Province not able to keep up improved audit status

The audit report on the financial statements of government departments and entities in the province for the 2015/16 financial year, made public last week by Auditor-General (AG) Kimi Makwetu, revealed that the Office of the Premier could not maintain its clean audit status.
Regression to qualified opinion
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.
Health and Education, cornerstones of the national and provincial development plans and accounting for approximately 76% of the provincial budget, received a qualified opinion and disclaimer of opinion, respectively. Education got a disclaimer for the fifth consecutive year despite national government intervention from December 2011 to January 2015 and the current section 18 intervention by the Provincial Treasury to stabilise and turn around the financial administration.
Improved outcomes
Corridor Mining Resources and Roads Agency Limpopo (Ral), improved their outcomes. The Corridor Mining Resources improved from a qualified audit opinion to an unqualified audit opinion with findings and Ral improved from an adverse opinion to a qualified opinion in the year under review. The improvement at Ral was ascribed by the AG to the tone set by the leadership in ensuring that consequence management was implemented within the entity.
Reasons for regression
The regression to a qualified opinion at the Department of Health was 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 had been vacant for six months and that of the chief financial officer for 12 months. This hampered the drive towards a sustainable control environment with effective monitoring controls, according to the AG’s report.
“Auditees continue to rely on the audit process to identify shortcomings and errors, and request corrections to the financial statements and/or annual reports. This was evident at the Department of Health, as the audit team identified a significant number of errors that were indicative of a breakdown in internal controls. Education continued to disappoint with its performance and retained a disclaimer of opinion 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,” the AG stated.
Successes
Notable successes in the eradication of unauthorised expenditure and a reduction in irregular expenditure by R658 million to R336 million, and fruitless and wasteful expenditure, by R55 million to R17 million, was reported. The decrease in the amount of fruitless and wasteful expenditure was described as an indication of improvement in financial and budgeting disciplines to ensure that late payments are avoided and any disputes are settled via arbitration instead of litigation.
Irregular expenditure of R1 billion
Although irregular expenditure has been at its lowest level for the past three years, 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 according the AG, who expressed his concern that approximately R7,6 billion of the accumulated irregular expenditure at the end of the 2014/15 financial year was still under investigation. He said the long timeframe reduces probability that funds will be recovered if negligence is identified due to movement of officials and loss of records.
The financial health of the province continues to be a challenge, was his verdict.

Story: NELIE ERASMUS
>>nelie.observer@gmail.com