By Lehlohonolo Lehana.
Auditor General (AG) Tsakani Maluleke says most of the R14.34 billion in losses due to material irregularities at national and provincial entities is completely irrecoverable.
A loss was accumulated by a sample of national and provincial departments between the 2018/19 and 2022/23 financial years.
A material irregularity is any noncompliance with, or contravention of, legislation, fraud, theft or a breach of a fiduciary duty identified during an audit 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 public.
The situation is even worse in South Africa’s municipalities – most of which have been crippled by financial and governance mismanagement.
Maluleke said, there were nine material irregularities related to the misuse of a material public resource. Accounting officers and authorities should establish an ethical culture. Further, she said, they should foster accountability by ensuring timely consequence management while also prioritising the monitoring of preventative controls.
R1.29bn in financial losses were recovered while R560m were prevented. An amount of R700m is in the process of being recovered. There were 58 cases where internal controls were improved to prevent a reoccurrence. Another 50 instances where responsible officials were identified and disciplinary processes completed were also recorded. Regarding fraud and criminal investigations, 15 cases have been referred. Four supplier contracts were also stopped where money was being lost.
Concerns were raised about the estimated R14.34 billion in material financial losses, emphasising the significant impact on the country.
Maluleke was briefing the parliamentary press gallery earlier on Monday, where she also reflected on the last five years as the head of the country’s supreme audit institution.
She told the media in Parliament that material irregularities continue to be a major burden on service delivery and the country’s finances.
Of the R14.34 billion financial losses, only R1.29 billion has been recovered. According to Maluleke, R560 million in financial losses were prevented, while R700 million was in the process of being recovered. Asked how much is irrecoverable, Maluleke said: 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.”
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.
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.