AG: Unauthorised expenditure remains high

The Auditor-General of South Africa (AGSA) Tsakani Maluleke says unauthorised expenditure at departments remained high throughout the administrative term, totaling R28.22 billion over four years.

Tabling the 2022-23 general report for national and provincial departments, their entities and legislatures in Parliament on Wednesday, Maluleke said in the 2022-23 financial year, such spending amounted to R4.59 billion.

Collectively, accounting officers and authorities managed an estimated expenditure budget of R3.10 trillion in 2022-23.

“The irregular expenditure disclosed in 2022-23 totaled R63.37 billion, with high-impact auditees being responsible for R53.77 billion (85%) of this amount. These amounts might be incomplete, as auditees no longer have to include irregular expenditure incurred in prior years or the closing balance of irregular expenditure in their financial statements,” the AG said.

She said when departments overspend their budgets, they disclose this as unauthorised expenditure.

“If this type of expenditure is condoned, it means that the department needs to either find more money or absorb the overspent amount, which reduces the available budget for the following years,” Maluleke said.

Unlike departments, which must submit their budget vote to parliamentary committee hearings to be approved, public entities do not have a separate vote and thus disclose their overspending as irregular expenditure.

In 2022-23, the irregular expenditure incurred due to overspending was R0.90 billion.

High-impact auditees were responsible for R4.35 billion (79%) of the R5.49 billion total overspending across departments and public entities in 2022-23.

Material irregularity process sees recovery in financial losses

Maluleke has 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.

“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 government to achieve its strategic priorities,” Maluleke said.

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 cutoff 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.

“We used this enforcement tool to spur accounting officers and authorities into action to strengthen internal controls, institute disciplinary measures, stem resource leakage arising from non-compliant procurement processes, recover funds lost through duplicate payments and overpayments to suppliers, safeguard assets, and improve the use of public resources such that they benefit citizens,” Maluleke said.

She said that where the MIs were not dealt with swiftly or with the required seriousness, her office included recommendations in audit reports, took remedial action or referred matters to relevant public bodies for investigation, where appropriate.

Financial management

The AG cautioned that when government is not careful with its spending practices, this reduces the already limited funds available.

“The main reasons for the continuing financial losses and waste that we observed, especially at high-impact auditees, were poor payment practices, uncompetitive and uneconomical procurement practices, limited value and benefit for money spent, poorly managed government properties and accommodation leases, and weaknesses in project management.

“Government’s budget for service delivery activities is reduced by claims made against departments, and by auditees overspending their budgets and being in poor financial health. Ailing institutions, such as the state-owned enterprises, place further pressure on government by needing bailouts and by creating potential future obligations as a result of guarantees,” Maluleke said. – SAnews.gov.za