AG reports overall improved audit outcomes

The Auditor-General of South Africa (AGSA), Tsakani Maluleke, has reported an overall improvement in the national and provincial government audit outcomes.

Tabling the 2022-23 general report for national and provincial departments, entities and legislatures in Parliament on Wednesday, the AG 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 government 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 behind on financial and performance management disciplines. This is placing further pressure on government finances,” Maluleke said.

She said 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.

“Overall, the audit outcomes of both departments and public entities improved and more auditees improved their audit outcomes each year of the administrative term than regressed. In 2022-23, the net improvement was 37 auditees (9%) – the biggest movement over the four-year period. Provincial government showed a net improvement of 44 (27%) and national government a net improvement of 34 (15%),” the AG said.

Clean audits

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.

“A clean audit is not always an indicator of good service delivery. 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 role-players 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,” Maluleke said.

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.

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 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 said.

She 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 role players 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 on 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,” Maluleke said.

Disclaimed and adverse outcomes

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. – SAnews.gov.za