 78 qualified audits with findings, three adverse findings, 18 disclaimed findings and 44 were not completed by the time the report was compiled.
In total, 66 auditees improved on the previous year, while 35 regressed.
The departments that completed their audits were responsible for a total expenditure budget of R1 533 billion.
Of these, 2% of the auditees’ financial statements were not reliable enough for financial analysis, 12% cannot continue to operate as going concerns in the foreseeable future based on budgets disclosed in financial statements and 66% of them showed indicators of financial strain.
AGSA also found that annual unauthorised expenditure increased from R1.65 billion the previous year to R18.12 billion in 2019-’20.
Almost 100% of this was related to the overspending of budgets.
The Department of Social Services was the biggest culprit, with just over R15 billion due to early payment of April social grants in response to Covid-19 lockdown measures.
AGSA found there was pressure on provincial departments of education and health – not one could achieve a clean audit, albeit that the audits of the Western Cape and Limpopo departments of health are still outstanding.
AGSA’s findings on state-owned enterprises (SOEs) painted another grim picture.
“SOEs disclosed significant doubt in financial statements about their ability to continue operating as going concern in foreseeable future,” read the AGSA presentation.
“In some cases, the financial statements were not reliable enough to analyse due to adverse/disclaimed opinion.”
Some SOEs, like Eskom, ended the year in deficit. Eskom’s deficit was R20.5 billion.
“Eskom disclosed significant doubt in financial statements about their ability to continue as going concern,” read the presentation.
In a statement released after the meeting, SCOAG chairperson Sakhumzi Somyo said the committee noted that the report “paints a very bleak picture of financial management in government departments nationally and provincially, as well as state-owned enterprises”.
“The AG produces these reports and they are lamented but there seems to be no progress. There is no excuse for this lack of financial management in the public sector,” read the statement.
“The committee has also noted that instability at leadership level is one of the main factors that has added to the challenges faced by the AG when conducting audits.
“This year was difficult as a result of delays due to the Covid-19 pandemic but the AG reported that it was made more difficult by the instability at accounting officer and accounting authority level.”