The potential improvement in the audit outcomes of South Africa’s 468 national and provincial departments and public entities is being hindered by a slow response in addressing the recommendations tabled by the Auditor-General (AG) South Africa in prior years.

Around 73% of those audited during the 2014/15 financial year had failed to attend to concerns raised by the AG in prior years, including internal control deficiencies, identified risk areas and governance risks, besides others, AG Kimi Makwetu told media on Wednesday.

The audit outcomes for the 167 national and provincial departments and 301 public entities accounting for the country’s R1.1-trillion budget in 2014/15 improved only marginally year-on-year.

Makwetu commented that, each year, the response to suggestions had slowed even more, to the point of receiving “no response”.

Releasing this year’s audit outcomes of national and provincial government departments and public entities in Pretoria, he said the number of departments receiving a financially unqualified audit opinion with no findings – a clean audit – had improved slightly from 118 in 2013/14 to 131 in 2014/15.

Auditees with financially unqualified audit opinions with findings declined by 2% from 237 last year to 224 in the year under review, while auditees with qualified audit opinions – unable to account adequately and accurately for all their financial transactions and activities – decreased to 68 from the 74 reported last year.

While there was “little change” in the overall outcomes of public entities, that of departments had improved.

Only 42 auditees were able to improve to clean audits from an unqualified opinion with findings.

Three departments received adverse audit opinions, the same as last year, while there was a decline in the number of auditees that received disclaimed opinions, from 22 in 2013/14 to 14 this year.

During the year under review, the national and provincial departments of education, health and public works, which contributed 37% of the total spending by departments, were the worst performers, with 40% attracting financially qualified or disclaimed audit outcomes, well above the average of 12% for the other departments.

“Except for two clean audits, all these departments had material findings on the quality of their annual progress reports and/or compliance with legislation. These sectors receive a substantial portion of the budget and are responsible for implementing key programmes to improve the health and welfare of citizens.

“Their poor audit outcomes should receive urgent attention from all role-players to ensure accountability and improved service delivery,” the AG stressed.

The star performers among the government sectors, namely the economic sectors, employment and infrastructure development clusters, secured 19 financially unqualified audit opinions, with five clean audits.

None of the seven departments in the justice, crime prevention and security cluster obtained a clean audit, although four were financially unqualified.

“Those auditees that have progressed or maintained their previous year’s positive audit outcomes, have stuck to the basics of clean governance, practically showing that clean audits are easy to attain and maintain if these fundamentals are in place,” Makwetu said.

Last year, Makwetu recommended the root causes of poor audit outcomes be addressed through the filling of vacancies with competent officials, responding to outcomes through action plans and well-coordinated initiatives, implementing basic controls and insisting on regular and
credible reports.

Further, it was suggested the departments observe, enforce and monitor compliance with legislation, and pursue accountability.

There was a persistent lack of consequences for actions that needed to urgently be dealt with urgently, he added.

During the 2014/15 audit, the AG found that irregular expenditure of R25.7-billion was incurred by 287 auditees, with noncompliance with procurement process requirements the main contributor to irregular expenditure.

While goods and services were received for 86% of the irregular expenditure, it could not be determined if the best price and value was received.

However, this was an improvement from the R35.3-billion incurred by 310 auditees in the prior year.

Two hundred and forty auditees incurred fruitless and wasteful expenditure of R936-million, which was a contraction on the R1.2-billion incurred by 247 auditees in the 2013/14 financial year.

Unauthorised expenditure from 23 departments reached R1.6-billion, R1-billion less that last year.

“South Africa’s legislatures led by example in showing that clean audits are attainable,” Makwetu pointed out, with six of the ten legislatures receiving clean audit opinions.

The North West, Northern Cape and Limpopo legislatures received unqualified opinions with findings, with only the KwaZulu-Natal legislature receiving a qualified opinion.

“This significant improvement bodes well and sets a positive tone in the drive towards wholesale clean administration in the public sector.”