Irregular expenditure remains high at R166,85 billion, and auditees are still slow to deal with it.
The biggest increase in irregular expenditure was in national government, mainly as a result of the National Student Financial Aid Scheme increase. If we exclude this amount (R77,49 billion), irregular expenditure for the current year would be R89,36 billion.
For the first time in many years, most of the irregular expenditure (R103,55 billion, or 62%) was caused by non-compliance with legislation that did not relate to supply chain management. As mentioned above, a significant portion of this amount (R77,49 billion) is from the National Student Financial Aid Scheme, mainly due to non-compliance with bursary-related regulations.
The R63,30 billion (38%) that relates to non-compliance with supply chain management legislation can be broken down as follows:
- Procurement without following a competitive bidding or quotation process – R7,43 billion (12%)
- Inadequate contract management – R4,65 billion (7%)
- Non-compliance with other procurement process requirements – R51,22 billion (81%)
All of the top 10 contributors to irregular expenditure are repeat offenders, having previously incurred this type of expenditure within the past three years. Further insight on some of these top 10 contributors is as follows:
- National Student Financial Aid Scheme –
R43,71 billion (56%) of the irregular expenditure was incurred in previous years but was identified and disclosed in the current year. The remainder was incurred in the current year and was mainly due to a failure to consult with respective Ministers on the funding rules and eligibility criteria for the student bursaries.
- Transnet – R16,96 billion (55%) of the irregular expenditure was incurred in previous years but was identified and disclosed in the current year. The remainder was incurred in the current year. Some of the more significant matters are being investigated by the Special Investigating Unit.
- Department of Transport (KZN) – R2,05 billion
(32%) of the irregular expenditure was incurred in previous years but was identified and disclosed in the current year. The remainder was incurred in the current year. Non-compliance with other procurement process requirements constituted 87% of the expenditure. The goods or services and key contracts affected included a bus service contract, security services and upgrading of roads.
- Department of Roads and Transport (GP) – R2,01 billion (100%) of the irregular expenditure was incurred and identified in the current year – most of this represents irregular expenditure incurred on ongoing multiyear contracts awarded in previous years. All of the expenditure is due to non-compliance with other procurement process requirements and relates mostly to extension of expired bus contracts.
Auditees have a poor track record in dealing with irregular expenditure and ensuring accountability. The year-end balance of irregular expenditure accumulated over many years continues to grow and remains unresolved.
Below are some examples of why this type of expenditure continues to grow.
Approximately R37 billion of the Transnet amount relates to the procurement of 1 064 locomotives that was found to be irregular. These transactions are the subject of ongoing investigations and court processes, the outcome of which will determine the appropriate steps to be implemented for dealing with the irregular expenditure, including recovery of losses incurred (if any), disciplinary steps and/or condonation if there are good grounds to do so.
The Gauteng Department of Health is not investigating all cases of irregular expenditure due to instability in leadership, lack or non-submission of requests for condonement of the irregular expenditure to the relevant authorities, and the fact that most of the irregular expenditure is from legacy issues, such as consignment stock, security contracts and cleaning contracts.
The biggest reason for growing irregular expenditure at the national Department of Defence is
the lack of an effective consequence management and control environment. In the current year,
74 new cases of irregular expenditure were identified, while only three were condoned and none were recovered or written off.
A culture of tolerance and even acceptance of non-compliance fuels the situation where officials are not held accountable and consequence management is not implemented. This blatant disregard brings into question government’s commitment to respect the Constitution of the Republic of South Africa, as required by section 41 of the Constitution.
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