Better, but the culture of non-compliance in government prevails

The Auditor-General of South Africa’s (AGSA’s) annual report on audit outcomes for national and provincial government departments and entities shows some welcome improvements, but there is a long way to go.

The Organisation Undoing Tax Abuse (OUTA) welcomes the AGSA’s report and the public accessibility of this report. We believe this is a crucial report for public servants, parliamentarians and active citizens to read and consider the contents, from a perspective of what must be done to improve the situation. While we commend the auditees which achieved clean audits, we call on the various oversight bodies of those who did not to improve or who have regressed and, more importantly, on Parliament and the provincial legislatures, to start taking meaningful action to address the myriad of shortcomings.

Changing the country’s culture to one of accountability is everyone’s responsibility.

Auditor-General (AG) Tsakani Maluleke noted that the institutional capacity to consistently produce transparent and credible financial and performance reporting is not yet in place.

The AG told Parliament on Tuesday that her team had seen improvements everywhere, which was a “good base” on which to build. “Our primary, primary message to the 7th administration and the 7th Parliament is this: we’ve got to push back on the culture of no accountability and consequences.” She said a key enabler was investing decisively in the professionalisation of the public service.

“The PFMA report underscores a troubling reality for South Africans. Despite incremental progress, government has failed to establish a culture of accountability and consequence management. This is not just about audit outcomes; it’s about the tangible impact on service delivery for millions of South Africans who rely on efficient governance for education, healthcare, water, safety and housing,” says Wayne Duvenage, OUTA CEO. “As active participants in the accountability ecosystem, OUTA remains committed to partnering with communities, civil society and oversight bodies to drive systemic change. We will not relent until transparency, ethical leadership, and value-for-money spending become the norm in public institutions.”

The AGSA’s report is comprehensive and gives South Africans a clear insight into why some departments and entities are able to deliver services but some fail repeatedly.

The National Student Financial Aid Scheme (NSFAS) is highlighted by the AGSA as an entity which failed to deliver its annual report and financial statements to Parliament on time for the last two years. OUTA has published detailed information about corruption and mismanagement in NSFAS (see here and here).

The AG informed Parliament that late delivery of annual financials by a number of departments and entities hampers oversight and accountability.

Those who submitted financials late or not at all were mostly state-owned enterprises. Of significant concern are the Compensation Fund and the Unemployment Insurance Fund (UIF): huge funds which continuously produced reports very late and with poor audit outcomes, with seemingly minimal consequences being meted out against their executive management.

OUTA has also previously raised concern about the detrimental effect on oversight and accountability of the delay in annual reports by departments and entities, in reference to the late tabling in Parliament of these reports, resulting in MPs have less time to assess them (see OUTA’s Parliamentary Oversight Report 2024, here).

The AGSA’s report: Key audit outcomes

• 144 auditees (35%) achieved clean audits, a big improvement on five years ago when only 93 managed it. This includes 65 auditees which maintained their clean audit outcome.

• 175 auditees (42%) achieved unqualified audits with findings. This means financial controls and compliance are weak. The AG noted that “far too many of them are too comfortable in that category” and should improve.

• Thus about 77% of auditees were able to provide credible financial information to the AGSA.

• Seven auditees currently, expected to be 13 when all the outstanding audits are completed (a big improvement on the 28 five years ago), received audit disclaimers (the worst outcome).

• Ten auditees have not been audited as they have not submitted their financial statements.

• High-impact auditees, which account for 77% of government’s R2 trillion annual expenditure, are overall lagging behind with audit performance. These are the departments and entities involved in delivery of crucial services, including health, education, training, infrastructure, water and energy. These auditees are improving, but most are lagging behind the others.

• The Compensation Fund (R11.18bn in 2023/24) has had audit disclaimers every year for 12 years.

• The UIF submitted financial statements late every one of the last five years, including 2023/24, so it is not finalised, and received qualified audit opinions with findings for those years. This is what the AGSA’s report says: “These delays have a knock-on effect on the submission of the annual report to the minister and the tabling of the report in Parliament. The minister is then also unable to hold the accounting authority to account and to make financial and related service delivery decisions.”

• The AG noted that in some auditees, when performance indicators were not met, the focus was not on improving skills or systems and discipline, but rather on removing or changing the indicators.

• Discipline on procurement management remains weak. The AG says there isn’t enough insistence on compliance with the law. Auditees pay for poor quality, or for supplies and services that don’t arrive. This is what the AG told Parliament: “At the point of procurement, the skills, the information systems and the sheer discipline remain inadequate.” Non-compliance cannot be ignored, warned the AG.

• There was R43.9 billion in irregular expenditure related to procurement.

• Public servants are still doing business with the state, although this is illegal: R153 million in contracts went to suppliers owned or managed by public servants or their close family.

• The AG’s team visited 143 infrastructure projects across the country, and found problems at 86% of them, including poor maintenance, project delays (64%), poor quality construction (25%), or infrastructure not used after it was completed (8%). Consultants and government employees signed off as complete projects that were not. Departments and entities do not coordinate properly, so projects such as housing are built, but there is no supporting infrastructure, such as roads and electricity, so they are not handed over and may be vandalised.

• IT systems, controls and protections need strengthening. The State Information Technology Agency (SITA), which coordinates the state’s IT resources, is “not delivering on its mandate”, says the report. The Department of Labour spent R231 million on software licences it is not using in full.

• The Energy and Water Sector Education and Training Authority paid R76 million for training 7 000 students but it could not be confirmed if this service was delivered. The Private Security Industry Regulatory Authority spent R30 million on training that was not provided until the AGSA asked questions.

• There was R10.34 billion in fruitless and wasteful expenditure over the five years.

• There are questions over whether 21 public entities (10% of them) are still going concerns.

• Public entities together have R470 billion in financial guarantees from the state.

• The culture of non-compliance prevails: 120 auditees (32%) did not comply with legislation relating to steps that should be taken to address unauthorised, irregular, or fruitless and wasteful expenditure, or allegations of financial misconduct, fraud and improper conduct.

• The AG’s extended legal powers to deal with material irregularities kick in when officials fail to act; the AG may then make stronger recommendations, engage with parliamentarians on oversight, and also take binding remedial action and refer matters to law enforcement for investigation. The AGSA’s team identified 292 irregularities over the past five years, linked these to losses of R14.3 billion and was able to get accounting officers to protect or recover just over R3 billion. A total of 55 fraud and criminal investigations were instituted and 17 supplier contracts stopped.

More information on the audits

OUTA urges active citizens to read the AGSA’s report, as this provides the public with a good understanding of how their government is failing them.

The audit opinions: The AGSA’s short explanation of audit opinions is here.

The AG’s presentation to Parliament is here.

The YouTube recording of the AG’s presentation to Parliament is here.

The AGSA’s report, Consolidated General Report on National and Provincial Audit Outcomes 2023-24, is here.