AG: R45bn down the drain
Makwetu worried about threats against staff North West on downward spiral
AS TAX revenue dwindles due to sluggish economic growth, worsening financial mismanagement in government departments and stateowned entities has forced Parliament to give Auditor-General Kimi Makwetu powers to go after the officials responsible for wasting public funds.
Yesterday, Makwetu released his consolidated general report on national and provincial audit outcomes, which revealed that irregular expenditure increased by more than half – to R45.6 billion – in 2016/17, from R29.4bn in 2015/16.
And Makwetu warned that this amount could be even higher as the R45.6bn did not include irregular expenditure of departments and state-owned entities, whose audits are still continuing, such as the Passenger Rail Agency of SA, which incurred R14bn in irregular expenditure last year.
In the report, the AG was also scathing about the Free State and North West, the two provinces he found to have regressed, and showing a lack of accountability and commitment to clean governance.
While Makwetu noted a slight improvement in the Free State, he found North West to be on a downward spiral.
”Give us power to refer undesirable audit outcomes,” said Makwetu, adding that he wants to refer matters to investigative bodies such as the public protector’s office and the Special Investigating Unit.
Makwetu said the review of the Public Audit Act, which is under way, will see his office being empowered to order officials to be investigated for their role in incurring irregular, wasteful and fruitless expenditure.
According to Makwetu, officials will be forced to pay back money to the fiscus that would not have been lost if they had acted correctly.
He said it was Parliament’s standing committee on the auditor-general, through its chairperson Vincent Smith, that came up with the proposal to change the act, when, last year, he presented his report on national and provincial audit outcomes in 2015/2016.
“Twelve months later, we are closer to the tail end,” he said.
Makwetu’s comments came days after Finance Minister Malusi Gigaba painted a grim picture of the country’s finances and the economy, saying there was a R50.8bn shortfall in this financial year.
But it appeared that even the money that the state was able to get from taxpayers was not prudently managed.
Makwetu complained about departments and state-owned entities increasingly contesting his audit outcomes through legal action and intimidating his staff.
”In the past, these issues never used to be contested… They even contest things when they don’t have evidence to the contrary,” he said.
Makwetu blamed the growing trend of incentives of senior government officials being linked to audit outcomes.
He said senior government officials start contesting findings when they see that they are about to lose out on the promised incentives due to adverse audit outcomes.
Makwetu said that in one instance, his staff visited a department that claimed to have delivered an asset, but when they got to the site, there was nothing.
He said his staff ’s concerns had resulted in intimidation by the officials, as there had previously been no requirement that assets must be viewed during audits.
ANC national spokesperson Zizi Kodwa has urged Parliament to amend the legislation to increase the powers of the office of the auditorgeneral.
“It is clear that there is no improvement in terms of performance, and the auditor-general must be empowered to refer criminal charges against repeat offenders.
“If people have an explanation about their use of public money, why would they resort to threats and intimidation when they are required to account?” Kodwa asked.
Smith said Makwetu could have some of his new powers as early as September next year, when audits for the current financial year are considered. “Come the new financial year, the auditor-general should have his new powers,” he added.
Kodwa said the third round of amendments to the Public Audit Act would be considered by the committee later this month.
AUDITOR-General Kimi Makwetu has revealed that the value of irregular expenditure at state-owned enterprises (SOEs), which have become a risk to the country’s economy and a drain on the fiscus, has increased.
Yesterday, Makwetu said while the number of SOEs with irregular expenditure decreased this financial year, the actual value had seen a major increase.
Makwetu’s audit outcomes, which he released yesterday, noted that Airports Company SA (Acsa) has seen a 60% increase in irregular expenditure – amounting to R1.17 billion – due to non-compliance with legislation on contracts.
The SA Post Office accumulated R719 million compared with R127m in the previous financial year, with 47% being due to compliance with procurement processes, while 37% was a result of not following competitive bidding.
In terms of the reported regressed financial health of SOEs from the previous year, the SABC was commercially insolvent by the end of this financial year.
The public broadcaster incurred a net deficit for the past two years, which could result in its being unable to pay its debt on time.
The report on the financial health of the SOEs indicated doubt about whether 26% of them could continue their operations into the future.
Makwetu revealed yesterday that the delayed audit of the SA Revenue Service (Sars) would be signed off tomorrow.
Sars had threatened to take Makwetu to court over the dispute on the payment of bonuses to a category of senior management.
“It’s a governance that gets entrenched over the years if not dealt with,” Makwetu said.
He said Sars was making a R3m payment to senior managers without following its processes and procedures.
According to Makwetu, he had warned Sars commissioner Tom Moyane that he did not have final approval for payment of bonuses and that there was someone above him who had to approve.
Makwetu also announced that the Passenger Rail Agency of SA had not submitted its financial statements.
In his Medium-Term Budget Policy Statement in Parliament last week, Finance Minister Malusi Gigaba said investors, both international and domestic, had raised governance challenges and weak balance sheets for SOEs as among the reasons behind growth constraints and low confidence in investing in South Africa.
“There are widespread concerns about the governance and performance of key state-owned companies,” the finance minister said.
“National Treasury is working with law enforce- ment agencies to investigate contracts which are alleged to be irregularly procured in certain state-owned enterprises,” Gigaba added.
He said the state-owned companies were developing a poor reputation with the public, adding that they had become a major fiscal risk to the country due to the government’s guarantee of their debt.
”The trend of state-owned companies seeking bailouts to finance operational expenditure, inefficiency and waste must also be brought to an end.
“In due course, National Treasury will make proposals to make our government guarantee framework more stringent,” Gigaba added.