Wasteful spending haunts Treasury
Dispute with auditorgeneral again delays submission of annual report to parliament
The National Treasury is embroiled in a standoff with auditor-general Tsakani Maluleke over her audit of its books, resulting in the Treasury missing the deadline to submit its annual report to parliament for the second time.
National Assembly speaker Nosiviwe Mapisa-Nqakula this week tabled a letter from finance minister Enoch Godongwana requesting that the September 30 deadline be extended to November 4 due to “outstanding disputes” with the AG.
“I hereby wish to humbly request that the honourable speaker grant the National Treasury an extension to table the 21/22 annual financial statements due to the annual financial statements of the National Treasury are still not finalised due to outstanding disputes that have been declared and are being dealt with through the mechanism for resolving disagreements between the auditor and the auditee,” Godongwana wrote to Mapisa-Nqakula on September 28.
At the centre of the dispute, the Sunday Times has established, is the Treasury’s recurring irregular, wasteful and fruitless expenditure of more than R300m on the procurement of software licences, that have not been used since 2019, as part of its controversial integrated financial management system (IFMS).
IFMS is an IT system approved by the cabinet in 2005 to integrate the government’s human resources and financial systems. But, with more than R1bn spent on it since then, it has been criticised for yielding no noticeable outcomes.
At least 12 top IT, accounting, auditing and human resources consultants were appointed by the Treasury as part of the IFMS project, but their appointments have been the subject of forensic investigations after it emerged that regular procurement processes were not followed.
Government sources familiar with the matter said the Treasury wanted the wasteful, irregular and fruitless expenditure to be regularised by way of a pardon from Maluleke’s office, so that future spending on the IFMS would not be called into question.
“It is just a technical dispute over the IFMS issue that we are struggling to resolve. It is about the accounting for the expenditures on the IFMS, so the teams on both sides need the opportunity to find each other,” said a top government official who is part of the discussions between the AG and the Treasury.
The AG’s spokesperson, Harold Maloka, said they could not comment on an ongoing audit issue.
The Treasury said it was unhappy with the methodology used by the AG to determine fruitless and wasteful expenditure regarding the IFMS payments.
“National Treasury is disputing the methodology used by the AGSA in determining fruitless and wasteful expenditure in respect of payments made for the integrated financial management system’s maintenance and support payments. Such differences in methodology have wider implications for how public sector spending on similar management systems is treated,” Godongwana’s office said in response to questions from the Sunday Times.
“National Treasury is concerned that many honest accounting officers have become risk-averse, given current very wide interpretations of irregular or fruitless and wasteful expenditure. Such risk averseness has significant implications for the delivery of services and it is in the public interest that we reach consensus on different interpretations.”
The finance ministry said it had a healthy and respectful relationship with Maluleke’s office. They continued to engage in a dispute resolution process with Maluleke, along with the Treasury’s accountant-general as provided for by AG complaint management regulations.
Godongwana’s predecessor, Tito Mboweni, was also forced in February 2021 to ask parliament for an extension to deal with the same issue. The AG had found that the Treasury’s irregular expenditure was caused by non-compliance with supply chain management and contract management processes.
The AG had found about R66m in fruitless and wasteful expenditure for technical support and maintenance on the software licences for the implementation of IFMS.
In 2020, President Cyril Ramaphosa issued a proclamation for the Special Investigating Unit (SIU) to probe the procurement process that caused the IFMS contracts not to be “fair, competitive, transparent, equitable or cost-effective”.
The SIU was also directed to investigate Treasury officials and employees for any “unlawful, irregular, or improper” interventions in the awarding of the contracts.