Audit Outcomes 2010/11: briefing by the Deputy Auditor-General

Meeting Summary

The Deputy Auditor-General met with the Committee to present the audit outcomes of national and provincial governments for the financial year ended 31 March 2011. The four audit areas looked at were qualified, financially unqualified with findings, financially unqualified with no findings (clean audits) and disclaimer/adverse audit findings. Clean audits decreased from 16% of national departments in 2008/09 to 8% in 2010/11. Nationally, eight departments received qualified audits and 25 departments received financially unqualified audit opinions with findings. Only three departments received audits financially unqualified with no findings (clean audits) and one department received a disclaimer. Unauthorised expenditure decreased from R8.9 billion in 2009/10 to R3.8 billion. However, irregular expenditure increased from R13 billion (2009/2010) to R21.1 billion (2010/11). Fruitless and wasteful expenditure also increased from R0.5 billion to R1.5 billion.

AGSA used the performance of Education, Health and Public Works national and provincial sectors (all with huge spending areas) to illustrate progress over a three-year period. Public Works had declined the most over the three years with 30% of its 10 departments receiving a ‘financially unqualified with findings’ audit in 2009/10 increasing to  50% of its departments receiving this audit in 2010/11, with also disclaimers increasing. Areas of material misstatements in Capital assets, Current assets, Liabilities, Other disclosure items, Revenue, Expenditure, and UIF were presented and the area receiving the biggest percentage of qualifications was capital assets at 22%, with UIF misstatements corrected during the audit at 51%. Auditees with findings on non-compliance with laws and regulations were highlighted. Categories of predetermined objectives were also presented, namely non-compliance, variances not explained, performance information not useful and performance information not reliable. A total of 38% of national departments showed non-compliance and 20% of legislatures had variances not explained. A total of 57% of national departments had performance information that was not useful and 45% of provincial departments had performance informational that was not reliable. 

The Auditor General presented a summary of consolidated findings on supply chain management: 12% of departments had limitation on planned scope of audit of awards; 34% had awards to state officials and their close family members; 76% of departments were found to have uncompetitive or unfair procurement processes and 30% had inadequate contract management. Other findings presented were related to IT control and HR management. The four critical focus areas that needed work were procurement, especially supply chain management, HR challenges, HR resources specifically governance and capacity and performance information and performance reporting.

Members were dissatisfied by the overall performance of departments. They asked questions on auditing methodology and whether the changes in methods had an impact on audit findings. They asked if principles and standards were acceptable. Members noted that the management of vacancies was poor and this had to be addressed urgently as it affected the functioning of departments. Members asked why the Department of Police had not received a qualified audit as it had been involved in an unfavourable procurement process.