Special Defence Account not included in latest Auditor General outcomes report


The findings of Auditor General Kimi Makwetu and his team on the country’s collective defence organisation can be described as good, with exceptions.

A major exception is the Special Defence Account (SDA), according to the latest Public Finance Management Act (PFMA) audit. The audit outcome for the SDA is not included in Makwetu’s report and this impacts on the comparability of information presented for particularly the Department of Defence (DoD).
“While the audit has been finalised, the impact of the sensitive activities was still under consideration to determine the impact on the audit opinion. As a result the audit report was finalised by August 14, the cut-off date.”

There are four so-called “auditees” in the defence portfolio. They are the Department of Defence (DoD), the Department of Military Veterans (DMV), Armscor, the Castle Control Board and the SA National Defence Force (SANDF).

According to the report total budgeted expenditure for the 2014/15 financial year was R42.9 billion. The main areas of expenditure are capital (R521.9 million), salaries and wages (R22.5 billion), goods and services (R12 billion) and transfer payments (R7.9 billion).

The latest DoD annual report shows the SDA has “to acquire, procure and develop armament and technology” and it received more than R5 billion in a transfer payment. Other notable transfers were to Armscor (just on R2 billion), half a billion to the DMV and R22 million to SASSETA (Safety and Security Sector Education and Training Authority).

Makwetu notes there is an improvement in the overall audit outcome which is now unqualified with findings. The DMV moved from a disclaimed opinion to a qualified opinion with both Armscor and the SANDF receiving clean audit reports.

In the DoD annual report the department said it continues to strengthen its institutional arrangements and internal control mechanisms for the utilisation of resources as its disposal.

The DoD has further enhanced its internal audit function and also addressed the audit qualification received on its intangible capital assets (ICA). “A nodal point was established to manage this function. Complex issues regarding ICAs are discussed and resolved at bi-weekly audit management team meetings chaired by the Chief Audit Executive,” according to the DoD report.

Makwetu notes the SANDF is not subject to the Public Finance Management Act “which means reporting on predetermined objectives is not a legal requirement and was not audited or reported on”. Similarly the SDA does not report separately on predetermined objectives as it falls under the DoD.

An amount of R504.1 million was budgeted for the DMV which Makwetu’s report notes “submitted financial statements for auditing that contained material misstatements in irregular expenditure, assets, good and services, accruals, commitments and the annual appropriation”.
“Some of these misstatements were corrected, but the uncorrected misstatements resulted in the DMV obtaining a qualified opinion.”

Defence and Military Veterans Minister Nosiviwe Mapisa-Nqakula in September named a team to lead a turnaround at the DMV. The team will investigate and report back to her on “a new and aligned vision and design of the department”, a legislative mandate, financial accounting and an operational rescue plan. The team has to submit monthly reports to Mapisa-Nqakula and her deputy, Kebby Maphatsoe.