AG to get power to ask for probes

AMID RISING IRREGULAR EXPENDITURE ENTITIES TO BE REFERRED TO INVESTIGATION AGENCIES If 20% of irregular expenditure could have been prevented, it may have meant the R50bn budget shortfall could have been smaller – Yugen Pillay, Grant Thornton.

Auditor-General Kimi Makwetu on Wednesday disclosed that irregular expenditure in the public sector (municipalities excluded) could have totalled R65 billion in 2016/17, a 124% increase on the previous year’s R29.4 billion.

Makwetu said the national and provincial government departments and state-owned entities his office audited recorded R45.5 billion in irregular expenditure.

But some audits haven’t been completed, including that of the Passenger Rail Agency (Prasa). Prasa alone has spent R14 billion in contravention of supply chain management regulations, so including that, the total irregular expenditure could be as high as R65 billion.

Makwetu said SA has “bigger challenges on expenditure than on revenue”. This is probably a reference to the R50 billion revenue shortfall Finance Minister Malusi Gigaba disclosed in his medium-term budget policy statement (MTBPS).

Grant Thornton’s Yugen Pillay said: “On the back of the finance minister’s MTBPS, auditees should at the very least be prioritising and tackling irregular expenditure head on, in an effort to prevent unnecessary leakages from the budget.”

He added that if the current level of irregular expenditure continues, the knock-on effects could have dire consequences for the public sector and the economy.

Makwetu said costs pile up when irregular expenditure occurs, as stopping unlawful contracts involves legal costs. He said a parliamentary process is under way to increase the powers of his office to respond to increasing irregular expenditure. Amendments are sought to empower his office to report irregularities to the proper entities to investigate. That might include the Public Protector or the Special Investigating Unit.

The AG’s office would then publish a yearly schedule indicating “who is behind the irregular expenditure and who should investigate”. That, he said, would be “shining a light” on something “growing in the dark”. It would also address entities’ failure to finalise the necessary information for audit purposes or to get a disclaimer due to lack of documentation. Such investigations would inform whether government could claim back irregular expenditure from anybody. The outstanding audits increased from three (1%) in the previous financial year to 26 (6%) by the end of August, due to late or non-submission of financial statements and outstanding information. Nine of these were due to going-concern problems in SAA and entities within transport and public enterprises.

Makwetu said the audit outcomes have been improving slowly over the past five years with the number of clean audits improving from 85 (24%) to 126 (30%). But there’s been a regression in overall financial health. “Some departments did not pay their creditors when their budgets started running out and thereby avoided unauthorised expenditure, but payments then happened the following year, using money intended for other purposes.”

Total outstanding audits, with disclaimers and adverse findings, increased from 27 (7%) in the previous financial year to 45 (10%) in the reporting period.

There’s a regression in overall financial health.