AG invokes additional powers to curb public sector financial mismanagement

Julius Mojapelo, senior executive: public sector, Saica

The disappointing audit outcomes signify the need for the AG to fast-track full implementation of his additional powers to curb corruption and financial mismanagement, says Julius Mojapelo, senior executive: public sector at the South African Institute of Chartered Accountants (Saica).

Financial ill-discipline continues to be the order of the day in provincial and national government as indicated by the high irregular expenditure of R62.6bn, fruitless and wasteful expenditure of R849m and unauthorised expenditure of R1.365bn.

“With the additional powers, the AG’s office will be able to compel the accounting officers and accounting authorities in public institutions to do what is expected of them by law when material irregularities are identified,” says Mojapelo.

A material irregularity is defined as any non-compliance with, or contravention of, legislation, fraud, theft or a breach of a fiduciary duty, identified during an audit performed under the Public Audit Act, that resulted in or is likely to result in a material financial loss, the misuse or loss of a material public resource or substantial harm to a public sector institution or the general public.

The results from the phase 1 implementation of the material irregularity process reveals the following instances:

• 11 related to unfair or uncompetitive procurement processes resulting in overpricing of goods and services procured, amounting to R438m;
• one related to unfair procurement processes resulting in a supplier appointed that did not deliver, amounting to R2.2bn;
• 11 related to goods and services not received, amounting to R55m;
• one related to payment for poor quality work, amounting to R 7,7m; and
three related to invoices or claims not paid on time, amounting to R106m.

The AG reports that 89% of the accounting officers or accounting authorities in the institutions where material irregularities were identified are taking appropriate action while the remainder are included in the audit report (7%) and referred to public bodies for investigation (4%).

“The amendments became effective on 1 April 2019 and are a welcome intervention to address the lack of consequences against corruption and financial mismanagement in public institutions,” says Mojapelo.