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Johannesburg – The Free State, Mpumalanga and North West provinces failed to improve their audit outcomes over the past three years, according to Auditor General South Africa (AGSA).
Auditor general (AG), Kimi Makwetu, shared the past year’s audit results at a press briefing held at Parliament on Wednesday.
According to the report, the three provinces with the biggest improvement were the Eastern Cape, KwaZulu-Natal and Gauteng. The Western Cape received the most clean audit opinions, followed by Gauteng and KwaZulu-Natal.
READ: Western Cape best performer in 2015/16 – AG
The Free State and Mpumalanga, though, in particular had regressed. Resolutions that leadership in these provinces had committed to were not implemented quickly enough, explained the AG.
Makwetu said the North West’s audit results over the past three years were “erratic”. This is because improvements in one year were set off by regressions in the following year.
For the 2015/16 year in particular, the Free State, Mpumalanga and North West received the least number of unqualified audit opinions across departments and public entities as each respectively scored 11%, 29% and 30%.
Free State
In the previous audit report, the AG warned that irregular expenditure could increase if procurement processes are not reviewed.
The provincial leadership subsequently committed to meeting with the AG on a quarterly basis to address internal controls and compliance issues. The provincial leadership also committed to investigate unauthorised and irregular expenditure.
But management failed to implement these commitments, and this resulted in an increase in irregular expenditure from R1.6bn in the previous year to R1.9bn.
The education department, health and human settlements departments accounted for 95% of this expenditure. This is R399m by education, R466m by the health department and R965m by human settlements. The education and health departments, which account for 69% of the provincial budget, also received qualified opinions.
Some departments did not disclose their irregular expenditure in financial statements, which means there could be an additional increase of R1.1bn in irregular expenditure, stated the report.
The leadership “failed to lead by example” by enforcing consequences for deviations from Supply Chain Management (SCM) processes, stated the report.
ALSO READ: Irregular expenditure balloons to over R46bn
Unauthorised expenditure decreased by 66% from R601m to R202m over the past year. Most (78%) of this expenditure is attributed to the education department, at R157m. Fruitless and wasteful expenditure by the province came to R9.7m.
The office of the Premier, Ace Magashule, incurred the most, at R4.2m.
Mpumalanga
The province has been struggling to improve its compliance with legislation for the past three years. This is owing to the “poor quality” of the financial statements submitted for auditing and failure to comply with SCM procurement processes set out by the constitution.
“Non-compliance with SCM legislation has been the main cause of the escalating irregular expenditure,” stated the report. This accounts for 98% or R3.9bn of the irregular expenditure incurred. Total irregular expenditure for 2015/16 came to R4bn, up by R1bn from 2013/14.
The health department and human settlements department contributed R1.9bn and R1.1bn, respectively, to the total amount. The irregular expenditure is attributed to the procurement of linen, food, pharmaceuticals, medical waste removal and RDP houses.
The high levels of irregular expenditure indicate that disciplines should be put in place to ensure procurement is “fair, equitable and transparent”. But these disciplines have not been "institutionalised", making auditees susceptible to the risk of fraud, according to the report.
Unauthorised expenditure was incurred by the agriculture, rural development, land and environmental affairs department and the culture, sport and recreation department. This is R2.7m and R6.4m, respectively.
Fruitless and wasteful expenditure came to R34.6m.
North West
The province has managed to submit financial statements on time, but the quality and availability of the records are a concern. These records have material misstatements, stated the report.
Further, SCM transgressions resulted in 98% of irregular expenditure incurred. This is owing to a “lack of consequence management, non-compliance with legislation and a slow response by political leadership”. As a result irregular expenditure came to R2.9bn, up from R2bn in 2015.
The community safety and transport management department accounted for R891.8m (30%) of this amount. The department of health incurred R696.7m (23%) of irregular expenditure and the department of public works and roads incurred R482.7m (16%).
There is a total balance of R13.2bn in unresolved irregular expenditure for the province.
“The high levels of non-compliance with SCM prescripts increase the risk that value for money might not be achieved when goods and services are procured.”
The AG recommended that oversight structures be put in place to hold officials accountable for these transgressions.
Fruitless and wasteful expenditure came to R41.8m. The department of health accounted for 36% of this, at R15.3m.
Unauthorised expenditure, which was only incurred by legislature came to R9m.
