Irregular expenditure by national and provincial departments and public entities has increased to R46.36-billion in 2015/16, an 80% increase from the prior year.

Auditor-General (AG) Kimi Makwetu revealed on Wednesday that this was owing to continued noncompliance with supply chain management legislation.

Six auditees were responsible for just over 50% of the irregular expenditure in 2015/16. This included the Passenger Rail Agency of South Africa (PRASA), the KwaZulu-Natal and Mpumalanga departments of Health, the Road and Transport and Human Settlements departments in Gauteng and the national Department of Water and Sanitation (DWS). 

Further, fruitless and wasteful expenditure in 2015/16 reached R1.37-billion.

Here, six auditees were responsible for more than 70% of this expenditure – PRASA and the DWS were again included in this list, joined by three departments in the education sector and the Compensation Fund.

Unauthorised expenditure, meanwhile, decreased to R925-million, as a result of interventions at national and provincial levels. The main reason for the unauthorised expenditure remained overspending of budgets.

Meanwhile, 24% of auditees improved their audit results in the three years from 2013/14 to 2015/16, with the number of auditees that received financially unqualified opinions with no findings increasing overall from 122 in 2013/14 to 152 in 2015/16.

Public entities fared the best with continuous improvement year-on-year; but, the audit results of departments regressed in 2015/16, with 14% of auditees regressing and 62% remaining unchanged.

Makwetu further noted that 13 departments and 19 public entities that had performed well previously had lost their clean audit status in 2015/16.

This regression, he pointed out, was offset by nine departments and 39 public entities that obtained clean audits this year.

The AG’s latest report covers 484 auditees, which include 169 national and provincial departments and 315 public entities with a total budget of R1.2-trillion for the year under review.

Public entities fared the best with continuous improvement year-on-year, increasing their total from 82 to 108, while 44 departments received clean audits in 2015/16.

The provinces with the biggest improvement over the three years were the Eastern Cape, KwaZulu-Natal and Gauteng, while the provinces with the highest number of auditees with clean audit opinions in 2015/16 were the Western Cape, at 79%, Gauteng, at 60%, and KwaZulu-Natal, at 35%.

“These improvements, barring the regression [in the provinces] overall, signify the great potential evident within the departments and provinces to make a definite step away from deficient financial management. This will require greater commitment from all levels of leadership to implement commitments already made,” asserted Makwetu.

NATIONAL OUTCOME
At national level, the AG reported an improvement of only 9% of the auditees over the three years. Only 30% of the auditees received a clean audit status and 15% were outstanding, disclaimed or received adverse opinions.

The Ministerial portfolios leading in clean audit outcomes were the Arts and Culture, Trade and Industry and  Higher Education and Training portfolios.

The Higher Education and Training portfolio was, however, a mixed bag, with the sector education and training authorities contributing a third of the clean audit outcomes at national level, while the technical and vocational education and training colleges, which also fall under this portfolio, received the poorest outcomes.

Other auditees with poor outcomes were the museums in the Arts and Culture portfolio Labour and Transport portfolios.

“As we have also reported previously, the departments of Education, Health and Public Works that are responsible for almost 37% of the budget and for implementing key programmes to improve the health and welfare of citizens, continue to have the poorest outcomes – 40% of these departments received qualified or disclaimed audit opinions compared to 13% of other departments,” the AG noted.

In 2015/16, the AG rated the financial health of 76% of departments as either "concerning" or "requiring intervention" – a regression over the three years.

This is a regression from 53% in 2014/15. “The signs of poor financial management are apparent in the increasing occurrence of deficits, departments funding cash shortfalls from the following year’s budget, poor revenue management and the inability to pay creditors within the required 30 days.”

In total, 5% of departments and 10% of public entities were in a particularly poor financial position by the end of 2015/16, with material uncertainty regarding their ability to continue operating in the foreseeable future. This remained unchanged from the previous year.