Auditor General (AG) of South Africa, Tsakani Maluleke, has expressed concern over the financial health of departments as unauthorised expenditure increased in the 2019-2020 financial year.<\/p>\n
\u201cThe financial health of departments continued to be alarming. Unauthorised expenditure, which is mainly as a result of overspending of the budget, increased from R1.65 billion to R18.12 billion \u2013 of which R15.13 billion was as a result of the early payment of the April 2020 social grants in response to the COVID-19 lockdown measures,\u201d Maluleke said.<\/p>\n
Addressing a media briefing on Wednesday on the audit outcomes for national and provincial departments, she said the remaining R2.99 billion was overspending by 21 departments.<\/p>\n
\u201cOver a third of departments ended the year in a deficit totalling R21.2 billion. In addition, over 60% of the departments had insufficient funds to settle all liabilities that existed at year-end if the unpaid expenses at year-end (totalling R22.78 billion) were also taken into account,\u201d the AG said.<\/p>\n
This means that these departments started the 2020-21 financial year with part of their budget effectively pre-spent \u2013 27 departments will have to use more than 10% of their 2020-21 operational budget (excluding employee cost and transfers) to fund the shortfall.<\/p>\n
\u201cAt year-end, 87% of the departments had claims against them, totalling R147.12 billion. Claims are made against departments through litigation for compensation as a result of a loss caused by the department \u2013 the most common claims are medical negligence claims against provincial health departments,\u201d Maluleke said.<\/p>\n
The total claims for provincial health departments (including medical claims) stood at R105.8 billion.<\/p>\n
\u201cDepartments do not budget for such claims, which means that all successful claims will be paid from funds earmarked for other strategic priorities, including the delivery of services, further eroding the ability of these departments to be financially sustainable.<\/p>\n
\u201cA third of the departments had claims against them in excess of 10% of their next year\u2019s operational budget \u2013 for five health departments, the unpaid claims at year-end were more than the next year\u2019s entire operational budget. This continuing trend of using the next year\u2019s budget to pay the current year\u2019s expenses and claims had a negative impact on departments\u2019 ability to pay creditors on time and to deliver services,\u201d she said.<\/p>\n
Key public entities are also under financial pressure. Fifty-five (29%) public entities incurred expenses that exceeded their revenue.<\/p>\n
\u201cTheir combined deficit for the year was R64.95 billion, of which 92% related to the Road Accident Fund. A total of 21 public entities disclosed uncertainty about whether they will be able to continue as a going concern.<\/p>\n
\u201cMany of them are key development and delivery entities that have been disclosing their vulnerable financial position for many years, including the Road Accident Fund, the South African National Roads Agency, the Property Management Trading Entity and a number of provincial public entities,\u201d the AG said.<\/p>\n
The financial statements of 17 public entities were not reliable enough for financial analysis \u2013 these included seven technical and vocational education and training colleges, the Passenger Rail Agency of South Africa and four provincial public entities in North West.<\/p>\n
\u201cEven though most public entities would be able to continue their operations through obtaining funding (loans, grants and overdrafts), delaying creditor payments, cutting costs and reprioritising projects, these negative indicators raise concerns about their financial viability.<\/p>\n
\u201cGovernment cannot afford to lose money because of poor decision-making, neglect or inefficiencies. However, we continued to see a rise in fruitless and wasteful expenditure, with 231 auditees losing R2.39 billion in the current year, of which R0.37 billion was to pay penalties and interest as a result of late payment to creditors,\u201d Maluleke said.<\/p>\n
Over the last three years, R7.44 billion of government expenditure was fruitless and wasteful.<\/p>\n
\u201cOften findings on non-compliance with supply chain management legislation are viewed and commented on as procedural issues or possible fraud. But the potential for losses to government due to the correct processes not being followed is often overlooked,\u201d the AG said.<\/p>\n
Two-thirds of departments and 44% of public entities did not comply with supply chain management legislation, resulting in unfair or uncompetitive procurement processes.<\/p>\n
\u201cMost often this means that not all potential suppliers were given a fair chance to compete for work. Less competition often leads to higher prices being paid for goods and services.<\/p>\n
\u201cThere were 42% of departments and 21% of public entities that did not comply with legislation on contract management, such as monitoring the performance of suppliers in accordance with contracts \u2013 this also often results in financial loss,\u201d Maluleke said.<\/p>\n
State-owned entities<\/strong><\/p>\n The AG said state-owned entities are in serious financial difficulty.<\/p>\n \u201cSouth African Airways and LMT Products (a subsidiary of Denel) are under business rescue and South African Express is under provisional liquidation. These entities did not submit financial statements for auditing \u2013 for most of the South African Airways group we have not seen financial statements for three years,\u201d she said.<\/p>\n Many state-owned entities disclosed uncertainty in their financial statements about whether they will be able to continue as a going concern.<\/p>\n These include the Petroleum Oil and Gas Corporation, the South African Broadcasting Corporation, Denel and three of its subsidiaries (Densecure, Denel Aerostructures and Denel Vehicle Systems), the Independent Development Trust, the Land and Agricultural Development Bank of South Africa, Pelchem and the South African Nuclear Energy Corporation.<\/p>\n \u201cA similar disclosure was made in the financial statements of Eskom, which is one of the state-owned entities we do not audit. Government had already issued guarantees of R445 billion to 11 state-owned entities (of which R350 billion was to Eskom) and these entities had used the guarantees to obtain R374 billion in loans,\u201d the AG said. \u2013 SAnews.gov.za<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" Auditor General (AG) of South Africa, Tsakani Maluleke, has expressed concern over the financial health of departments as unauthorised expenditure increased in the 2019-2020 financial year. \u201cThe financial health of departments continued to be alarming. Unauthorised expenditure, which is mainly as a result of overspending of the budget, increased from R1.65 billion to R18.12 billion […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","ngg_post_thumbnail":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[38678],"class_list":{"0":"post-184981","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-south-africa","7":"tag-sanews","8":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/184981","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/comments?post=184981"}],"version-history":[{"count":0,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/184981\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media?parent=184981"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/categories?post=184981"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/tags?post=184981"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}