The process that can ultimately result in accounting officers being held personally liable for financial losses due to irregularities in their departments has improved the culture of accountability, integrity, transparency and performance in the public sector, says auditor-general Tsakani Maluleke.
The personal liability of accounting officers is the ultimate step of the material irregularity process, which Maluleke says has given the auditor-general “bite” and is acting as a deterrent to wrongdoing. Accounting officers have been responsive and are taking the recommended actions.
Provision for material irregularities and enhanced powers for the auditor-general is contained in amendments to the Public Audit Act, which took effect in April 2019. The amendments were introduced in the context of pervasive mismanagement and leakage of public funds. The auditor-general’s recommendations were also not receiving the required attention.
Maluleke was reporting to parliament’s standing committee on the auditor-general on Friday about progress in the implementation of the material irregularities process.
In terms of the law the auditor-general can refer a suspected material irregularity to a public body such as the Hawks or the Special Investigating Unit for investigation, and require the accounting authority to act on the auditor-general’s recommendations within a stipulated time. If these recommendations have not been implemented by the stipulated date, the auditor-general may take binding remedial action and, if the irregularity involves a financial loss, issue a directive to the accounting officer or authority to quantify and recover the loss from the responsible person.
Material irregularities
If the accounting officer fails to implement this remedial action, the auditor-general can issue a certificate of debt in the name of the relevant accounting officer or accounting authority.
Maluleke told MPs that of the 179 material irregularities on noncompliance and fraud identified until end 2021/2022 in national and provincial government 169 resulted in material financial loss estimated at R12bn, nine led to substantial harm to public sector institutions and one related to misuse of material public sector resources.
She said that no action was taken to address 82% of these matters until the auditor-general issued notifications to accounting officers and accounting authorities.
A financial loss of R636m was prevented and a financial loss of R14m was recovered through the actions taken by accounting officers and accounting authorities in response to material irregularity notifications. In addition, a financial loss of R509m was in the process of being recovered.
Disciplinary processes were initiated against 36 responsible officials, 15 fraud and criminal investigations were instituted, and five supplier contracts in which money was being lost were stopped.
The auditor-general has sent eight matters to public bodies for further investigation and is issuing a certificate of debt in one case.
“This is a clear demonstration that our enhanced powers are having an effect and we are pleased with the attention accounting officers and accounting authorities are giving to addressing and acting on the material irregularities,” said Maluleke.
She urged all role players in the national and provincial government to support, monitor and oversee the quicker resolution of material irregularities.
“If accountability fails, the [auditor-general] will not hesitate to invoke her powers to enforce accountability. This was demonstrated on the 19 material irregularities where no appropriate action was taken by the accounting officers and authorities, and the [auditor-general] stepped in and took action,” Maluleke said.
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