The financial management of provincial governments deteriorated in the year to March last year, with the number of qualified audit reports on provincial departments rising to 62% of the total from 48% the previous year.

In a consolidated report on provincial audit outcomes, the first produced by his office, auditor-general Shauket Fakie found a total of R5,8bn in irregular, fruitless and wasteful expenditure during the year, compared with only R142m for national departments.

Fakie’s findings come in the wake of a recent national treasury report showing continued underspending by provincial departments, particularly on their capital budgets.

Fakie said the increase in qualified audit reports demonstrated that “accounting officers are far from meeting the full requirements of the Public Finance Management Act (PFMA) and related legislation”.

The PFMA sets out standards and procedures for proper financial management by national and provincial governments.

The clearest deterioration was found in provincial health departments, where the number of qualified audit reports doubled to six from the previous year.

Free State, Northern Cape and Western Cape all received qualified audits for all three main spending departments, health, education and social development, which take up about 81% of the total provincial budget of R167,4bn.

Fakie’s report, tabled in Parliament on Friday, said that unauthorised, irregular, fruitless and wasteful expenditure by 111 provincial departments (of the total of 115) in the 2003-04 year was R5,833bn, which represented 3,5% of total expenditure of R167,4bn. This was far higher than national departments’ percentage of 0,1% (R142m).

Fakie found that a common deficiency in provincial financial management was the lack of proper asset management, including the absence of basic policies and procedures and key documents such as asset registers.

A total of 103 asset management issues were reported as “matters of emphasis” in the audit reports of 62 provincial departments.

“This lack of management frameworks constitutes a basic and serious financial management problem. Asset registers that are not updated merely indicate a lack of working practices and a lack of system or management policy. Adequate training and/or addressing the lack of capacity may solve some of these problems,” the report said.

Another commonly cited provincial problem related to the administration of leave, which proved significant as personnel expenditure represented 47% (R78bn) of total expenditure. Deficiencies in leave management accounted for 9 of the 14 qualifications.

Another high risk factor identified at provincial level was a lack of an “effective and efficient internal audit function”, Fakie said.

Insufficient control of transfer payments to outside agencies – representing 28% of the total provincial budget – was also found to be problematic.

Effective accountability was diminished by some departments, which did not adequately set out measurable performance measures and objectives against which they could be evaluated.

Comparisons between provinces were hindered, Fakie said, by the fact that the different provinces organised their departmental portfolios differently.

Source: AllAfrica.Com
URL: http://allafrica.com/stories/200505310098.htm…/p>