Auditor General uncovers further potential losses of public funds as stricter rules kick in | Fin24
 
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Auditor General uncovers further potential losses of public funds as stricter rules kick in

Feb 03 2020 16:56
Londiwe Buthelezi

The auditor general’s office has uncovered an additional R2.8bn of "unacceptable expenditure" in public institutions within the first year of implementing changes suggested by the amended Public Audit Act. And that was just from 16 of the 422 government entities that are scrutinised, Auditor General Kimi Makwetu said on on Monday.

Makwetu whose last municipal audit report showed that management of public funds deteriorated further in the financial year ended 30 June 2018, said it had became clear during the first phase of implementing the amendments to the Public Audit Act that controls have been destroyed in many public institutions. Preventative measures were often non-existent.

“There’s evidence of rising levels of unacceptable expenditure,” said Makwetu, during the Institute for Internal Auditors SA’s 2020 Public Sector Forum in Kempton Park.

“If the money has not yet been stolen, then the environment is fertile for those that are planning to take it next week,” he added.


The amendments to the Public Audit Act came into effect on April 1, 2019. Changes include the broadening the AG’s scope to look at certain transactions – called material irregularities – that have not yet have resulted in a loss for government institutions, but where there is good reason to suspect they will cause the state to lose money.

The amendments also give the AG’s office new powers to refer material irregularities to investigative bodies like the Hawks and Special Investigative Unit, and to hold accounting officers responsible for correcting the irregularities within 20 days, failing which the AG could issue a certificate of debt in their names.

The amendments were applied for the first time to audit reports of 16 government institutions in the current fiscal year which ends on March 31.

In the 2020 fiscal year, which begins on April 1, a total of 89 government institutions - including state-owned companies and those who pay for procurement in areas like education, public infrastructure, water and sanitation - will be subjected to the new public auditing rules. These 89 entities account for 70% of the annual expenditure funded by National Treasury.

This year, the AG only scrutinised 16 institutions as it still needed to build capacity and train staff to conduct more intense audits. But in the 16 organisations alone, the new auditing standards triggered 28 material irregularities, over and above the irregular, fruitless and wasteful expenditure that the AG's office usually reports on.

“[The 28 irregularities] resulted in a possible financial loss of about R2.8bn. This is from a sample of 16 where we normally audit about 422 different audit reports. So, you can see what is possible in respect of other environments that we are now going to audit,” said Makwetu.

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