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BLSA says SOE audits remain cause for concern this year

4th December 2023

By: Marleny Arnoldi

Deputy Editor Online

     

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While national and provincial government has made strides in improving financial management, there is also a concerning increase in entities that simply do not complete audits, says Business Leadership South Africa (BLSA) CEO Busi Mavuso.

In her latest weekly newsletter, she lauds the increase in public entities’ clean audits this year from 126 to 147, and the number of those with disclaimers falling from 14 to five; however, she mentions that the Auditor General of South Africa’s (AG's) report showed an increase in entities not submitting audits from 12 to 31.

The most concerning aspect is the contribution to this number from the State-owned enterprises (SOEs), Mavuso says.

Only the Development Bank of Southern Africa received a clean audit, while several audits were outstanding, including that of South African Airways for the fifth year, Eskom, Denel and Alexkor.

Two saw regressions in outcomes including the Land Bank from clean audit to financially unqualified opinion with findings and the South African Broadcasting Corporation from a qualified audit opinion with findings to a disclaimed opinion.

“The performance of the SOEs remains a critical problem for our country and the AG’s report makes clear that accountability for their management and reporting on finances and performance is a key part of the failings,” Mavuso states.

Other entities that had not submitted accounts were the Unemployment Insurance Fund, the National Student Financial Aid Scheme, and the Compensation Fund. These are critical institutions that provide support to many South Africans and their failure to adhere to accountability norms is very concerning.

PROVINCIAL PERFORMANCE

The improvement in provinces is perhaps the best takeaway. This represents a concerted effort by provincial governments and the support of the National Treasury.

Auditor-General Tsakani Maluleke noted during a Parliamentary briefing last week that Gauteng’s education department got a clean audit this year after years of work.

In KwaZulu-Natal, there were nine improvements and in the Eastern Cape and North West eight improvements in each. The Western Cape remains the leading province, with 18 clean audits.

Apart from the financial accounts, the AG’s office also assesses the delivery of government entities on their annual performance plans. The findings are decidedly mixed.

The AG reported that a quarter of auditees provided unreliable, incorrect or no evidence for the achievements they reported.

At national level, transport, public works and human settlements do reasonably well, but health has four disclaimed opinions and one outstanding audit out of ten.

Findings are made where reported achievements are not backed up by sufficient evidence, ranging from the number of schools provided with running water to the number of title deeds registered by the provincial departments of human settlements.

RECURRING ISSUE

Mavuso says one issue that keeps surfacing is the role of the Public Finance Management Act and Municipal Finance Management Act, with several entities that fail to get clean audits complaining that the legislation and corresponding regulations are not appropriate for their entities.

The AG reports that what really matters is that there are disciplined management teams seized with ensuring systems, processes and monitoring controls are in place.

“Getting that in place is much more important than the detail of the regulations,” Mavuso states.

The AG also has a mandate to identify and report on material irregularities, which are acts of fraud, theft or breaches of fiduciary duties.

The AG has identified 266 material irregularities over the last four years, ranging from overpriced goods and services in procurement to fraud.

Actions by the AG have prevented loss or recovered R2.6-billion in that period, with 15 criminal investigations instituted, 50 individuals subjected to disciplinary processes and 58 internal controls improved.

“This is a welcome addition to the many efforts to tackle corruption and other criminality across our economy,” Mavuso notes.

The AG’s call for action is to drive a culture of accountability and consequences throughout the civil service.

Accounting officers and authorities need to implement consequences swiftly, bravely and consistently, Mavuso emphasises.

When there are consequences for actions, it helps to deter others from wrongdoing. The AG expressed some frustration that authorities are sometimes slow to act and miss opportunities to instill a disciplined and ethical culture.

The AG reported that of the procurement fraud and improper conduct incidents reported in the previous year, 59% were satisfactorily resolved but the rest were not. Ensuring swift consequences must be a key component to improving the overall performance of government.

“The AG is one of the institutions that underpins our demographic dispensation. It is an example of excellence in the public sector,” Mavuso states.

During the current administration, the AG has noted a steady improvement in compliance of public institutions, an achievement of this government, but also of the AG itself, which through consistent and thorough audits, highlights areas of underperformance. That also means the AG is a credible voice on improvements too.

For business, the report highlights the serious work that must be done on our SOEs.

“We are actively engaged in working with government through Business for South Africa to improve performance at these institutions, and the AG’s insights are a helpful spur to focus attention on the financial and performance monitoring and reporting of these institutions,” Mavuso concludes.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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