Another qualified audit finding for the Department of Defence

883

Continuing decreases in the defence budget appear not to have affected spending in Minister Nosiviwe Mapisa-Nqakula’s Department of Defence (DoD) with the Auditor General pointing out, among others, “weak internal controls”.

Government’s watchdog on finance met the Portfolio Committee on Defence and Military Veterans (PCDMV) earlier this week with committee chair Cyril Xaba noting “concern” that both the DoD and the now separate Department of Military Veterans (DMV) did not respond “with the required urgency to risk and improving internal controls”.

He was also quoted in a Parliamentary Communication Services statement as saying this was why issues of irregular expenditure are not resolved.

“The AG report exposes weak internal controls and if it continues the department (DoD) will struggle to prevent non-compliance and that is a serious indictment.”

Another area of concern is fraud and misconduct in supply chain management with the committee noting half of cases are not investigated “along with insufficiently investigated risk areas”.

The Auditor General presentation to the oversight committee noted Mapisa-Nqakula’s department “remained qualified with findings”.

“This is due to the issue of completeness of irregular expenditure identified in the current year while a similar issue identified in the prior year was also not addressed. The qualification area in relation to the sensitive project environment is inherent to the circumstances under which these transactions occur and is further contextualised in the accounting officer’s report. Findings on compliance with legislation were also reported.”

Another reason put forward by the Auditor General for the qualified finding was “action plans to address prior year findings not being effective as management did not review and monitor compliance with legislation and performance reports were not reliable”.

With regard to financial health, the Auditor General said of the DoD that the department has been affected by budget cuts which impact on its ability to afford the compensation of employees’ expenditure. “Claims against the department also increased by 25% from R4.3 billion to R5.4 billion. If the department were to lose the claims, it could significantly affect the available cash flows. As at year end the department had payables amounting to R114.2 million, exceeded the R5.88 million of voted funds to be surrendered by R108.55 million as per the statement of financial performance. The amount of R108.55 million would therefore have constituted unauthorised expenditure had the amounts due been paid on time.”

Fruitless and wasteful expenditure decreased over the last two years by the entities in the defence portfolio (R19 million in 2019/20 and R37 million in 2018/19). “The majority of the disclosed fruitless and wasteful expenditure for the current year was caused by leased property not utilised by DoD while they continued to pay for the property resulting in fruitless expenditure of R12 million.”

Similarly, irregular expenditure decreased, going from R3.6 billion in 2018/19 to R2.8 billion in 2019/20, according to the Auditor General. “The majority of the irregular expenditure relates to the increase of compensation of employees without necessary authority in DOD environment amounting to R2.6 billion (Prior year was R2.9 billion). The irregular expenditure incurred in the portfolio as a result of not following prescribed procurement processes remains a concern, particularly in the DoD.”

The Auditor General raised concerns regarding supply chain management (SCM) in the defence portfolio, with “no improvement in SCM compliance” for 2019/20 and suggested all SCM findings should be investigated.



The most common SCM findings in the DoD were: goods and services with a transaction value below R500 000 were procured without obtaining the required price quotations; goods and services of a transaction value above R500 000 were procured without inviting competitive bids; quotations were awarded to suppliers whose tax matters had not been declared by the South African Revenue Services to be in order; contracts were awarded to bidders based on evaluation or adjudication criteria that differed from those stipulated in the original invitation for bidding and quotations; and the preference point system was not applied in some of the procurement of goods and services above R30 000.