Improved audit outcome for water and sanitation - but AG still concerned
The water and sanitation department attained an unqualified audit outcome for the 2018/19 financial year - its first in four years and just its second in 15 years.
The achievement rang hollow, however, as MPs heard that in the year under review the department incurred R16.5bn in irregular expenditure.
“We commend the department for having implemented certain measures, at least to be able to deal with their financial statement matters, but then they still have some significant findings in terms of compliance and of performance information that they should deal with in order for them to progress to be clean,” said Andries Sekgetho, an official from the auditor-general's office who was briefing parliament's water and sanitation committee on Tuesday.
Irregular expenditure is incurred in contravention of key legislation - while goods may be delivered, prescribed processes would not have been followed.
Sekgetho said limitations with the financial statements of trading entities like the Trans-Caledon Tunnel Authority (TCTA), a state-owned entity charged with financing and implementing bulk raw water infrastructure projects, negatively impacted the department's bottom line.
He cited the lack of consequences as a key concern for the auditor-general (AG), saying despite flagging issues at the water boards, there had been no investigation.
Director-general Mbulelo Tshangana revealed that his department has written to the National Treasury asking them to condone at least R10bn of the irregular expenditure. But for this amount to be condoned, the department has to take measures against the wrongdoers.
There is always this accusation that things are happening in the department because there is no consequence management.Mbulelo Tshangana
Tshangana said all the officials who were involved in procurement in all the projects that were flagged for irregular expenditure in water projects were undergoing disciplinary processes.
“There is always this accusation that things are happening in the department because there is no consequence management,” he said.
“We can confidently say to you all of the officials who are involved in that R10bn that we are asking Treasury for condonation of our undergoing disciplinary process. Some have been dismissed, others have been charged, but others are still going through the process.”
Tshangana described their unqualified audit outcome as “significant” as the department had been struggling for a very long time to achieve these targets. In a written presentation, the department said the irregular expenditure was high in 2018/19 as a result of cases recorded during that year but related to previous financial years (2017/18, 2016/17 and 2015/16).
Minister Lindiwe Sisulu said they were turning things around in the department. She said that when she was appointed to the department, the minister of finance and the auditor-general had decried the department's finances and had said it was bankrupt.
She said they had to turn around a perception of financial mismanagement where most of the department's top officials at national and municipal level were under investigation but that there was no urgency in dealing with the problems.
Sisulu said there were 48 cases of serious misconduct within the department. Of these, six involving deputy directors-generals and chief directors were prioritised and all of these cases were as a result of irregular expenditure, involving contracts to the value of R7bn.
“In total, R16,6bn is regarded by the AG as irregular expenditure. This is what we inherited. The department lost R1,7bn in fruitless and wasteful expenditure,” she said.
“We do intend to turn the fortunes of the department around and make sure we have as clean a record as possible.”
We do intend to turn the fortunes of the department around and make sure we have as clean a record as possible.Lindiwe Sisulu
The minister acknowledged concerns around the water boards saying the emphasis has always been on lack of consequence management and lack of proactive investigations and a hands-on approach to some of the matters.
She confirmed starting a process on the water boards to get “a full answer” on the issues identified by the auditor-general, but said they had so far only managed to get to two: the Amatola Water Board in the Eastern Cape and the Lepelle Northern Water Board in Limpopo.
“As you know, the two water boards where we have been investigating have responded in a way that is completely outside the prescripts of the public service,” she said.
In this regard, Sisulu told MPs that she will be taking legal steps in relation to the responses of the CEOs of the two water boards that she has been dealing with. She said they had put together a legal team to deal with these matters.
Amatola's Vuyo Zitumane and Lepelle's Phineas Legodi were placed on precautionary suspension to allow the investigations to continue. They have both submitted affidavits detailing alleged interference in their respective supply chain management processes.