Slight improvement in audit outcomes

Wednesday, March 31, 2021

The overall audit outcomes for government departments for the 2019-20 financial year show that 66 auditees improved their outcomes, while 35 regressed.

“In this year, we have seen 66 auditees improve their audit outcome category, either they moved from unqualified to clean or qualified to clean or qualified to unqualified.

“However, that is set back by the regression, 35 of them went backwards into a less desirable outcome,” Auditor General (AG) of South Africa, Tsakani Maluleke said.

While addressing a media briefing on Wednesday on the audit outcomes for national and provincial departments, she noted that the main reasons for improvements is the stability and the filling of vacancies at key roles, specifically accounting officer and chief financial officer (CFO).

“Over the years our analysis has demonstrated a high correlation between the tenure of an accounting officer and CFO and the audit outcomes. Many of the disclaimers are those where you do not have a CFO that stays longer than 22 months on average,” Maluleke said.

In total, 111 of the auditees (26%) managed to produce quality financial statements and performance reports and to comply with key legislation, thereby receiving a clean audit.

“This is a slight improvement from the 98 (23%) in the previous year. These auditees represent 17% of the expenditure budget of R1 706 billion managed by national and provincial government.

“The total expenditure budget comprises the operating and capital expenditure budgets of the departments and public entities as included in their financial statements,” she said.

Countrywide, 74% of the auditees received unqualified audit opinions on their financial statements, a slight improvement from 71% in the previous year.

“The number of auditees that submitted quality financial statements increased – 49% of the auditees could give us financial statements without misstatements, but this figure is still very low.

“The auditees with modified audit opinions (in other words, qualified, disclaimed and adverse) are responsible for 33% of the expenditure budget,” the AG said

The quality of performance reporting showed an improvement, with 71% of the auditees now publishing credible reports compared to 60% in the previous year.

“However, the quality of the performance reports submitted for auditing remained poor (only 39% submitted good-quality reports) and even after auditees corrected the misstatements we identified, we reported material findings on 29% of the performance reports,” Maluleke said.

Overall, 69% of the auditees materially did not comply with legislation. This outcome is only slightly better than the 73% of the previous year.

Compliance with supply chain management legislation slightly improved from the previous year.

“It remains concerning that only 36% of the auditees are fully complying. This is in spite of all the reporting we have done in this area, the red flags we have raised and the many recommendations we have made.

“Uncompetitive and unfair procurement processes and inadequate contract management remain common. We identified non-compliance with the legislation requiring auditees to procure certain commodities from local producers at 40% of the auditees where we audited this area, which could result in government not achieving the objectives of this initiative,” she said.

The AG noted that there had been little action in addressing the concerns raised year after year about contracts being awarded to employees and their families without the necessary declarations of interest.

“We also found little action being taken to ensure compliance with the Public Service Regulations that prohibits employees of departments from doing business with the state from 1 August 2016,” Maluleke said. – SAnews.gov.za