Irregular expenses

Auditor-General readies for more teeth, awaits Ramaphosa’s signature

By Greg Nicolson 8 October 2018

Auditor-General Kimi Makwetu releases the 2015/2016 municipal audit report on June 01, 2016 in Pretoria, South Africa. Photo by Gallo Images / Beeld / Lisa Hnatowicz)

Auditor-General Kimi Makwetu’s office is preparing to implement the Public Audit Amendment Bill, which will finally allow action to be taken against financially errant government entities. Now President Cyril Ramaphosa just needs to sign the law.

Auditor-General Kimi Makwetu said on Monday that his office had engaged staff across the country to prepare for the signing of the Public Audit Amendment Bill, which was passed by Parliament in June and sent to President Cyril Ramaphosa for assent.

We are currently in the process of finalising the regulations for this,” Makwetu said at the Banking Association of South Africa’s banking summit in Johannesburg.

The new law will provide the auditor-general’s office with the power to refer irregularities to law enforcement agencies for investigation and to make binding recommendations, which will increase accountability in government entities with repeated reports of irregular, unauthorised, fruitless and wasteful expenditure.

Makwetu said his office had engaged staff across the country, at “the coalface” of the auditor-general’s work, to provide clarity on the new law and unpack concepts to help draft regulations it will present to Parliament in the next month to ensure the law’s smooth implementation.

The auditor-general said Ramaphosa hadn’t yet provided feedback. In September, the president told Parliament he was studying the constitutionality of the bill.

This almost changes the game in a way,” said Makwetu on Monday on the long-awaited law.

At present the auditor-general can only try to “persuade” government entities to improve their audit outcomes, he said, which hasn’t worked over the past 15 years.

This new power, which comes with this amendment, is now going to afford the audit office the opportunity to identify material irregularities in the audit process and refer them to investigative bodies for further investigation,” said Makwetu.

The latest audit of municipalities, released in May, saw an overall deterioration in results and local governments failing to take the auditor-general’s advice. Irregular expenditure increased by 75% to more than R28-billion.

Only 30% of national and provincial government entities received clean audits in the latest results, released in November 2017, with irregular expenditure increasing by 55% on the previous year to more than R45-billion.

The new law allows Makwetu to refer irregularities to authorities such as the Hawks and NPA and to make binding recommendations for entities to correct irregularities in a given timeframe.

It also allows a certificate of debt to be issued to accounting officers who fail to comply with the law, potentially making directors-general, chief financial officers, boards or municipal managers personably liable to repay the finances they have wasted.

That provision has been subject to rigorous debate. Makwetu said engagements with staff have focused on ensuring officials who receive debt certificates don’t have to pay without first going through a fair process.

Makwetu faced multiple questions on State Capture and accountability. He said each year his office reported on behaviour typical of people trying to divert public funds, particularly in supply chain management, but little had been done to hold officials accountable.

For as long as nobody does anything about it, the people doing it will see it as part of their business and they will develop values that we will adopt. They will develop teamwork,” he said, noting that if corruption stays unchallenged it can become part of an organisation’s culture.

Makwetu said his office had been “advising caution on a slippery road so there’s no need to cry fire in a crowded theatre. Now the theatre is crowded”.

The cost of governance failures is real, tangible and terrible,” he repeated, citing a recent report on governance in state-owned entities.

The theme for the banking association’s summit on Monday was “growth and good governance”. The group’s chairman Mike Brown said State Capture had broken trust between social partners who now need to come together and make hard choices.

None of us are going to get everything we want, but we know we have to put aside narrow interests so our country can get what it wants and needs,” said Brown, who is also the Nedbank CEO.

We are hopeful for the future but we are painfully aware of the damage done to the economy and its institutions.” DM

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