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SA needs to look beyond debits and credits in the public sector, says Auditor-General

SA needs to look beyond debits and credits in the public sector, says Auditor-General
Rebecca Davis
By Rebecca Davis
12 Aug 2024
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Auditor-General Tsakani Maluleke says that her office’s expanded powers are paying off, allowing her staff to go beyond the numbers to look at whether public entities are ‘doing harm’ or ‘doing good’.

Just over halfway through her seven-year term, Auditor-General Tsakani Maluleke reports that the expanded powers granted to her office in 2019 are paying off.

The changes to the Public Audit Act have meant that when auditors issue a finding of “material irregularities” (MIs) against an entity, the Office of the Auditor-General of South Africa (Agsa) now has some teeth to enforce consequences. These could include the referral of the matter to bodies like the Hawks for investigation, or the issuing of a certificate of debt for financial losses incurred.

However, Maluleke, addressing the parliamentary Press Gallery Association on Monday, made it clear that her office aimed to look beyond balance sheets.

There were instances, said Maluleke, where the “debits and credits are fine” — but the public entity in question was still not fulfilling its mandate.

The Auditor-General cited the example of a newly built Mpumalanga neonatal high-care ward, a project which was financially compliant but which an inspection by her staff found was standing empty.

“Because we now have these powers, our team could expand its inquiry,” said Maluleke. They found that the facility was not being used because the relevant budget was insufficient to recruit the skills needed to run the ward.

Maluleke said this was an example of the kind of “harm” her team was now on the lookout for: “You are causing harm to the public because they should be benefiting from this asset government has invested in.”

In response to the Agsa investigation, the ward was now staffed.

“This, you won’t see in the numbers,” Maluleke told journalists.

Billions squandered


Those numbers are, however, still alarming.

Audits undertaken in accordance with the Public Finance Management Act (PFMA) during the 2022/2023 financial year revealed an estimated financial loss of R14.34-billion.

In local government, an estimated R5.19-billion financial loss was estimated by the end of the 2022 financial year — of which, Maluleke previously told Parliament, R1.6-billion alone was lost by municipalities which had invested in VBS Mutual Bank.

One of the major challenges that remained was unresponsive accounting officers.

Maluleke said that in matters related to local government, no actions were taken to address audit problems in 86% of cases until the Agsa team issued MI notifications. In cases identified in terms of the PFMA, no action was taken in 82% of matters until the auditors followed up.

“People get away with poorly performing their duties even if they have the skill,” said Maluleke.

“Non-compliance is tolerated.”

She said another area of concern when it came to oversight in municipalities was the preponderance of local councillors with “significant responsibilities” who were “not equipped to engage with those duties”.

Wasted public money rarely comes back


Asked how much of the squandered money was gone for good, Maluleke replied candidly: “Most of it.”

One of the reasons is the delays in uncovering wrongdoing: “When you have to wait for the AG to come a year later and highlight an overpayment, the chance of getting that money back is quite low.”

In some instances, businesses enter voluntary liquidation before money can be claimed back.

Investigations by law enforcement also tend to take too long. Maluleke cited the case of an inappropriate payment made for a particular project where Agsa raised an MI in 2021.

“By the time we got the Hawks to arrest someone it was 2023,” said Maluleke.

“The delays made it difficult to get any money back in the coffers of government.”

Plaudits and slow progress


Maluleke, South Africa’s first female Auditor-General, has won wide praise for her work and in 2023 was recognised by the United Nations Educational, Scientific and Cultural Organization (Unesco) with her appointment as an external auditor to the body.

Among the issues she has taken up during her time in office has been a crackdown on the use of expensive consultants to fulfil basic financial reporting responsibilities for public bodies.

When it comes to fruitless and irregular expenditure, she says, “much of it is about poor institutional capabilities. What we believe needs constant attention is building the capacity of municipalities.”

Maluleke acknowledges that it is too soon to point to significant change. “It will take time,” she said.

Agsa is responsible for auditing all state-owned enterprises except a handful, one of which is Eskom.

On Monday, Maluleke was diplomatic when asked for her response to the news that some fraud-accused former CEOs of state-owned enterprises were set to join Parliament as MPs for the MK party; namely, former Eskom CEO Brian Molefe, former Prasa CEO Lucky Montana and former Transnet CEO Siyabonga Gama.

“Democracy will deliver what it will,” Maluleke said. “Our job is to work with the oversight machinery.” DM

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