A loss of R14.34bn was accumulated by a sample of national and provincial departments between the 2018/19 and 2022/23 financial years due to material irregularities identified by the auditor-general.
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.
During this period, 266 material irregularities involving noncompliance and suspected fraud were identified, 240 of which involved a material financial loss. The material irregularities related to procurement (the majority of cases), resource and revenue management, interest and penalties for late payment of bills, fraud and compliance, harm to the public and public sector institutions and misuse of public resources.
Auditor-general Tsakani Maluleke gave these details in a report to parliament’s standing committee on the auditor-general on Friday on the material irregularities identified in national and provincial departments and entities, saying that the material irregularity process was having an impact.
She said that due to action taken by the office of the auditor-general, R1.29bn of the loss had been recovered, R560m was financial loss prevented and R700m was in the process of being recovered, resulting in R2.5bn of state resources being protected.
Once a material irregularity has been identified by the auditor-general, accounting officers are required to implement recommendations, failing which they can ultimately be held personally liable.
Of the 266 material irregularities identified, 240 were where there was a financial loss, nine related to the misuse of a public resource, three to substantial harm to the public and 14 to substantial harm to the public sector institutions.
Maluleke reported that 79 of the 266 material irregularities identified had been resolved, in 75 cases appropriate action was being taken and in 32 cases the auditor-general had implemented the powers provided in the Public Audit Act because inadequate action had been taken. Eight cases had been referred to investigation bodies.
Maluleke said no actions were taken to address 82% of the material irregularities identified until notifications were issued. She stressed the need for greater responsiveness to the matters raised by the auditor-general.
A material irregularity is only resolved when all possible steps have been taken to recover financial losses or remove/address the harm cause, effect consequences for officials and third parties involved and prevent any further losses and harm by among other things improved internal controls.
Some of the material irregularities were still being assessed.
Among the reasons for the material irregularities were the inefficient use of resources or state assets not being properly looked after, poor cash flow management, the payment of significant penalties because projects were terminated and the misuse of public resources.
Maluleke noted that because of the material irregularity process, internal controls had improved, responsible officials had been identified and disciplined, fraud or criminal investigations instituted and supplier contracts stopped where money was being lost.
“Greater impact can be made through swifter and timely action taken by accounting officers and authorities to respond to material irregularities and implement preventive controls to improve the overall control environment,” Maluleke said.
Also needed was regular monitoring of progress in implementing planned actions by executive authorities and oversight structures.
The material irregularity process had been progressively implemented since the introduction of the amendment to the Public Audit Act with the number of auditees selected increasing from 25 in 2018/19, to 146 in 2019/20, 189 in 2020/21, 376 in 2021/22 and 707 in 2022/23.
ensorl@businesslive.co.za
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