THE Free State has suffered financial losses estimated at R321 million through material irregularities flagged by the Auditor General since the 2018/19 financial year.
This includes four cases recorded in 2022/23, three of them at the Department of Education.
Material irregularity is defined as any non-compliance 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 general public.
“Since we began implementing our expanded powers in 2018/19, we have notified accounting officers of 21 material irregularities with a combined estimated financial loss of R321 million,” Auditor General Tsakani Maluleke said about the Free State in her report on national and provincial audit outcomes for the 2022/23 financial year.
“This includes four notifications we issued in 2022/23 for which we have already received responses from the accounting officers,” she added.
“Three of these four material irregularities related to the education department paying for standing time not included in the terms of project contracts and the remaining one related to the premier’s office overpaying suppliers for transport services”.
The Auditor General said 12 of the 21 material irregularities in the province – some relating to overpayments on housing projects and payments for goods that were not received – had been resolved.
“In some instances, contracts were cancelled before further losses were incurred,” Maluleke said.
“Accounting officers have prevented financial losses of R47.63 million and recovered R70.43 million from third parties.
“Accounting officers and an accounting authority are also busy recovering a further R59.45 million.
“We commend those accounting officers who have instituted appropriate action and implemented internal controls to prevent irregularities from recurring.
“Some of their investigations have also identified the responsible officials – who subsequently went through disciplinary processes.”
Maluleke said some auditees were proactive and had referred material irregularities to public bodies themselves.
“Three were referred to both the Special Investigating Unit and the South African Police Service, and another two to the Office of the State Attorney,” she said.
“Where accounting officers did not take appropriate action to resolve the material irregularities, we were decisive and included recommendations for six material irregularities in the audit reports to ensure that they will be addressed.
“We regularly follow up on how accounting officers are implementing these recommendations.”
The Auditor General noted that although the Free State’s financial health improved slightly, she remained concerned about eight auditees – 50 percent – with significant financial health constraints.
“While the education department reduced its bank overdraft to R574.62 million, the health department’s overdraft increased to R742.64 million,” she said.
“Eleven departments reported a total cash shortfall of R2.74 billion, while auditees also owe more than R8 billion.”
Maluleke said she was also concerned that some departments in the province had to use their 2023/24 budgets to meet their 2022/23 commitments.
“Although the provincial treasury tracked the quarterly spending of departments and cautioned them where exceptions were noted, the departments were not always receptive to this,” she said.
“These auditees are likely to face significant pressure to pay their short-term debts and to deliver adequate services that meet community needs.” – Staff Reporter