AG report: Limpopo slides backwards

Instability, vacancies in key positions and immature internal control systems and processes have seemingly hijacked the Limpopo government’s clean audit drive the past financial year as it failed to sustain the 26% improved audit outcomes of the past three years and the huge strides made the previous financial year.
Limpopo’s financial health evidently continues to be a challenge.
The overview of Limpopo’s financial matters was included in the 2015/16 Consolidated General Reports of Auditor-General Kimi Makwetu, who addressed the media in Cape Town upon releasing the national and provincial audit outcomes at the time of going to press.
Compared to the previous two financial years, 4% of Limpopo auditees obtained disclaimers as opposed to the 4% and 9% in the past.
Considering the outcome of this past financial year, a total of 30% of auditees received qualified audits with findings as opposed to the 22% and 43% of the two previous years. During the 2015/16 financial year 66% of auditees had unqualified audits with findings. The past two years the figures were at 66% and 40% respectively. This year there was no sign of the 4% of unqualified audits with no findings as well as adverse opinions with findings of the previous two years.
In his analysis Makwetu pointed out that instability at the level of head of department remained a concern that threatened the province’s ability to improve its audit outcomes and submit quality financial statements and performance reports. Of the 13 departments, including the Provincial Legislature, there were six vacancies, equating to 46%, at the level of Head of Department at year-end, with the average period in this position being less than 36 months.
He further noted that regrettably, the province was unable to build on the momentum from the previous year. The Office of the Premier could not maintain its clean audit status.
In addition, two departments (Health and Economic Development, Environment and Tourism) regressed to a qualified opinion, due to their failure to maintain sound internal control discipline to ensure that daily and monthly financial recording is accurate, complete and valid.
It was mentioned that the two key service delivery departments of Health and Education which account for approximately 76% of the provincial budget, received a qualified opinion and disclaimer of opinion, respectively.
The regression to a qualified opinion at the Department of Health can be ascribed to instability in the positions of accounting officer and chief financial officer following the withdrawal of the intervention team in terms of section 100(1)(b) of the Constitution in January 2015. At year-end, the position of accounting officer was vacant for six months and that of the chief financial officer for 12 months.
The Department of Education continues to disappoint with its performance and retained a disclaimer of opinion for a fifth consecutive financial year, despite being one of the departments that were placed under section 100(1)(b) intervention. The department has the biggest budget allocation in the province, which amounts to approximately 47% (R25 billion) of the provincial budget.
“Of particular concern was the inability of the political and administrative leadership to effectively integrate the seconded officials into the department to work with departmental officials towards a common goal and take joint accountability for the development and implementation of the financial management resuscitation plan. We recommend that the MEC: Treasury take the lead in addressing these matters, together with the MEC: Education, as the success of this intervention is highly dependent on a good working relationship between these two departments. Although there was no improvement in the audit outcome as a result of this intervention, there have been some notable successes in the eradication of unauthorised expenditure and a reduction in the amounts of irregular expenditure (by R658 million to R336 million) and fruitless and wasteful expenditure (by R55 million to R17 million).”
Two entities (Corridor Mining Resources and Roads Agency Limpopo) improved their outcomes.
Corridor Mining Resources improved from a qualified audit opinion to an unqualified audit opinion with findings and Roads Agency Limpopo improved from an adverse opinion to a qualified opinion in the year under review.
The level of non-compliance with legislation reportedly remained very high, as 100% (23) of the auditees had material findings.
A significant decrease was further noted in the amounts of unauthorised expenditure from R5 million in 2014-15 to R555 000 and fruitless and wasteful expenditure from R141 million in 2014-15 to R43 million, which has been at its lowest levels for a number of years.
Although irregular expenditure has been at its lowest level for the past three years being at R1 billion compared to R2 billion and R3,5 billion for the past two years respectively, it remained high and required further strengthening of supply chain management processes to eliminate non-compliance, it was reported.
The poor revenue collection strategies, especially of revenue generated by departments and public entities, as well as ineffective debt-management processes posed a threat to the provincial financial management capabilities, Makwetu remarked.
• Expect a breakdown of the Limpopo scenario in next week’s edition

Story:
YOLANDE NEL
>>observer.yolande@gmail.com
NELIE ERASMUS
>>nelie.observer@gmail.com