Parliament, Wednesday, 27 November 2024: The House Chairperson for Committees, Oversight, and Public Participation in the National Assembly (NA), Hon. Cedric Frolick, and the House Chairperson for Committees and Oversight in the National Council of Provinces (NCOP), Hon. Dennis Ryder commend the excellent work by the Auditor-General of South Africa (AG), serving as the crucial checks and balances in ensuring sound financial practices and consequence implementation when it comes to the handling of public funds by government departments and entities.
The AG briefed a sitting of Parliament's Joint Committee of Chairpersons on Tuesday on the 2023-24 audit outcomes on all national and provincial government departments and entities.
Since the 2018/19 financial year, there has been an improvement in the audits of 139 departments and entities. In 2018/19, 93 auditees received a clean audit. In 2023/24 this was increased to 144.
While there is an improved outlook overall on the outcomes, there remains significant space for more work to be done to turn around financially struggling departments and entities.
"The AG's approach to go beyond just debits and credits and conduct physical oversights to various departments and entities is highly commendable and ensures the lived experience of South Africans is considered when probing the use of public funds earmarked for service delivery," said House Chairperson Ryder.
"The necessary work of the AG serves as a crucial component in the work of Parliament's committees, especially considering the roles of both institutions are interconnected, symbiotic, and complementary. Without the AG's existence, Parliament would have very little guidance on how to conduct their oversight responsibilities," commented House Chairperson Frolick.
The House Chairpersons look forward to the continued cooperation between the institutions when the AG is set to meet with individual committees and brief them on the details of the audit outcomes of each department and entity under their oversight scope.
The House Chairpersons nonetheless noted several issues raised by the AG during her presentation, including:
A total of 82 departments and entities have remained within the unqualified with findings category since the 2018/19 financial year, indicating complacency among accounting officers from striving for a clean audit. While unqualified audits indicate sound financial statements, findings in this category often indicate challenges with financial management and compliance.
Out of the 371 departments and entities measured for compliance with legislation on procurement and contract management, approximately 40% were flagged for non-material findings, with a further 23% flagged for material findings, while 57% were found to have uncompetitive and unfair procurement processes. Supply-chain management remains vulnerable to corruption, and without sufficient discipline and controls, public funds remain vulnerable to misappropriation.
Regarding infrastructure projects, the AG found project delays, poor-quality construction work, and constructed projects not put into use after completion as the leading causes of failed infrastructure delivery, resulting in increased costs and financial losses.
In terms of cybersecurity, among 203 departments and entities, 79% were found to have weak IT controls, with reliance on outdated infrastructure and a shortage of skilled cybersecurity professionals as the main contributing factors to cyber vulnerabilities. This impacts the financial health of departments and entities, as exposure to cyber-attacks and unauthorized access leads to service disruptions, loss of resources, and delays in executing key improvement plans and projects.
Over the past five financial years, there has been R10,34 billion in fruitless and wasteful expenditure, while there has been a total of R38,83 billion in overspending. As of the 2023/24 financial year, 150 departments and entities have deficits totaling R69,33 billion, while 106 have cash shortfalls totaling R38,68 billion.
The AG identified 292 material irregularities on non-compliance and suspected fraud, with an estimated R14,3 billion in material financial losses for 256 of them. These losses stem from payments for goods and services not received, unfair procurement practices, value for money not received, revenue not billed nor recovered, interest and penalties on late payments, unsafeguarded assets, and ineffective use of resources.
Through the outstanding work of the AG, 140 of these material irregularities have been resolved, with R1,45 billion in financial losses recovered, R1,08 billion in financial losses prevented, while a further R860 million in financial losses are in the process of being recovered.
The AG concluded her presentation with a summary of the macro causes of poor financial management of government departments and entities: culture of no accountability and consequences, ineffective resource management, and inadequate intergovernmental planning, coordination, and support.
House Chairperson Ryder added that "the committees of Parliament have their work cut out for them as they take the audit outcomes from the AG and use them as the foundation of their oversight to scrutinize the work of national government departments and entities over the medium term."
"Without the AG shining light on the uncomfortable truths about our public funds, mistakes cannot be learned from, consequence implementation cannot be applied, and solutions cannot be pursued. Parliament remains richer for the work of this Chapter 9 institution," House Chairperson Frolick concluded.
ISSUED BY THE PARLIAMENT OF THE REPUBLIC OF SOUTH AFRICA
Enquiries: Moloto Mothapo, Parliament Spokesperson
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