No consequence: The accumulated irregular expenditure reaches R488-billion
In her annual report on audit outcomes for the 2020/21 financial year, Auditor-General Tsakani Maluleke reported that the accumulated sum of irregular government spending that has ‘not been either recovered, condoned or written off stood at R488.14-billion’.
It is understandable that a great deal of the attention on Part One of the Zondo Commission report on State Capture has focused on the stories behind the capture of SAA, SARS and The New Age. These familiar stories and their larger-than-life rogues such as Dudu Myeni, Tom Moyane and Vittorio Massone are easier to turn into parables and easier to retell.
However, the Zondo Commission’s recommendations at the end of Vol 3 of Part One, while more technical and dry, are just as important, if not more so.
The Zondo Commission proposes:
- A national charter against corruption, including a code of conduct setting out the ethical standards which apply in the procurement of goods and services for the public. It suggests that this code be “given legal status and effect by an act of Parliament”.
- The establishment of an agency against corruption in public procurement: “Independent in the full and untrammelled sense”.
- Practical and legislative protection for whistle-blowers;
- The creation of a procurement officer’s profession; and
- Protection for accounting officers/authorities acting in good faith.
Why is this suite of measures so important?
Since the February 2018 resignation of former president Jacob Zuma, the Zupta conspiracy (which we now know targeted particular parts of the state, either to rob or to incapacitate them), has morphed into endemic and uncoordinated corruption. Despite all the anti-corruption rhetoric of recent years, unbelievably, corruption has snaffled up even larger sums of money.
It’s probably not surprising.
It’s gone up since then.
A combination of corruption, outsourcing to hyenas like Bain & Company, underinvestment and austerity means that this treasure pile is largely unguarded. Zondo calls this “fundamental system failure”, describing public procurement as “a system that has lost its moral compass”.
Covid-19 arrived while the Zondo Commission was still sitting, seemingly to reinforce his conclusions. It opened the door to an explosion of corruption around the procurement of PPE and other services needed to save lives during the Covid-19 pandemic.
We have reported on this extensively in Daily Maverick/Maverick Citizen, prompting several investigations by the Special Investigating Unit (SIU), most notably into the R150-million Digital Vibes scandal; the Gauteng Education Department’s spending R431-million on sanitising schools; and Red Roses Africa receiving R515-million for disinfectant supply to SAPS.
It is important to note that while we await parts two and three from the Zondo Commission, we also wait on the final report of the SIU on Covid corruption handed to the president on 10 December, which Tyrone Seale, spokesperson for the president, told us last week is “still under consideration”.
Irregular expenditure gone wild
In his report, Judge Raymond Zondo pays some attention to the work of the Auditor-General and the vexed issue of mounting irregular expenditure. Although he wouldn’t have seen it, the reasons why Zondo’s proposals on public procurement are so important and urgent is evident from the 2020/21 Consolidated general report on national and provincial audit outcomes report of the Auditor-General, released in December 2020, which makes it clear just how vulnerable state procurement is to corruption.
Consider some of the facts reported by the Auditor-General:
- The year-end balance of irregular expenditure that had accumulated over recent years and had “not been either recovered, condoned or written off stood at R488.14-billion.” (p.9)
- By 15 October 2021, the AG was dealing with 121 “material irregularities” (defined here) at various stages in the process. The AG-SA estimates the total financial loss of these material irregularities at R11.9-billion. (p.12)
- In 2020/21 there was R3.2-billion in unauthorised expenditure:
- The provincial health and education departments alone incurred R2.83-billion of this.
- During the audits, the AG-SA identified 712 employees who were still doing business with the state (up from 560 the year before), despite the amendment of Department of Public Service and Administration (DPSA) regulations prohibiting doing business with the state, in existence since 2016.
- Gauteng incurred R378.40-million in fruitless and wasteful expenditure in the 2020/21 financial year, “mainly attributable to the procurement of personal protective equipment”. (p.174)
- Despite its profligacy, the AG-SA notes that “the Gauteng Department of Health is not investigating all cases of irregular expenditure due to lack or non-submission of requests for condonement of the irregular expenditure to the relevant authorities, and the fact that most of the irregular expenditure is from legacy issues, such as consignment stock, security contracts and cleaning contracts”.
In this context, perhaps the most concerning finding of the AG-SA relates to the lack of action by government departments on matters arising from the audits, basically allowing a high degree of impunity and making a mockery of the AG-SA’s diligence.
The table below (found on p. 78 of the report) speaks volumes. It shows how “to date” nearly R400-billion of what has been declared unauthorised, fruitless and wasteful, and irregular expenditure was simply “not dealt with”. Only R1.3-billion has been recovered or is in the process of recovery:
From these findings, the AG-SA concludes that “the risk that remains in the process relates to the lack of consequence management implemented by management in instances where both the Special Investigating Unit and internal investigations identified fraud and/or non-compliance. The current challenge in the sector is to finalise the consequence management processes so that appropriate and decisive action can be taken against transgressors”.
Zondo puts it more strongly. He says (at para 628) that “the evidence shows that for the most part no consequences flow [from the audits of the AG-SA] — corruption in procurement is unaffected”.
He laments (at para 654) that “it seems scarcely believable that the constant flow of legislation over the years had so little impact in curbing corruption and that the combined efforts of Parliament, National Treasury, the Auditor-General, the provincial Treasuries and national and provincial governments could have been so ineffectual”.
“The efforts, albeit failed efforts, to address corruption show that there is no easy solution to the problem… Clearly a new approach is required; it cannot be the same mixture as before.”
Zondo is right. R488-billion and counting is a lot of money to lose or misuse in a country with inequality and social deprivation on the scale of ours. DM/MC
To illustrate the scale of spending on Covid-19, this week Maverick Citizen, in partnership with the NGO OpenUp, will publish a visualisation and analysis of all procurement linked with Covid-19 since March 2020, based on the National Treasury’s public dashboard of all expenditures.
This viz reveals that, although the SIU may have submitted its final report to the president, there remains prima facie evidence of large-scale irregular and unauthorised expenditure and thus many contracts still needing to be investigated. Watch this space…
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