The Limpopo provincial leadership must immediately develop and implement turnaround strategies to arrest the current situation which shows the provincial government moving further away from the desired clean audit outcomes, Auditor-General Terence Nombembe cautioned today.

Releasing his general report on how provincial departments and entities performed in the 2011-12 year, Nombembe said the province "had a very good reason to be proud and celebrate" in the previous year as two departments had received clean audits, but the positive picture has now been tainted as only the Department of Social Development and nine entities have shown some improvement, while four departments and five entities have regressed from their promising previous year’s results. The results reflect an overall regression.
During the year under review, the national government placed five Limpopo departments under administration. The audit outcomes of two of these departments, Education and Public Works, showed a regression from qualified audit opinions to disclaimer of opinions. The audit opinions for the other three departments that are under administration remained the same as Heath again received a disclaimer of opinion, Roads and Transport received a qualified opinion and Provincial Treasury maintained their unqualified opinion with other matters.

The report shows that the Department of Agriculture, the Department of Cooperative Governance, Human Settlements and Traditional Affairs, as well as one of the entities that had achieved clean audit outcomes in the previous year, have not sustained their results. And while they remained financially unqualified, their audit reports reflect that they did not comply with the relevant legislation.

AG buoyed by Premier’s pronouncement that plans are in place to address internal systems.
During his 2013 State of the Province address recently, Premier Cassel Mathale indicated that his provincial government was working closely with the national intervention team to address some of the administrative and governance issues that could hamper the province’s drive towards total clean administration.

"We made a commitment to work with the national intervention team and we remain steadfast to this commitment. One of the critical issues highlighted by the (intervention) team was that there is a need to strengthen the structural capacity of the Provincial Treasury. We are working together with the National Treasury to strengthen the Provincial Treasury. We have upgraded the post structure of the executive management of the Provincial Treasury to enable it to respond to its mandate adequately," the Premier announced.
The AG said this was an important announcement as it sets the tone and commitment towards clean administration. However he cautioned that commitments needed to be backed up with tangible, sustainable plans that will ensure that clean administration is entrenched, and that regressions in positive audit outcomes are avoided.

"Regressions in audit outcomes are generally due to lack of commitment to sustainability. The golden rule of maintaining clean audits is that when you reach the finishing line (clean audit), you need to know that you are just starting another critical journey towards maintaining that clean audit," said Nombembe.

Leadership commitment needed to ensure action plans are implemented
Nombembe says the overall regression in audit results in the province can be attributed to the fact that commitments made by leadership to address the previous year’s outcomes were not honoured. When he met provincial leaders last year to discuss the province’s results, the provincial leadership led by Premier Cassel Mathale undertook to address the critical challenges that still exist with regard to skills and capacity in finance units, specifically at chief financial officer level, and committed to address this by March 2012. Unfortunately, the process of addressing the skills in the various finance sections was started by provincial treasury but deferred with a view of focussing on the immediate cashflow recovery plan by the national intervention team. In October 2012 this process was resumed with a new commitment to complete it by 31 March 2013.

He was quick to point out, however, that the intervention team has had a significant positive impact in curbing unauthorised expenditure and improving cash flow. Unauthorised expenditure was reduced from R774 million in 2010-11 to R175 million, and Province managed to close the financial year with a positive bank balance of R231 million. There were, however, outstanding accruals (goods and services received but not yet paid) amounting to R1,1 billion at year-end. If one adds the accumulated unauthorised expenditure not yet dealt with at year-end (R2,8 billion), the province is in fact starting the 2012-13 financial year with a deficit of R3,7 billion.

Unfortunately, he said, there were very few consequences for poor performance relating to audit outcomes and the province is still unable to achieve credible in-year financial reporting as the senior managers in the province are not yet in a position to give assurance that all basic key controls are implemented and are functioning effectively.

Nombembe called on the provincial legislature and Parliament to fulfil their oversight role on the five departments currently under administration.

"The oversight responsibility of both the legislature and Parliament, through the National Council of Provinces, for these (five) departments cannot be overemphasised. Members must deal with this responsibility effectively and hold officials accountable for poor outcomes. It is encouraging to note that portfolio committees have increased their engagements with my office to share insights and to ensure that they (committees) are able to effectively carry out their critical role of holding auditees accountable. To this effect, we will support the Speaker and the Premier to reflect on the progress of the province before the end of the financial year," Nombembe invited.

The AG reiterated his office’s commitment to assist auditees, highlighting that following the launch of government’s Operation clean audit in July 2009, he had introduced regular engagements with municipal, provincial and national political leaders to share his office’s assessment of key controls in the areas mentioned above and to identify threats to clean audits. These engagements helped to create greater awareness on matters that require urgent attention to enable the realisation of clean administration in all spheres of government.