More must be done to halt wasted expenditure

IN HIS medium-term budget policy statement in October last year, Finance Minister Nhlanhla Nene announced that he would be initiating and enforcing expenditure cuts across all government departments. This was a long overdue move by the minister, and the implementation of this “fiscal consolidation” was closely watched by investors, rating agencies and the public. The minister further responded to the fiscal shortfall by increasing personal income tax and a host of other levies.

It is against this backdrop that the minister should consider the Audit Outcomes of National, Provincial and Public Entities for the 2014/15 financial year. The preliminary 2014/15 audit indicated a whopping R25.6 billion in irregular expenditure.

When the final audit outcomes are announced, the minister will no doubt focus on the fact that irregular expenditure fell from R35.2bn in the 2013/14 financial year. But that sort of diversionary tactic does not sit well with South Africans. This is because the figure is still R25.6bn.

To put it into perspective, the amount of irregular expenditure across the government for the past financial year could have funded the higher education funding shortfall 11 times over.

A slight improvement in audit outcomes is simply not good enough, as South Africans are growing impatient with the cost of maladministration on the economy.

Judge Dennis Davis, who heads up the Davis Tax Committee, recently warned that the greater the level of corruption and maladministration, the less we will have tax integrity and the greater the possibility of a tax revolt.

Enforcing compliance

The reality is irregular expenditure is as a result of tacit tolerance by the government. For example, the non-compliance in supply chain management remains unacceptably high, at 72 percent in departments and public entities.

The only way to end misappropriation and maladministration of public money is through a zero-tolerance approach.

The question is how to fix this unacceptable trend. The minister of finance and National Treasury should have a dedicated unit dealing with fraudulent activities, corruption, irregular expenditure and fruitless and wasteful expenditure in departments and public entities. This should focus on, among others:

The lack of consequences for unfair or uncompetitive procurement processes, awards to close family members of employees, inadequate contract management and awards to employees must be addressed;

General violations the Public Finance Management Act;

Treasury regulations and the noncompliance by departments to verify SA Revenue Service compliance with regards to tax clearance certificates;

Where necessary, intervention by the auditor-general to enforce compliance and monitor daily disciplines. This to be conducted in conjunction with Parliament’s Standing Committee on Public Accounts (Scopa) and should play a leading role in enforcing consequence management.

Accountability for non-compliance relating to expenditure management, procurement and contract management, transfer payments and internal audit procedure.

Consequence management is critical to achieving sound financial management across all levels of government.

The DA has written to the Parliamentary Budget Office to conduct a study on the lack of progress in improving compliance management. Our proposals include:

Ensuring transparency in the procurement process by introducing a central supplier database;

Flushing out the 200 000 government officials transacting with the state;

Tabling of the Supply Chain Management Bill, which is long overdue; and

Implementing Treasury regulation interventions to municipalities that have violated financial regulations.

In addition to this, improving Scopa’s effectiveness to deal with financial maladministration, lack of compliance, and corruption is key to addressing the problem. Inadequate consequences for poor performance and transgressions also hinder the government.

Nene should show bold leadership in mobilising the Treasury to intervene and enforce consequence management. This needs to be done with immediate effect.