North West on 2016-17 Auditor General report on PFMA

Media Statement by the Director General, Dr. Lydia Sebego on behalf of the North West Provincial Administration at the press briefing on the 2016-17 Auditor General’s report on PFMA
The North West Provincial Administration has noted the 2016/17 PFMA Auditor General media reports which list our Province as one of the 2 worst performing Provinces. The Province wishes to state its support to the Auditor General as one of the important Chapter Nine institutions which supports democracy.
On assumption of duty by the fifth administration in 2014, the Hon Premier made an acknowledgement relating to the uninspiring audit outcome and as part of the Rebranding opportunities made an undertaking on behalf of government that the Province would implement measures that seek to improve the audit outcomes of departments, municipalities and entities through the package of interventions as a demonstration of our commitment to good governance and effective utilization of scarce public resources. To this end, the government remains committed to the principles of good governance and prudent financial management.
Consequently, we wish to provide the correct perspective about the departmental and entities audit outcomes for the year 2016/17 and also dispel the allegation that there is weak leadership and commitment to improve audit outcomes.
For four consecutive years, the Province has managed to submit departmental and entities financial statements timeously in line with the prescribed timeframes.
The following measures have been put in place to improve accountability and audit outcomes by all auditees:
• The Executive Council led by Premier SOR Mahumapelo regularly monitors development and implementation of post audit action plans. On a continuous basis all departments account through the relevant MECs on the progress made with regard to the implementation of the post audit action plans.
• In an effort to strengthen accountability and to demonstrate commitment, the Provincial Government has recently approved the implementation of consequence management framework including the establishment of the consequence management committee.
• This Committee has been given the responsibility to implement disciplinary corrective measures flowing from the investigations on irregular and fruitless expenditure.
• The Provincial Advisory Committee which includes the Auditor General is currently working with the departments and entities to deal with matters relating to irregular and fruitless expenditure.
• To date through the process of the Advisory Committee an amount of R140 million irregular and fruitless expenditure has been cleared with the appropriate consequence management.
• Stringent monitoring of irregular expenditure through implementation of cost containment measures recommended by National Treasury through application of thresholds on certain expenditures that resulted in irregular expenditure.
• Provincial Treasury issued a comprehensive instruction note and a consequence management framework in conjunction with the National Treasury Guideline to Departments and Public Entities to assist in process of detection, investigation, consequence management and condonement of irregular expenditure.
• Departments have in the meantime carried out extensive investigations on irregular expenditure and are in the process of concluding those investigations. The outcomes of these investigations will determine the consequence management strategies to apply.
• Executive Council has further directed that all instances of irregular expenditure should be dissected and transgressions associated with them outlined.

Through the detailed evaluation of the irregular and fruitless expenditure data, we have identified that 90 percent of the irregular expenditure can be accounted for and such expenditure has not compromised service delivery and or the state has not suffered a loss. The process to conclude investigations relating to the 90 percent is ongoing and would be presented to the Advisory Committee for conclusion.
The fifth administration has inherited contracts signed as far back as 2009/10 financial year, such as commuter and scholar transport in the Department of Community Safety and Transport Management where an average annual amount of R700million was incurred as irregular expenditure. Unfortunately this government could not terminate this essential service because of the irregularity as identified by the Auditor General.
In the Department of Health an amount of R596 million was identified as irregular expenditure because the department did not advertise on the national tender bulletin as required by the National Treasury processes, they had advertised on local and national newspapers following all the necessary Supply Chain Management processes.
Other reasons that result in irregular expenditure are due to gaps that exist in SCM policies which the province is addressing. The 5th administration has ventured into empowering people in VTSD areas and has initiated policy processes to close these gaps. For instance in some remote areas of the province it is often a challenge to secure 3 quotations when procurement is done due to the unavailability of service providers.
We wish to indicate that there are areas of disagreement largely as a result of interpretation of policy and legislation between the Office Of the Premier and the Auditor General which have been referred to National Treasury for guidance.
The Province has considered it prudent to refer the matter to National Treasury rather than to approach the courts as a way of concluding on the disagreements.
It is sad that the report is silent on the improvement recorded in Departments and state owned entities.
• Over the last four years, none of the provincial departments received disclaimer or adverse audit opinion while the number of disclaimers in public entities reduced from 7 to 4 which demonstrates the Province’s ability to fully account for the money allocated to the departments for the delivery of services.
• There is also an improvement on achievements of clean audits with two entities obtaining clean audits compared to one last year.
• Furthermore the Province has managed to consistently reduce the number of qualification areas among the Entities.

To reduce and eliminate the irregular and fruitless expenditure from the Departments and Entities’ books, the only logical explanation is to follow appropriate consequence management and charge the responsible officials who contravened the legislation and caused the expenditure. The Province is determined to lead by example and to take appropriate action where necessary.
This improvement on audit outcome has come as result of Executive Council taking keen interest and providing leadership in the implementation of Post Audit Action Plan by tracking progress regarding the implementation of corrective measures on a monthly basis. The Executive Council further re-affirms its commitment to strengthening monitoring , evaluation and intervention for improved audit outcomes.

Source: Government of South Africa

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