Purple Tod Consulting

A glimpse at some of the report’s key findings

• the quality of the performance reports improved slightly to 65% of the auditees now publishing credible reports. However, the AGSA received performance reports for auditing with substantial misstatements
• at national level there was a regression in audit outcomes, with the number of clean audits decreasing to 23 % of the total audited population compared to 30% in the previous financial year
• provincially, the Western Cape and Gauteng continued to produce the best results – with 83% and 52% clean audits, respectively
• there were serious weaknesses in the financial management of national and provincial government that had not been addressed over the past four years
• unauthorised expenditure increased by 38% from the previous year to R2,1 billion, 86% of which was a result of overspending
• fruitless and wasteful expenditure increased by over 200% from the previous year to R2,5 billion
• irregular expenditure continued to remain high at R51 billion. This total includes the irregular expenditure of those auditees where the AGSA had completed the audits after the cut-off date of this report (R5,4 billion). It is worth noting that the R51 billion excludes the SOEs that are not audited by the AGSA, whose total irregular expenditure totalled R28,4 billion
• the financial health of auditees continued to deteriorate
• there was an emerging risk of increased litigation and claims against departments. Almost a third of the departments had claims against them in excess of 10% of their next year’s budget. “Departments do not budget for such claims, which means that all successful claims will be paid from funds earmarked for the delivery of services, further eroding the ability of these departments to be financially sustainable,” warned Makwetu
• a total deficit of R35,1 billion was incurred by the 41% of public entities whose expenditure exceeded their revenue – 75% of this was the deficit of the Road Accident Fund.
• The AG’s report cautioned that “even though the majority of public entities that incurred deficits would be able to continue their operations, these negative indicators raise concerns about their financial viability, which could result in pressure to acquire additional funding from government”
• the auditees that substantially did not comply with legislation increased from 64% to 72%. The AG said the lapse in oversight and controls in the area of compliance was evident in a number of areas, including supply chain management (SCM), and led to increased irregular expenditure
• the non-compliance with SCM legislation increased. Makwetu stressed that the status “was even worse than in 2014-15.”