- The latest report on national and provincial government audits shows a slight improvement in the number of "clean" audits.
- But it also paints a stark picture of billions lost in irregular and wasteful spending.
- Over recent years, for example, government departments have failed to recoup millions paid in error, and non-compliant tenders have wreaked havoc on service delivery.
- For more articles, go to www.BusinessInsider.co.za.
The latest auditor-general report on national and provincial audit outcomes for the past financial year shows small improvements in how government entities are managing their books. But the larger picture remains grim: billions in taxpayer money are wasted, with little consequences.
South Africa’s new auditor-general Tsakani Maluleke reported that 111 (or 26%) departments and government entities produced “quality financial statements” and received clean audits, among them the departments of public service and administration, science and technology, social development, telecommunications, trade and industry, traditional affairs and economic development. This is an improvement: in the previous year only 98 entities received a clean audit.
But the report highlights large problems with financial mismanagement.
Government lost more than R2.2 billion on spending where suppliers didn’t deliver the goods following a non-compliant tender, and almost R1 billion spent on overpriced goods and services due to problematic procurement. Government departments and entities paid more than R150 million in interest or penalties on invoices that weren’t paid on time.
Over the last three years, almost R7.5 billion of government expenditure was fruitless and wasteful, the report found.
In the past three years, KwaZulu-Natal’s irregular spending reached almost R10 billion – the highest of all the provinces. “A lack of consequence management continued to trigger the high levels of non-compliance and irregular expenditure,” the report notes. The auditor-general's office is also scathing about the Free State, where “a culture of no consequences has been created through the political and administrative leadership’s inability to implement consequence management for the pervasive non-compliance with legislation. Thus, the environment was vulnerable to misappropriation, wastage and the abuse of state funds.” The AG notes that the Free State leadership has been slow to respond by investigating the irregularities.
Other provinces have made progress, and the AG noted a “notable improvement” in audit outcomes in Limpopo
The AG’s office was recently granted more powers to refer material irregularities for investigation to other authorities, and in its most recent report, reported back on some of the most egregious recent cases it uncovered:
Department of defence mismanagement
Since 2016, the department has been paying R108.3 million in rent for unoccupied office buildings, the AG found.
It also awarded a contract for inventory and asset verification to two bidders in 2017 – instead of to only one party with the best bid. This resulted in increased costs, and a financial loss of almost R251 million, the AG found.
In addition, the department awarded a contract in July 2019 for the supply and delivery of fuel using criteria that differed from those stipulated in the original request for quotations, which resulted in higher prices being paid and a financial loss of R2.57 million.
Millions lost at Gauteng health
Together, South Africa’s provincial health departments now face claims (including medical claims) of almost R106 billion. The AG found that in the 2019 financial year, the Gauteng health department had to pay R8 million in interest on medical claims not paid within the period stipulated by court judgments.
The Gauteng department of health also bought IT infrastructure without inviting competitive bids, resulting in a R148.9 million financial loss “as cheaper alternatives were available”, the AG found. Disciplinary action was taken against two of the implicated officials, and the matter has been referred to the National Prosecuting Authority (NPA) to consider possible criminal charges and to the State Attorney to consider possible civil claims.
R103m lost after wrong Cogta payments
The department of cooperative governance made two incorrect grant payments to a supplier, and has not been able to recover all of the money – leaving it with a financial loss of R103 million. The Hawks, State Attorney and Special Investigating Unit took the matter to court to recover the money, and the case is still progressing. The responsible officials have been subjected to disciplinary hearings and other “consequences”, reports the AG.
The department also paid R200,000 to dead people, and R7.1 million to non-qualifying civil servants, as part of a community work programme. This was due to weak internal controls, the AG found.
Dept of water paid R18m for non-existent consulting
The department of water and sanitation paid R17.9 million to a consulting firm for financial management services without evidence of work performed. The officials involved in allowing the contract have since resigned, the AG found.
SABC’s over-priced security
The AG found that the SABC awarded a contract for security services in 2017 to a bidder that did not score the highest points in the evaluation process, resulting in higher prices being paid. A court case is still ongoing.
Gauteng’s payment mistake
The Gauteng department of human settlements paid R2.5 million to the wrong contractor, and hasn’t yet received the money back. The contractor was arrested in September 2020 and subsequently released on bail.
Disastrous airport plan
The North West department of community safety and transport management awarded a contract in 2015 to introduce scheduled flights to Mahikeng and Pilanesberg airports. In the end, the suppliers were paid while no flights were launched because the contract breached internal controls. Two criminal cases were opened, and both are still in progress.
The same department also paid more than R21 million in 2015 to a supplier for a learner driver training programme – without services being delivered. A competitive bidding process was not followed, and the ability of the supplier to deliver services was not assessed. A criminal case was opened with the Hawks in 2017, and a civil claim has been instituted against the supplier.
Almost R3m for radiology equipment that can’t be used
The Limpopo department of health paid R2.6m to lease radiology equipment at a local hospital that was not licensed for use due to safety concerns. Following an investigation, the supplier agreed last year to equip the department at no cost for 24 months.
Math error, ‘ghost’ mammogram service in the Northern Cape
The Northern Cape department of health made overpayments for radiology services for four years due to a mathematical error. Also, payments were made for mammogram services even though the hospital where services were rendered did not have a mammogram machine.
Pricey sanitary towel contract
The Free State department of education awarded contracts for the supply of sanitary towels to eight bidders, instead of one bidder that scored the highest points in the evaluation process, resulting in higher prices, the AG notes.
R20m for incomplete houses
The Free State department of human settlements paid a contractor for houses in Thabong that were not completed. A new contractor had to be appointed to complete the work, with the department suffering a loss of more than R20 million. The department also paid a contractor for unfinished, and substandard, housing at a Thaba Nchu project. The AG says the contractor has committed to rectifying the work.
The same department also made an overpayment of almost R7 million to the developer of a Kroonstad housing project due to duplicate claims.
Unsecured equipment stolen
A piece of construction machinery, worth R1.5m, was stolen from the Eastern Cape department of transport after it was not properly safeguarded.
Compiled by Helena Wasserman