Presenting the 2022-23 general report for national and provincial departments, their affiliated entities, and legislatures in Parliament, Auditor-General (AG) Tsakane Maluleke asserted that the results indicate a general improvement during the fourth year of the current administration’s tenure.

By Telegram Correspondent

Tabling the 2022-23 general report for national and provincial departments, their entities and legislatures in Parliament, Auditor-General (AG) Tsakane Maluleke said the outcomes reflect an overall improvement over the term of the current administration, now in its fourth year.

However, she pointed out that there are still weaknesses in planning, monitoring and reporting on service delivery; challenges in infrastructure management; and increasing pressure on the fiscus due to a lack of prudence in spending.

“Over the administration’s term, we have seen some encouraging signs of improvement in the ability of national and provincial governments to transparently report on their finances and performance and to comply with key legislation. 

“However, those auditees with the greatest impact on the lives of South Africans and on government finances, which we refer to as ‘high-impact auditees’, are lagging on financial and performance management disciplines. This is placing further pressure on government finances,” Maluleke noted.

These high-impact auditees comprise departments, public entities and state-owned entities that are 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.

The AG cautioned that when auditees, especially high-impact auditees, do not properly manage their performance, finances and infrastructure, this directly affects the delivery of key government programmes that are intended to improve the lives of South Africans and to alleviate hardships stemming from tough economic conditions and poverty.

Based on the insights on service delivery planning, monitoring and reporting, infrastructure and financial performance, the national audit office identified three main weaknesses that inhibit progress:

• a culture of no accountability and consequences

• ineffective resource management

• inadequate intergovernmental planning, coordination and support.

“If those in the accountability ecosystem charged with governance, administration and oversight were to diligently implement our recommendations, more public institutions would be characterised by good governance, sustained performance and responsiveness to the service delivery needs of South Africans,” adds Maluleke.

The AG reported that through the material irregularity (MI) process, accounting officers and authorities have taken action to prevent or recover financial losses of R2,55 billion since 2019, with some of this amount still in the process of being recovered. From 1 April 2019 (when the amendments to the Public Audit Act became effective and the AGSA began implementing the MI process) until 30 September 2023 (the cut-off date for MIs to be included in the latest general report), the audit office identified 266 MIs.

“We estimate the total financial loss of the 240 MIs that involved a material financial loss to be R14,34 billion. The 26 MIs with an impact other than financial loss involved material public resources not being used (most often health facilities), harm to the general public due to infrastructure neglect and poor-quality service delivery, and harm to public sector institutions mainly because of the non-submission of financial statements,” the AG pointed out.

“We are pleased that the MI process is proving to be effective in enforcing accountability and protecting state resources. Departments and public entities can direct the recovered funds towards service delivery, enabling the government to achieve its strategic priorities,” Maluleke says.

Maluleke points out though that her office can only finalise and report on an audit in time if the AGSA receives both the financial statements and the performance report for auditing by the legislated date of 31 May each year.

The AG reported that there were 31 outstanding audits at the time of the report. “Of the 26 audits we reported as outstanding in our previous general report – either because the auditees had submitted their financial statements late or not at all, or because of delays encountered 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 expressed concern that some of the auditees have failed to submit financial statements for auditing as required by law for several years. She called on Parliament to pay significant attention to these auditees as this translates into a lack of transparency and accountability.

The AG noted that the number of clean audits continues to increase every year due to significant effort and commitment by the leadership, officials and governance structures of these institutions.

She re-emphasised the importance of a clean audit, which shows that an auditee’s financial statements and performance report give a transparent and credible account of its finances and its performance against the targets that had been set. 

It also means that the auditee had complied with the important legislation that applies to financial and performance management. This enables everyone with an interest in the auditee – particularly those who need to oversee its performance and provide support for it to succeed – to determine if the auditee is addressing citizen needs and delivering services.

“A clean audit is not always an indicator of good service delivery,” the AG explained.

“However, a clean audit positions an auditee to transparently communicate to citizens on whether and when their needs will be met through accurate records, which also enables informed decisions by the different roleplayers in the accountability ecosystem.

We have seen that auditees with institutionalised controls and systems to plan, measure, monitor and account for their finances and performance, and to stay within the rules, often also have a solid foundation for service delivery to the people of South Africa.”

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

Maluleke says, “It is commendable that these auditees that 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. ”

The AG also commended the 53 auditees (36%) that have managed to retain their clean audit status over the administrative term through practices such as institutionalising and monitoring key controls (including preventative controls), and by having all roleplayers in the accountability ecosystem committed to fulfilling their monitoring, governance and oversight roles.

She further 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 their performance reporting.

“Some of these auditees have been working towards this goal for many years and we encourage them to persevere in overcoming the last hurdle. If they manage to do so, we expect to see an increase in the number of clean audits for 2023-24. This will set a strong foundation from which the next administration can build when its term starts in 2024-25.”

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

Maluleke reported an increase in adverse audit opinions due to three public entities moving from a disclaimed opinion last year to an adverse opinion in 2022-23.

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