Accounting Officers are starting to fear the AG’s new teeth

The Auditor General is no longer just pointing out problems with financials, it’s threatening to hold accounting officers personally liable. 

The Auditor General is holding accounting officers’ feet to the fire thanks to its new powers, and it’s saving millions.  

Changes in legislation made in 2019 allows the Auditor General to follow up and eventually hold individuals responsible for what’s called material irregularities (MI). MIs include a wide range of red flags including non compliance, misstatement, wasteful expenditure, fraud, breach of fiduciary duty and others.

Previously the Auditor General would note these issues in its reports, make recommendations, see them ignored, and then repeat the cycle yearly. Now, the Auditor General’s office sets into motion a chain of consequences, which can lead to Hawks or SIU investigations or a certificate of debt being issued against individual accounting officers.

“These MIs have led to some interesting outcomes, principally  we're seeing accounting officers be more responsive,” Tsakani Maluleke, the Auditor General, told a press briefing yesterday. “Many of them are responding to our MIs with greater urgency, with greater diligence than what they tend to do to audit outcomes normally.”

Maluleke was speaking after publishing the PFMA 2021-22 audit outcomes and a report on material irregularities.

“We have noted that there were no actions taken to address 82% of the matters raised until we issued notifications of material irregularities.” So far the Auditor General has notified accounting officers of 179 material irregularities. 

AG says that through MIs, it’s prevented R613 million in financial loses, has recovered R14 million and is in the process of recovering R509 million.

“This is not different from a soccer game or a rugby game,”  executive in the office of the Auditor General, told delegates at CIBA’s Public Procurement Summit earlier this month. “You know the old system of yellow cards and red cards,” said van Schalkwyk.

First there are warnings, then there are instructions – in the case of the Auditor General – binding remedial action. Then, if no action is taken, it could result in a certificate of debt. The Auditor General can also recommend that other public bodies such as the Hawks or SIUinvestigate. Increasingly, accounting officers themselves are asking law enforcement for investigations.

“Accounting officers facing material loss, we see that they suddenly wake up and have the telephone number of the SIU,” said van Schalkwyk.

One example given in the report is an MI issued against the Department of Defence which, “Imported an unregistered drug (Heberon) at a cost of approximately R260 million without approval from the South African Health Products Regulatory Authority. The unused vials were repatriated to Cuba, preventing an estimated financial loss of R227 million.”
   

“Our view is that we should draw inspiration from the ability to respond and start to insist that that energy be deployed to responding to our normal audit findings,” said Maluleke.  “It's important that there be this level of responsiveness because that's how we're going to build public institutions.” 

Not a perfect solution 

Although the MI tool gives the Auditor General more teeth, it’s still dependent on other actors and state institutions. 

The MI report notes several common reasons for why there are delays resolving MIs, including: staff turnover such as a change in accounting officers, liquidated suppliers, delays in disciplinary processes against officials and delays in the financial recovery process by the State Attorney and investigations by the SIU or Hawks taking long to conclude.       

Regarding cases referred to the Hawks, Maluleke said, “Unfortunately, there hasn't been too much progress on a number of those cases, but they are sitting in the hands of the Hawks and we are tracking them regularly.”