AG’s new whip makes itself felt
● Financial losses to the state arising from irregular expenditure have more than doubled from R2.8bn in the financial year that ended in 2019 to an estimated R5.8bn in 2020, new auditor-general Tsakani Maluleke has revealed.
This is only the second year that the AG has been empowered, through amendments to the Public Audit Act, to quantify and recover money lost through noncompliance with or contravention of procurement legislation, including fraud and theft.
Maluleke told the Sunday Times the figure was incurred by 78 auditees out of a sample of 89 selected by her department in the past two financial years using the new powers that came into effect in April 2019.
The amendments empower the AG to identify actual financial losses suffered by the government through material irregularity and order binding remedial action to be taken by an institution. This is only in cases where the accounting officer has ignored notification by the AG of the irregularity. The AG is also empowered to issue a certificate of debt against the accounting officer.
In the first year the R2.8bn losses were incurred by 16 government entities that were selected during that Public Finance Management Act (PFMA) cycle. At the end of the month Maluleke will table her first PFMA general report as AG since taking over from the late Kimi Makwetu in November last year.
“We’ve been able to identify 78 material irregularities in total, if you combine the two years, and the estimated financial loss that we are reporting on is R5.8bn. That’s quite different from the R50bn-odd we normally report on as irregular,” she said.
Quantifying material irregularity undermines the usual mantra of government departments that irregular expenditure “does not mean that no services were rendered” because it shows what the state lost as a result of irregular procurement.
Some of her office’s notifications to affected entities led to swift action. At the Unemployment Insurance Fund (UIF), where there was abuse of a special UIF payment for those affected by Covid-19, there have been more than 38 criminal cases against the perpetrators.
There was similar swift action at the South African Social Services Agency, where more than 1,500 directors of companies that do business with the state benefited from temporary relief grants for the unemployed.
Recent criticism of the AG’s office include charges that it isn’t making the most of its new powers to ensure accountability on the part of those who flout procurement regulations.
Maluleke said the ultimate control over departments resided in the hands of accounting officers. “Their roles, their abilities, their rights have not changed. If you look at section 38, we still just ‘inspire’ them to do what is necessary.”
She credited the new powers for what she said was a greater degree of co-operation from departments. The “new tools”, as she calls them, mean her office can follow up on material irregularities throughout the year until they are resolved.
She said the process, which includes representations from affected parties, is structured so as to discourage judicial review.
“The accounting officers, in many instances, have actually responded by either referring the matter for investigation or they’re following up. Some matters have even ended up with the Hawks in terms of following through on the law enforcement part of it, which is what we were hoping this instrument would do,” she said.
“But if it’s not fine, then we pick it up again, check it out and then give a recommendation. And if that’s implemented, we just keep following up. But if it’s not OK, we then issue a remedial action.
“So what I’m saying is we’re now going to be able to track that R5.8bn in a year, which is different from how we were dealing with the R50bn or R60bn irregular expenditure.”