The latest national and provincial government audit outcomes, released by the Auditor-General South Africa (AGSA) on 31 March, show “signs of improvement” in some auditees, according to Auditor-General (AG) Tsakani Maluleke. The work was conducted under the Public Finance Management Act (PFMA) and covered the financial year of 2019-2020. Besides the provincial and national departments, auditees included state-owned enterprises, Technical and Vocational Education and Training colleges, and other public entities in both spheres of government. The total budget audited amounted to R1.7-trillion. Despite the hints of improvement, said Maluleke, AGSA “cannot yet see the progressive and sustainable improvements required to prevent accountability failures and deal with them appropriately and consistently across national and provincial government”. Nor could AGSA see improvements in addressing the weaknesses in basic financial management controls such as record keeping, making decisions based on credible financial and performance information, or the implementation of the audit action plans that are designed at the end of each previous financial year. “We’re not seeing those critical disciplines that must become a feature if we are to spend wisely and deliver effectively.” Maluleke reminded viewers that at the end of the 2019 financial year, the AGSA issued a “clarion call” for all levels of government to immediately begin to focus on accountability, the implementation of effective consequence management, and the inculcation of good financial management practices. Adherence to these principles would drive sustainable and progressive changes. This call was repeated at the release of both special audit reports related to the Covid-19 national response. “Our messages … have not been heeded,” Maluleke said, echoing the oft-repeated sentiment of her predecessor, the late Kimi Makwetu. The audits for the 2020 financial year were completed under extraordinary circumstances, said the AG, and the impact of the Covid-19 pandemic and resultant lockdown meant that the deadline for the submission of financial information was extended from 31 May to 31 July. This delayed the release of the 2020 PFMA report. Download the 2019-2020 PFMA report. Key audit results show signs of improvement Overall, audit outcomes improved with 66 auditees improving and 35 regressing. The main reasons for improvements, as observed by the AGSA, were: Vacant key management positions were filled – most notably those of accounting officers and chief financial officers. AGSA has often observed that stability in key positions has been a driver of improving poor audit outcomes and maintaining good audit outcomes.Accounting officers and senior management were committed and got directly involved to ensure improvements in internal control processes and implement our recommendations.Improvements in the internal controls – including implementation of preventative controls. Overall, 111 auditees (26%) managed to produce quality financial statements and performance reports to comply with key legislation. They received a clean audit – this marks a slight improvement from the 98 (23%) in the previous year. These auditees represent 17% of the R1.7-trillion expenditure budget of national and provincial government. In terms of the quality of information submitted, 74% of the auditees received unqualified audit opinions on their financial statements, a slight improvement from 71% in the previous year. The number of auditees that submitted quality financial statements increased – 49% of the auditees supplied financial statements without misstatements, although this still an unacceptably low percentage. The quality of performance reporting improved in 2019-20, with 71% of the auditees now publishing credible reports compared to 60% in the previous year. However, the quality of performance reports submitted for auditing remained poor, with just 39% making the grade. Overall, 69% of the auditees materially did not comply with legislation, compared to 73% in the previous year. Compliance with supply chain management legislation improved slightly, but it is still concerning, said AGSA, that only 36% of the auditees comply fully – despite “all the reporting we have done in this area, the red flags we have raised, and the many recommendations we have made”. Irregular expenditure decreased to R54.34-billion from R66.90-billion in the previous year. This amount could however be higher, though, as 31% of the auditees were qualified because the amount disclosed was incomplete and/or they disclosed irregular expenditure but the full amount was not known. If the full irregular expenditure was disclosed there would not have been a decrease from the previous year. In addition, the AGSA could not audit R2.08-billion worth of contracts because of missing or incomplete information. Unauthorised expenditure, meanwhile, shot up from R1.65-billion to R18.12-billion. Of this, said AGSA, R15.13-billion was as a result of the early payment of the April 2020 social grants in response to Covid-19 lockdown measures. Fruitless and wasteful expenditure, which is a good indicator of the state of financial management of the public purse, remains high. In the current year, 231 auditees lost R2.39-billion in fruitless and wasteful expenditure. Over the last three years, R7.44-billion of government expenditure was fruitless and wasteful.