Departments do not take management of public funds seriously, says OUTA

AG's report to Parliament on national and provincial audits shows some improvements but a long way to go on responsible management of public funds

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29/11/2023 13:18:14

Departments do not take management of public funds seriously, says OUTA 

The Auditor-General’s report to Parliament on audit outcomes for national and provincial government for 2022/23 shows an alarming lack of financial control in high-impact government departments.

While OUTA notes a 13% improvement in the number of unqualified audits of departments from the last year of the previous administration (in financial year 2018/19),when compared to 2022/23, there are still far too many (26%) of departments that fail to achieve unqualified audits. Even more concerning is that 31 departments missed the deadline of 30 September for providing their financial statements to the AG.

"We are very concerned at the growing number of departments and state-owned entities (SOEs) who fail to have financial statements ready for audit purposes on time, which has increased from 4 to 31 over the past four years. This in itself sends a clear message that these departments do not take the management of public funds seriously. What is more worrying is that once again, we will not see the required accountability and consequence management by the accounting authorities of these organisations, who will merely continue to remain comfortably employed by the state,” said Wayne Duvenage, OUTA CEO.

"We commend AG Tsakane Maluleke and her team for the diligence applied to the audit process, and the ongoing improvements to this function. We note this year, the AG’s report identifies the high impact departments, to give the public a sense of where attention may require acute focus on those departments that manage state funds in areas more critical to service delivery, such as water, energy, healthcare, employment, infrastructure and so on. This picture paints a bleak situation, in that it is in these high impact departments that the percentage of unqualified audits drop from an overall 74% to 65%. This means that 35% of our high impact areas of government have qualified audits and 8% thereof failed to submit financials on time.”

Only 52% of SOEs achieved unqualified audits, while 43% had audits which were qualified with findings, adverse with findings, disclaimed with findings or failed to provide their financial statements.

"This is a serious concern for OUTA, and we reiterate once again, as we have for years, that government should rid itself of those state companies that are not core to the service provision essential to the public. The state has no need to own diamond mines, airlines and armament manufacturing businesses, all of which are performing poorly and a drain on the fiscus or do not even have financials to audit,” says Duvenage.

"The AG has spelt out the myriad of reasons for poor service delivery from her audit outcomes, and the issues of excessive overpayment for infrastructure and services by the state, along with accepting poor quality workmanship or even zero services delivered but paid for at times, clearly indicates that there is a combination of gross ineptitude or maladministration and corruption that continues to thrive within many state departments. The amount of infrastructure development projects that are delayed (68%) and have cost overruns (51%) is a significant problem for the country, signalling poor planning, lack of oversight and monitoring, and outright poor leadership. The lack of maintenance is also a significant concern and this is playing out in higher expenditure resulting in reactive and emergency maintenance spending to fix broken infrastructure, which generally costs a lot more than preventative maintenance.”

While the AG indicates that the Department of Higher Education’s efforts to address the need for more student accommodation has been a good story in that three of these projects came in on time and within budget, OUTA is currently investigating concerning developments within the department’s future student accommodation plan.

The AG also finds the government wanting in infrastructural development plans for the country’s water needs. The gap between where departments believe they are performing and what the actual situation is leaves much to be desired.

Material irregularities caused losses of R14.34 billion.  "We are appalled at these losses that could and should have been averted, if sound financial hygiene and good management practices were in place,” says Duvenage.

"Our government is failing its people and, while there are a few signs of improvement, these come of a base of extremely low performance and degradation of service delivery for the past two decades. We need a much faster recovery to this dire situation and to see more consequences for the mismanagement of state funds, something which appears to be a foreign concept to this government.”

More information

A soundclip with comment by OUTA CEO Wayne Duvenage is here.

The Auditor-General report on national and provincial government departments for 2022/23 is here.

Image of Parliament: Shutterstock