Auditor-General on 2022/23 National & Provincial Audit Outcomes

Meeting report

2022/23 National and Provincial Audit Outcomes  

Ms Tsakani Maluleke, Auditor-General of SA (AGSA), took Members through the presentation. She began by looking at the overall audit outcomes since 2018/19 noting the improvement in departments achieving unqualified audit outcomes with no findings (clean audit) – see attached for details.

The presentation detailed the 31 outstanding audits, including South African Airways (SAA), five years outstanding, the Compensation Fund, the National Student Financial Aid Scheme (NSFAS) and the Unemployment Insurance Fund (UIF).

The presentation detailed a picture of the national and provincial audit outcomes – see attached for details.

The presentation also detailed the audit outcomes of high-impact auditees, defined as those with the greatest impact on the lives of South Africans and government finances, including health services, skills development and employment, infrastructure development, safety and security, water and sanitation, energy, environmental sustainability and financial sustainability – see attached for details.

The presentation looked at the audit outcomes of the legislature sector, State-Owned Enterprises (SOEs)

Continued weaknesses in infrastructure project delivery

The AG reported that 137 projects were audited and 82% had one or more findings

Root causes

• inadequate coordination and collaboration within the ecosystem, leading to unsynchronised deliverables
• failure to conduct proper needs assessment and feasibility studies
• lack of accountability in implementing actions against the non-performance of contractors or service providers
• Inadequate monitoring and enforcement by regulatory bodies in infrastructure

Impact

• Project delays in completing healthcare facilities led to communities travelling to alternative locations for medical treatment, causing inconvenience and reduced accessibility
• delays in refurbishing schools result in overcrowded classrooms, negatively impacting the quality of learning for students
• Slow delivery of housing projects leaves intended communities residing in poor and unsafe environments, compromising their well-being
• insufficient road and rail infrastructure, affecting public and freight transport, tourism, and law enforcement
• Residents are compelled to drink unsafe water due to shortages and poor quality, adversely impacting agriculture, health, and education sectors.
• Delays in delivering infrastructure projects by public works compromise overall service delivery by user departments

The presentation relayed a good story of the student housing programme as an infrastructure project effectively planned and executed. Key elements that contributed to project success:

• Appointment of competent and experienced contractors and agents through proper procurement processes • Collaboration between contracting department, implementing agent and SIP team in reviewing actual work done against invoices before payment

• Monthly project steering committee meetings to allow proactive oversight and monitoring of challenges and to enable such challenges to be addressed speedily

Weaknesses in performance planning and reporting

 Achievements reported by 24% of auditees (39% of high-impact auditees) not reliable (incorrect or no evidence). Poor quality performance reports submitted for auditing by high-impact auditees.

Root causes

• Inadequate systems to collate and report on performance information

• Insufficient understanding/ appreciation of performance planning, management and reporting requirements • Planning and reporting done ‘off the books’ -not subject to executive and oversight scrutiny and auditing. Instead of addressing inadequate systems and processes resulting in unreliable reporting or poor delivery, indicators are removed

• Inconsistencies in standardising indicators across some sectors due to disagreements

• Audit committees and internal audit units not sufficiently involved in process or misstatements in annual performance reports are not identified for correction

• Recommendations of coordinating institutions that review annual performance plans not always accepted by accounting officers

• Executive authorities and portfolio committees are not supported to effectively scrutinise of annual performance plans and reports at the level required. Plans are approved without sufficient interrogation of whether they will achieve the desired results. Little consequence for being provided with unreliable information in the annual performance report and for underachievement of targets.

The presentation looked at pressure on government finances where there was R7.62 billion in fruitless and wasteful expenditure over term of administration and R14.34 billion estimated financial loss from 240 non-compliance and suspected fraud material irregularities identified since 2019.

Financial losses due to:

• Poor payment practices within the system, including late payments to suppliers, lead to additional interest costs. Instances of payments made without receiving goods or services and instances of overpayments are identified. Additionally, there is a challenge in the quality of spending, where funds are expended, but visible improvements in service delivery are lacking.
• Unfair and uncompetitive procurement processes result in higher prices due to the absence of market testing. It is noted that the most cost-effective options are not consistently chosen within these procurement practices.
• Inadequate needs analyses and project management, including standing-time payments to contractors, leading to delays in project completion and escalating costs. Issues include appointed suppliers or contractors not delivering on their responsibilities, and projects being abandoned due to poor planning and coordination.
• Instances where no or limited benefits are derived from money spent, such as lease payments for unoccupied government properties, paying higher-than-average market rates due to month-to-month leases, and underutilisation of software licenses and IT systems.
• Issues of ineffective maintenance on infrastructure, characterised by a reactive approach, limited conditional assessments, and resulting in poor infrastructure conditions. The consequences include the failure to deliver services, increased costs, financial losses, and incidents of theft and vandalism.

The presentation noted over R386.47 billion government guarantee exposure for SOE borrowing programmes SOEs have reported poor growth, unsustainable operational challenges and high debt-servicing costs, and several appear to be at risk of defaulting on their debts. R113.63 billon owed for claims made against departments –high-impact auditees R109.85 billion. R68.01 billion claims against health sector. Government is self-insured and does not budget in full for claims. Payments are made from funds budgeted for service delivery.

The presentation moved on to cover Material Irregularities (MIs) identified, status and impact

Recommendations

Culture of no accountability and consequences

• professionalisation of the public sector, advocating for qualified and competent officials equipped to perform their public functions conscientiously and with a strong sense of public service and ethical disposition
• support in implementing a professionalisation framework built on meritocracy, emphasising merit-based management.

Ineffective resource management

• executive authorities and parliamentary committees insisting on timely and credible reporting and accountability. It emphasises the need for these entities to effectively and impact-fully fulfil their oversight role.
• institutions tasked with monitoring and enforcement are urged to contribute to ensuring accountability and implementing consequences

Inadequate intergovernmental planning, coordination and support

• Coordinating institutions should enhance interventions to improve intergovernmental planning and coordination, ensuring integrated and effective service delivery planning. Transparent accountability for service delivery should be reflected in performance reports
• effective utilisation of audit committees and internal audit units is recommended to enhance governance

see attached for full presentation

Discussion

The Chairperson thanked the AG for the extensive outline of the report which sought to summarise the more than 100 pages tabled today. The summary came to the Committee in the form of slides and the AG was allowed a period to present. The AG informed the Committee of how it stood through to the value of its strategy, to honour its plan as the prescript approved when it came to the Committee, and the standard of its acquisition in these areas was acceptable. In terms of the Public Audit Act, the Committee saw no areas emphasised hindered the AG’s role as given by the Constitution. Therefore, the growth of South Africa’s democracy and entrenchment of such stood true to the value of the Constitution. He allowed the Committee Members to engage with the report and ask questions or make comments if they wished to do so.

Mr N Singh (IFP) apologised for not being physically present in the meeting. He said the main reason for him to have been physically present was the lovely dinner promised by the AG. He thanked the AG for the presentation. He was always concerned about disclaimers and disclaimers with findings. What kind of interventions do we take? From his years of experience, he found that several auditees wanted disclaimers and either lost the documents or got rid of them intentionally so the AG could not make any findings on those sets of accounts.

Is there a figure you can give us for the total irregular, wasteful, and unauthorised expenditure? He wanted it to be compared between March 2022 and March 2023. The Committee was trying to get a sense of the total amount of irregular, wasteful, and unauthorised expenditure.

Next, he asked about the AG’s general view on government performance and value for money. When looking at the specifics provided, what is the AG’s general view? Are there any specific cases you can mention where you feel we are not getting value for money in terms of how much was spent within the specific department or SOE? He moved on to the slide on insights on the higher education, and training portfolio. These insights were appreciated. To what extent are they shared with the ministers responsible for the departments, together with the accounting officers and the responsible committees? This was where the interrogation could occur. He noted that the AG went into detail when speaking about NSFAS and trying to measure the courses offered and the job opportunities they created. This was great work. To what extent does the AG sit and talk with the respective departments about it so they can do something?

He also spoke about the internal audit functions within those departments. Do they look at the kinds of things that you are highlighting here? If not, why not? The various departments should also use the template used by the AG to gather this information and identify the issues.

On the slide about the material irregularities, he was pleased to see some criminal investigations and supplier contracts stopped. However, he wanted to know about the certificates of debt.

Ms M Matuba (ANC) welcomed the AG’s report and congratulated it. The Committee was proud of the AGSA. When listening to the presentation, the thought occurred to ask the AG whether it should possibly review legislation and engage with the Department of Labour. She said this because, in many instances, accounting officers who did not have the required capacity were appointed. It was difficult to fire an individual because of certain law processes that took place in the country. However, it was easy to remove politicians by reshuffling and so on. Removing officials was difficult. She did not know whether the country should begin looking into the laws and determining which ones did not assist in professionalising its institutions. She wanted clarity on this matter. 

Regarding accounting officers in all spheres and appointing incompetent individuals, she suggested conducting a study in the country to check whether these individuals had the necessary tools for these positions and how to deal with them in all fairness. Otherwise, there would be accounting officers who hid information and others who did not know what to do with the information. One could have all the information if they could not interpret and analyse it, then they were not capable of fulfilling their duties. If that assessment could be conducted, perhaps the country could agree to have a census of some kind every two or five years, where the AG would randomly check whether individuals had the capacity for their roles. Are we leading as a country to achieve what is contained in Agenda 2063 in terms of skills development? Are we getting there as a country or are we going backward?

On the education sector, she asked whether government was investing where necessary. With the information given by the AG, the Committee could also receive more detailed reports on all sectors to gain an understanding of what took place in those sectors. She fully agreed with the AG on the APPs. At some point, she served on one of the committees. She then asked whether 100% on this specific project had been spent and it was said that this was made a target. This was not made a target, but 100% was spent. Are we not learning properly or are we choosing money for the sake of spending it and being able to produce the financial statements at the end of the year? She thought these things needed in-depth analyses.

On the issue of duplication, leakage, and losses, when she listened to the presentation, she got a sense of what the issue was. In education, there were duplications where people were in different projects. What is the status? Why are we not finding a system? Why are we not using technology? It was like the country was so backward, whereas it could have all the systems interlinked. When she was born in 1972, the system that stated whether she was still alive was a system education policy, aligning everything that was done with the APPs. Accounting officers should not be allowed to do their APPs at that level. There had to be a team somewhere that involved the systems.

Ms Z Kota-Mpeko (ANC) said the Committee Members were proud of the work done by the AG. Regarding reporting, the AG said the qualified audits were decreasing in some areas. She liked to see the Eastern Cape moving from where it currently was. This represented good news, but the Eastern Cape could easily be seen like other provinces. The report gave the Committee peace of mind that the issue of adverse findings would be addressed. They were getting lesser, but simultaneously, there was a moving train towards ensuring the desired product. It was very important to have reliable quality information that could be useful for the work required. The Committee was at the point where it helped come up with these results. The rest of South Africa was looking at the AG. It was worse now with these new responsibilities it was given. The issue of governance, oversight, and accountability should be with all state entities. At the end of the day, these entities were not being followed like children; they needed to fulfil their responsibilities. The report was explicit, and the Committee was giving marching orders to follow up with its colleagues in Parliament. She did not think any time should be wasted. The AG did the work and delivered. The Committee looked forward to the following year. The AG was closing the year on a high note. The Committee would understand and be with the AG in the work it did.

Mr Z Mlenzana (ANC) felt proud about the report to the point where he put on a suit in appreciation and did not want to politicise the colour of his suit. There was a kind of refreshment with the AG’s report. He pitied those who missed the interaction with AGSA.

On slide five, there were 12 or so non-submissions of financial statements. These culprits were categorised according to years. These were SOEs. What can be advised? Talking about the rationalisation of SOEs and even closing them down would defeat the genesis of their establishment. If it were up to him, Members would find a way of going back and identifying what made the then government think of establishing SOEs. Regardless of whichever government established SOEs, why should they die during our time? Perhaps if the AG did not have a ready response available, it could unpack this another day. He thought Members needed to apply their minds on this going forward. He also looked at slide seven with the high-impact auditees that had poor performance. Putting aside these financial caps, this would include those who had too much to bite and it was too much for them. What do we do in that case? The Committee should not be looking at breaking down all these state-owned assets. It still looked at Eskom. It was still observing and it took time and more money. The Committee was even unable to keep track of accountability. In Eskom, there was a situation where one person was responsible for breaking down assets and another was at the helm of running the business. How do you collate facts and figures for auditing purposes? This would be a nightmare going forward. He raised this question when it came to the poor outcomes of high-impact auditees.

He looked at slide 11, the North West and the Western Cape where the AG did site visits for impact assessment. This told the AG those who were in the school of public financial management would say that public finance management was more than just finance management, which was debit and credit. It was also performance information management and all these things combined made up public financial management. The AG was not able to spread its wings throughout the country. He was unsure because when the AG spoke about action it had to mention funding. He was not sure if the AG could find the resources to spread its wings so by this time next year, when the Committee received the report, it could say it managed to broaden the scope, and its audit findings were not only informed by desktop exercises, but also by the work that was done. The fruits of the labour could be seen and it was very good work. For now, do you have the financial muscle to do it throughout? There was a mismatch between expenditure and performance were linked. Ms Matuba said the two things did not only go to the AG but the Committee and government. At some stage, the Committee would have to look at the qualifications and beyond. This was to profile the potentially responsible individuals in entities and government, specifically at management level. There could be someone who was well-schooled to cheat and government's financial resources would not match up when assessing expenditure on paper and physical performance on the ground. There was a department in the Eastern Cape that was R79 billion behind the margin. If it was asked what was done, the response was always that everything had been done. But when one went there physically, they would find that nothing was done. This is exactly what he meant by the mismatch. This was a challenge. He asked a department official if he knew the department’s assets. He was not asking in terms of numbers. If he was asked if he knew his ships, he should know which was old, new, etc. Do you know your assets for budget priority purposes? If the budget was not prioritised, there would be a situation where there would be ageing infrastructure. On paper, assets would be listed but when going physically, they were no longer usable. He did not know what could be inflicted on the ears, eyes, and minds of the auditees so they could take care of the asset management system to be on par with current demands.

Mr O Mathafa (ANC) joined the other Members in thanking the AG for the presentation and the quality of how it was presented. He thought the quality of the presentation spoke to the quality of the work done by the AG. On slide four, the improvements seen in the overall audit opinion were somewhat also an indication of the AG’s contribution of what it did in terms of its strategic outlook. The Committee commended the AG on this. He joined the other Members in congratulating the AG on being appointed as the external auditor for the United Nations Educational, Scientific, and Cultural Organisation  (UNESCO).

On slide five, this was touched on earlier by some of the Members. One of the Members mainly spoke about the delays and another spoke about disclaimers. He asked if there were remedial actions. He took the engagement further. Are there any cost operational implications that the AG has to endure when these delays are being picked up and as they happen? If there are, how are you responding to them? As mentioned earlier, those qualified to be in those positions knew and respected such legislative prescript. The high-impact auditees were mentioned earlier. The biggest chunk of the R113 billion claims against the departments was by the same auditees. There was also underperformance in complying with the audit cycle. Equally, there was huge pressure and exposure that these entities placed on the government. Knowing this relationship, how best can we try to pull them out through the audit process to ensure that specific exposure was not where it was?

Lastly, is there a correlation between the quality of service and the spending or exposure that was seen? More specifically on the trailing as far as auditing processes were concerned. He would think that in most cases where the AG could not account for its performance, it would be lacking somewhere. When the other member mentioned a figure of how far behind the Eastern Cape department was, this gave credibility to the observations by the AG when it said the coordination of role-players in project management was not where it was meant to be. The Committee requested the Department of Human Settlements and Water and Sanitation to make a presentation because it believed there was collaboration between the two. The action of one had a bearing on the outcomes of the other in project implementation. He agreed with the AG’s observations that perhaps this needed to be strengthened. In the Committee’s engagements with the departments, they agreed that they did not pay attention to these things and were taking the observation away as advised.

Is there a way through the AG’s audit process that could assist us in ensuring this observation is dealt with in terms of collaboration? Perhaps when there was an audit on human settlements, top structures, and the planning of human settlement township development, then the AG could say a certain department played a role. It also audited this part to include this one. He put it in simplistic terms. It put it in audit language. He was sure the AG knew what he was saying. The Committee asked for the same collaboration it asked from departments and committees. Is it possible? That was the question. If yes, it would have the discussion offline to see how best it could assist going forward.

Slide 9 spoke about four outstanding audits in the space of SOEs. What is the current status? Again, like in the previous question, what are the reasons that we still have these particular challenges? Given the question asked by Mr Singh about depositing this with the legislative authority in those departments, are you receiving support so that we are then able to assist these SOEs in moving out of the red zone?

Those were his inputs. The Committee should once again appreciate the quality of work being done by the AG. It was refreshing to speak to the AG. He liked how, in the strategy presentation, the AG spoke about change management and how processes were altered and the work of government was strengthened, which assisted in auditing compliance, auditing impact, and auditing quality of service so the change could be seen happening gradually, it was consistent and helped conduct the AG’s work. The change was happening gradually, but the change was consistent. It assisted the way things were done. The AG audited the impact on service delivery today. It presented what NSFAS was funding. Immediately when it did that, what occurred was the reconstruction and recovery plan by the President. He highlighted certain sectors. Immediately, it could be said the learners were aligned with this long-term strategic goal. If not, what can we do? For the lawmakers, these were advice and notes taken to assist them in formulating policies going forward. He thanked the AG for this.

The Chairperson thanked the Committee for the questions. He thought the Members asked the bulk of the questions concerning what the AG highlighted when she started the presentation. The presentation displayed the nature of the audit on the R3.1 trillion budget for auditees. The bulk of the R3.1 trillion came from the high-impact auditees. This amounted to R2.64 trillion. Therefore, the outlook based on the report stated the majority of those who did well amounted to about R264.7 billion.

The totality of such sought to bring attention to the emphasis of the fact that high-impact auditees remained a huge challenge in the expression of audit outcomes. However, there was some improvement in that area. The Chairperson said he looked into the overall audit outcomes. He found that for the previous financial year, there were 126 clean audits and 183 unqualified. For the 2022/2023 financial year, there were 147 clean audits with very good expressed performance. The increase was 21 auditees which improved their audit outcomes. One would take a linear assessment when following the trend and looking at the outlook. This assessment determined whether the auditee had moved from yellow to green. The balance between the previous and current financial year in accountability was 21. The movement could have been from yellow to green, which was very good because the improvement was sort of incremental. This meant there would be a dip in the yellow, bringing some form of stagnation because of the movement from the other side, which was the qualified with findings. In the previous year, the qualified with findings was 80, and 69 in the current year. This was a very good drop. This drop did not say where they went.

The Committee did not know whether these went to the extreme right, but there was the assurance that if they went to the yellow, the yellow still had a deficit of some kind. Therefore, the AG needed to dig deeper to find out where they went. As it went to the extreme left, it would find the actual reduction of those was very good and appreciated. Unfortunately, what the AG referred to which was 31 which were either not submitted or were late, making the audits late, he found a positive contribution. Three of these were non-submissions or late submissions that were later audited. This added to the 162. Another four were added to the 69 and the number increased to 73. When the two were added to the five, it totalled seven. The numbers changed as the AG dealt with the areas that were delayed.

The AG informed the Committee that in one area, people would avoid being audited on crucial information and would choose to remove it. Pulling this information meant the credibility of that information was under question. These auditees would immediately be moved to the end of the spectrum. This meant there was a problem with discipline. That discipline required what was mentioned in the recommendations; those areas needed to be directed. Whether this was to the executives, the AG should say where it felt that accounting officers were not disciplined enough in accountability in certain areas. This was because of the withholding of information to see that transparency and accountability were at the core of the ecosystem. If that was absent, the state could not evaluate the value of the money that was allocated at that level. This created problems. Do you not think there would be a stage with National Treasury where there might be penalty propositions related to a hold of a substantive amount to such in terms of the provision? Or that, coupled with what you are dealing with in terms of your material irregularities directive to the accounting officer? In his previous meeting, he saw the AG worked with the Special Investigating Unit (SIU).

The SIU reported on some of the AG’s findings, where it followed one other entity. Its findings were exactly on the trends highlighted by the AG. Do you not think these kinds of behavioural patterns would not lead you to be moderate about them? It could highlight this in its referrals and refer those matters to the bodies that could follow them. The AG made a point for the executives, committees, and Parliament to follow such. This kind of situation needed to be fought because the Minister of Finance was explicit. If the AG got there in the audit, it would find that there could be discrepancies with money, but the discipline was not there. The exercise and enforcement of that discipline for accountability and ensuring the expenditure met the required standard. This fed into the AG’s analysis of the SOEs when looking at its assessment of the SOEs based on what the state made available in the form of guarantees and if the quantum of those guarantees was assessed based on the value proposition of the outcomes, it needed to be followed through. The AG said it discovered a R14.3 billion potential loss. In the potential loss, this meant the actions somewhat amounted to a definite amount which worked positively on the line of savings. R1.29 billion was directly saved from recovery. The prevented financial loss was R56 billion. The processes were on track to recovering R0.7 billion. If the AG did not conduct its audit, the state would have faced a potential loss of R14.3 billion. What is the situation that the SOEs that failed to account would face in totality based on your assessment of various departments after your outlook which reflects R386 billion on government guarantees? This was an exposure for SOEs. Some of them failed to account while they were beholden to such guarantees by the state. There was a reflection of the danger of what the state would lose with the quantum, guaranteed to those who were far from accounting, while the AG provided the scenario of an ecosystem. In this ecosystem, each entity had to account for the money. Failure no longer belonged to an entity, the department had failed to follow that entity, so it had a responsibility to the ecosystem. Those who ought to hold these entities to account were also accountable for their failure to identify those who needed to account. Therefore, there was a movement closer to the Department of Monitoring and Evaluation, which was a very good partnership that had to be appreciated. The Department had to assess the ability of the departments to meet key performance areas and observe the necessary disciplines going forward. The Committee needed a period to look at what the report entailed on the exemplary areas that the AG cited. The AG spoke about the problems with textbooks. The nature of failure in having those books arrive in time impacted schooling. The committees responsible should deal with these matters and follow up. The AG’s role was to highlight those areas and red-flag them so the committees could follow up.

On the R7.6 billion on wasteful expenditure in slide 17, he asked if it was linked to the R14.3 billion or if it was separate from the identified financial loss. He was unsure if this was spoken about separately regarding tagging and quantum. The AG could be talking about the amount already included in the overall figure of R14.3 billion.

AGSA response

The AG thanked the Chairperson and the Committee for the questions. The R7.26 billion on slide 17 dealt with the total fruitless and wasteful expenditure reported by the different auditees over the four years on a cumulative basis. Some of it would have ended up with material irregularities processes and some of it would not. This process arises from things identified in the audit. When the AG audited, it did not audit 100% of the transactions in any environment; it inspected a sample of those transactions. Identifying this sample was a scientific method so it had confidence in what it said. Having assessed that sample, it identified that sample, it then identified areas where it could see financial loss or a likely loss on things identified in material irregularities. The R14.3 billion was money that was either lost or in the process of being lost. This was identified through the sample. If the AG had to audit 100% of the population of transactions throughout the PFMA cycle, it would likely have a greater number of financial losses. What was identified was definite. It should worry everyone because it was a big number. If this was representative of the sample at hand, it meant the problem of leakage would be greater than what was identified. The AG was able to contribute to a recovery of R2.5 billion against the R14.3 billion. Hence, its message was that it was good that R2.5 billion was recovered. If it were to be truly effective in public resource management as a state, it would be important for accounting officers to apply discipline in preventing problems, detecting them, and acting quickly when they occur. By the time the AG arrived and issued a material irregularity, the year was gone. By the time that was dealt with, another 18 months were lost because the notification was issued, and then the accounting officer had the chance to add. Fortunately, many accounting officers responded, but the R2.5 billion recovery would have been much better if accounting officers had done these recoveries themselves, preventing the problems in the first place. For the state to get the full value of the resources at hand, it had to ensure accounting officers applied discipline in fulfilling their responsibilities as stated in the PFMA to protect resources and act as the steward appointed to look after those institutions.

On the question asked about interventions on the disclaimers, fortunately, there were fewer disclaimers within the PFMA cycle. It would keep looking at what it could do. When it highlighted these outcomes, it called on those who monitored these entities to also act. Service delivery issues were happening around the Passenger Rail Agency South Africa (PRASA), and the opportunity was for all in the accountability ecosystem to play their part. It received a budget allocation each year and received the money. Every year, its audits were late, and it received undesirable audit outcomes. There were opportunities for the AG to do a few things—however, the most urgent action needed to be taken by those in the accountability ecosystem.

Irregular expenditure was R63.3 billion in cumulative reported irregular expenditure. This was likely to be incomplete. When there were entities with a disclaimer of audit opinions, even the irregular expenditure disclosed was incomplete. There was a credibility issue on this figure. The AG was vigilant in looking deeper at what was behind this figure and used its powers to highlight where there were financial losses and raised them through the material irregularities process. This began improving irregular expenditure. The figure for annual unauthorised expenditure for 2023 was R4.59 billion. The cumulative figure was R26 billion over four years. There was a matter around irregular expenditure; there was a different dispensation where auditees did not have to disclose irregular expenditure in the financial statements but in the annual reports. When the AG received the annual reports on time, it was able to check whether the number put in the financial statement and annual report was correct. However, some of the entities did not submit their annual reports on time so it was unable to confirm that number. When there was an audit report that showed non-compliance with procurement, the accounting officer needed to be asked what they were doing to stem the irregular expenditure and what they were doing to investigate the non-compliance and hold people accountable. Regardless of the fine details, the audit report would highlight that it found non-compliance. She asked the Committee to think about how it could shape the accountability and oversight conversations with those accounting officers outside of the figures. This was to ask the accounting officers what was being done to investigate the transgressions, whether they were extensive, what they did to ensure they did not reoccur, and whether they checked for leakage arising from the transactions flagged by the AG. This was how these institutions would run better when accounting officers were held accountable for acting on their duties.

On the question of where the AG saw a lack of value for money in certain government spaces, there were several areas where there was leakage through duplication, poor quality of spend, etc. There were other areas where there was ill-discipline. She asked the Members to look at the sector work done by the AG; this was available to the members of different portfolio committees. She asked them to look at each auditee's different financial statements and annual reports. Where there was a material irregularity and a financial loss was raised, they should ask the question because there was a loss. Where they saw the AG saying financials were not being submitted, they should ask why the compensation fund, year-on-year, ended up with financial statements and annual reports not subjected to proper scrutiny. With its significant resources and responsibilities to provide social benefits, why would the UIF’s audit report never enjoy this scrutiny? When the AG raised the matter of non-submissions and exclusion from scrutiny, it was an invitation to say there were real issues with transparency and accountability. The Department of Public Works had several material irregularities that led to a confirmation of poor quality of spend. There were several opportunities for the AG to answer the question in certain areas, but it was difficult to pull out one.

It was also asked if the AG’s insights shared with the higher education sector were shared with the responsible parties, they were. Anything that went into the report would have been shared before being tabled. Internal auditors in different departments operated in silo, so they did not look at the entire sector. There was an opportunity for the leadership of that portfolio to invest in some capability to assess that. This was so that they avoided repeating the leakages they had already seen.

On the material irregularities, one wanted to see the certificate of debt. The PFMA was interesting. There was such good responsiveness among accounting officers who acted quickly when the matter was raised. This was a good story. On reviewing legislation, she was no expert on whether legislation needed to be changed. As public sector auditors, the AG saw there needed to be attention to ensure that the right people were employed. The right performance standards needed to be set with those officials. When there was a problem with performance information, it would indicate the culture of certain performance standards and cascade them into the senior management level; the culture and discipline were not there. It became difficult to hold anyone accountable if they were not disciplined in setting the performance standards. Once the right person was hired, it was important to ensure they had good performance requirements; they would then be monitored and held accountable. One did not have to be a finance expert to hold a senior officer accountable. If they did not submit financials on time, this was a key responsibility. If the financials had no credibility, internal auditors should be asked questions and one would identify evidence of a problem. An accounting officer’s responsibilities were clearly articulated in the law. Those in the executive who supervised them had every opportunity to look at the internal audit committees, AG reports, etc., to understand what needed to be done.

The quality of spending and skills development was articulated. The AG said she was glad the insights were useful for the Committee. The partnership with the SIU started to help with the annual performance plans. Everyone in the ecosystem needed to worry more about performance information. This was not to be left as an audit matter. It was left to be dealt with as an AG matter, and it was not.

On the SOEs, she was unsure she was qualified to articulate SOE-related policies going forward. Having audited these institutions over several years and read different reports from other structures, including the Judicial Commission of Inquiry into State Capture, I can say that SOEs were plagued with instability and ineffectiveness at key leadership and governance levels. Stabilising these would help. If the expectations of SOEs were clearly stated, and the managers accountable were held to account, there would be a better chance at winning. There was no excuse for having only one obtaining a clean audit. There were concerns about the onerous procurement processes and requirements from National Treasury regulations. Sometimes, the conversation would highlight the PFMA as the problem, but she was not sure the conversation about the PFMA being the problem was helpful. The issue tended to be that perhaps National Treasury regulations needed to be amended. The reality was that it did not matter how perfect the legislation or regulations were if those management teams did not ensure their setup systems, processes, and monitoring controls were informed by discipline, the policies in the world would not help them run properly performing institutions characterised by institutional integrity, transparency, and accountability.

On the projects, the 137 visits were an investment it would not make again. It helped gain clarity on what happened with these projects and enhanced the quality of its insights and recommendations. It hoped this information helped others in the accountability ecosystem to do their part. Accounting officers had to be worried about missing things and implementing controls to deal with the root causes identified in the internal audits, or she would have to review the processes throughout the year. Audit committees had to ensure proper controls and oversight of projects during the year. The executive authority that received a quarterly report should be about whether those projects went well. The Committee should be worried about getting confirmation from the accounting officer and the audit committee saying there was comfortability that there were enough controls to ensure projects happened at the right quality and pace. This investment helped the AG. It wanted to ensure it helped others propel and act according to their responsibilities. Disciplined accounting officers used this insight to drive the necessary improvements; they were professionals who ensured internal auditors were properly capacitated to do what they had to.

 

On the professionalisation, amongst professionals, cheats were always in the minority. It did not matter which sector they were in. In a professional environment, some people were trained to do what they were meant to do. These people understood their duties and that they should be held accountable and would not shy away from an AG report, but look at improving. Professionals did not operate on perfection, but ongoing improvement. They would be held accountable. Professionals ensured they had a fixed asset register and preventative maintenance plan. If there were budget issues, they could articulate them properly. When it was time to submit financials, they ensured those financials were ready, submitted, and of good quality. Section 40 of the PFMA said a performance report should be ready for audit. When there were findings, they ensured they understood them and made the required improvements. They would ensure they were disciplined.

The high-impact auditees were put in a different category. With their biggest impact on service delivery and the entire budget, if the AG focused on this, it could get the required improvement translated into clean audits and the quality of delivery by institutions. Many in charge of these institutions always contend with a multitude of challenges. Several of them responded well when the AG raised matters. The issue was ensuring there were enough people of that calibre properly supported by all the other players in the accountability ecosystem.

In coordination, the AG would think about what it could do. It would think carefully about what it could do in the different sectors. Many of these audit outcomes would move from unqualified to clean audits. 37 auditees were unqualified; the AG hoped they could move into clean audits. The AG would love a situation where it could bank its gains through stability and insist on the right things so it could build on those gains and not start from scratch. The time for doing that was no longer there. She hoped she represented the AGSA’s hard work which made this big investment and went beyond the call of duty to be energised and assess different projects and programmes around the country, having difficult conversations with auditees.

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