Summary of Free State Performance
The performance of the Free State in the 2011/12 audit outcomes does show signs of improvement in the financial management environment of provincial departments and entities.
Of the 46 qualified matters reported in 2010/11, 24 matters were resolved during 2011/12. Sixty two (62) %of provincial departments got unqualified audit outcomes as compared to 46 % in 2010/11, and 54 % in 2009/10.
With regard to provincial entities there has been a slight improvement in comparison with the previous financial year. According to the Provincial Treasury’s statistics, the Free State obtained 83 % unqualified audit outcomes among the provincial entities in 2011/12 when compared with 80 % in 2010/11 and 86 % in 2009/10. There is a slight inconsistency in the percentages reported in the report of the Auditor-General that have subsequently been clarified.
Matters of concern raised by the Auditor-General with regard to the provincial audit outcomes for 2011/12 include irregular, fruitless & wasteful and unauthorised expenditure as well as matters relating to accruals, debt, assets, IT governance and Predetermined objectives.
The following positive outcomes must be noted:
- No Disclaimer or Adverse audit opinions for provincial departments as per Operation Clean Audit 2014 objectives.
- 83% of entities achieved unqualified audit opinions against the Operation Clean Audit 2014 objective of 66% unqualified audit opinions.
- The improvement in the audit opinions of the Department of Agriculture, COGTA and Education from a qualified audit opinion to an unqualified (with findings) audit opinion.
- The improvement in the audit opinion of the Provincial Legislature from an unqualified audit opinion with findings to an unqualified audit opinion with no findings.
The Provincial Treasury and Office of the Premier retained their unqualified with no findings audit opinion for three and two consecutive years, respectively.
Unauthorised expenditure
Unauthorised expenditure means that the expenditure incurred exceeds the budget allocated to a vote /main division of a vote or is money spent for purposes other than it was allocated for. Unauthorised expenditure does not mean that government did not receive value for money or goods and/or services were not delivered.
The total amount of recorded unauthorised expenditure decreased from R81.4 million in the 2010/11 financial year to R65.380 million in the 2011/12 financial year. This unauthorised expenditure was incurred at the provincial departments of Agriculture, Health, Social Development and Police, Roads and Transport. The figure of R 50.6 reported in the General Report excluded the internal charges for laundry services (Department of Health) which were processed after the reporting date.
The Auditor-General noted that the decrease in unauthorised expenditure is the result of improved monitoring of actual expenditure against the budget. Although the decrease in unauthorised expenditure is a positive sign of improvement in provincial departments, the objective is to achieve a significant reduction and to eliminate unauthorised expenditure incurred by departments and entities.
The Provincial Treasury, together with Provincial Departments, will continue to ensure that cost containment measures as introduced are adhered to and that effective and continuous monitoring of expenditure takes place.
Irregular expenditure
Irregular expenditure is when a department incurred expenditure which does not meet all the requirements of the PFMA, other relevant legislation or policy procedures. This is one of the most serious challenges faced in the financial management environment of all provincial governments throughout the country.
Irregular expenditure increased to R3.175 billion in the 2011/12 financial year. This expenditure, however, was not only incurred in 2011/12. Amounts totalling R1.069 billion incurred in previous financial years but only identified during the 2011/12 financial year, contributed to this increase.
The main contributing departments to this irregular expenditure were the provincial departments of Public Works, Human Settlements and Police, Roads and Transport. One of the reasons for the high amount of irregular expenditure reported by departments in 2011/12 is the fact that internal control measures were improved in departments that led to the identification and reporting of irregular expenditure.
Fruitless and wasteful expenditure
Fruitless and wasteful expenditure is expenditure which was made in vain and could have been avoided if officials had taken reasonable care to ensure that goods and/or services were delivered before payments were made. Fruitless and wasteful expenditure was reduced to R30.3 million in 2011/12 compared to R51.8 million in the previous financial year.
The figure of R30.3 million included fruitless and wasteful expenditure incurred in prior years but identified in 2011/12 as well as possible fruitless expenditure identified during the external audit process.
Although this reduction in fruitless and wasteful expenditure is a step in the right direction, the provincial government must continue in its efforts to ensure that this type of expenditure is eliminated in all departments. This can only be achieved through the concerted efforts of all provincial departments and by ensuring that the necessary corrective action is taken in instances where such expenditure is incurred.
Free State as it compares with other provinces
The Free State Province, together with the Western Cape, has the highest number of clean audit opinions. The five Free State departments that obtained qualified audit opinions as well as the number of unqualified audit opinions with findings on other matters, results in the Free State being ranked only fifth out of the nine provinces. There is clearly room for significant improvement to be achieved.
Way forward
The Office of the Auditor-General, Provincial Treasury and the Forum of Heads of Departments convened a number of sessions during the current financial year where the focus was placed specifically on matters relating to unauthorised, irregular and fruitless and wasteful expenditure as well as accruals and debt. Additional focus was also placed on IT governance matters.
Concrete resolutions, aimed at ensuring that accountability measures are improved and corrective action are implemented, were taken during these sessions. The commitment of Heads of Departments, Chief Executive Officers, Chief Financial Officers and senior management of departments and entities are required to ensure that practical and effective measures are taken to achieve the improved audit outcomes required by the provincial government.
The Provincial Treasury will continue to monitor and support the initiatives and actions taken by provincial departments and entities to ensure that identified weaknesses are addressed.
The achievement of improved audit outcomes will directly impact on the more efficient and effective delivery of services to all communities in the Free State.
Enquiries:
Gunnett Kaaf
Cell: 083 291 6622
