The case of the missing grader is one of 75 material irregularities the Auditor-General’s Office has escalated for further action by accounting officers on the pain of personal cost orders possible under the Public Audit Amendment Act. 

While the law gives the Auditor-General teeth, it’s a slow and winding road. A departmental investigation into the July 2019 disappearance of the R1.5-million grader was concluded in August 2020. After the theft was reported to the SA Police Service, police traced the vehicle to Lesotho. 

“Accounting officer aims to recover assets and take necessary disciplinary actions against responsible officials,” said the 2019/20 Consolidated General Report on National and Provincial Audit Outcomes, released on Wednesday. 

That missing grader is just one of 75 material irregularities that took from the public purse:

• R2.22-billion, lost through irregular procurement that meant appointed suppliers did not deliver;
• R1.44-billion, lost in payments for goods that were not supplied or were of unusable quality;
• R983-million, lost by overpaying for goods; and
• R1.09-billion, lost through failures to recover debt.

Those material irregularities reflect what cripples public finances – irregular expenditure, violations of procurement and other laws, lackadaisical internal controls and a general lack of consequences for wrongdoing, including the loss of or harm to a public resource.

Most of the identified material irregularities were “not complex accounting or procurement issues and could have been prevented through basic controls”, according to the consolidated audit report. 

It’s been like this for years and years. 

Auditor-General Tsakani Maluleke on Wednesday called for  “progressive and sustainable improvements” and “effective consequence management” to redress auditing failures that seem not to improve. 

Internal stability was identified as central; where accounting officers and chief financial officers remained in their post for at least five years, performance and outcomes improved. 

Consequences for wrongdoings, including failure to stick to laws or maintain internal controls, was also again highlighted as key to good public finance management. 

Or, put differently, the reasons for the lack of improved audit results are: slow or no response to address identified risk areas and internal controls (84%), vacancies (36%), and lack of consequences (37%). 

Despite the Public Administration Management Act and regulations since 2016 banning public servants from doing business with the state – and making this a criminal offence – 553 state employees scored contracts worth R438-million from the state. 

The government not implementing its own rules also meant suppliers waited, on average, 48 days, not 30, to be paid, and local content procurement rules were broken at 67 of 166 auditees in contracts worth R2.616-billion, the report showed. 

The number of clean audits – an unqualified audit with no findings – is up to 111, from 98 the previous year. That means just 17% of the R1.7-trillion public finance in the 2019/20 financial year was spent without any dodginess.

Those with an unqualified audit with findings dropped to 173 from 188 in the previous 2018/19 financial year, but that means another 40% of public finances has been spent without significant mishaps. 

Overall, only 49% of national and provincial departments and entities were able to provide credible quality financial information for the 2019/20 financial year. 

Nationally, those with a clean audit include Parliament, the Office of the Chief Justice, Social Development, the Public Service Commission, Trade and Industry and the Presidency’s Planning Monitoring and Evaluation.

All provincial treasuries also obtained clean audits; in the Free State and the North West the treasury is the only clean audit. Entities with clean audits include Iziko Museums, the Financial Intelligence Centre, Human Sciences Research Council, Medical Research Council and Legal Aid South Africa. 

But, as in previous years, irregular expenditure remains a red flag in public finances. 

A total of R262.03-billion still has to be dealt with in line with the Public Finance Management Act-required investigations into the circumstances of the irregular expenditure that should lead to a finding of who’s responsible, moves to recover the lost monies and/0r to condone it. 

Irregular expenditure doesn’t directly mean corruption, but it does mean government overpaid for services or did not receive all the services it thought it paid for. Together with procurement violations, lack of paper trail, and tolerance for wrongdoings, it remains a tocsin for the state of public finances. 

Just looking at the numbers, it may seem a good thing that irregular expenditure dropped to R54.34-billion in the 2019/20 financial year, from R66.9-billion just a year earlier. But just the numbers do not tell the whole account. 

“This is absolutely no reason to celebrate,” said Maluleke, emphasising how one in three auditees had failed to fully disclose their irregular expenditure. 

If the full extent of irregular expenditure was disclosed, the numbers would not have decreased. Then add into the mix the fact that contracts worth almost R2.08-billion could not be audited at all because of the lack of documentation. The largest contributor here is the department of defence, where lack of documentation meant inability to audit contracts worth R1.751-billion, including the supply of tri-axle trailers, an outsourced service provider for graded fire-breaks, and cleaning and gardening services. 

Also important to note is while the Auditor-General audits many of the state-owned entities, Maluleke pointed out that her office did not deal with Transnet or Eskom, which have recorded R56-billion and R11-billion irregular expenditure, respectively, in the 2019/20 financial year. 

The unbroken record of public finance mismanagement means the impact of irregular expenditure goes back years.  

A total of R262.03-billion still has to be dealt with in line with the Public Finance Management Act-required investigations into the circumstances of the irregular expenditure that should lead to a finding of who’s responsible, moves to recover the lost monies and/0r to condone it. 

But Maluleke said that’s not happening. “All of that indicates we are continuing to have a culture where there is tolerance of lack of compliance.” 

Also not happening are basic internal controls, effectively the paper trail to support procurement and expenditure. 

The 2020 real-time audits every three months underscored how documents to support transactions could not be traced even in this short auditing period. 

“The transactions have gone through the books. The transactions have gone through the bank accounts. But we can’t find the tender documents,” said Maluleke. “That tells you something’s wrong – it’s the discipline of document management.” 

Progressive and sustainable measures are needed for compliance with good financial management practice and laws, while consequences for breaches and accountability failures must be swift, brave and consistent. 

Or, as the Auditor-General’s report put it, “All officials must do their part to ensure that public money is protected and that there is transparency and accountability in the management of state funds.” 

Anything less, and public finances continue to go missing in action. like that Eastern Cape Transport Department grader. DM