In 2021-22, the consistent positive pattern of prior years continued, reflecting an overall ‘robust control environment, with a solid and consistent pattern of good financial governance’. This positive reflection highlighted the tone set by the accounting officers and authorities, instilling a culture of doing the right thing, being accountable, and improving controls as key elements in achieving and sustaining clean audit outcomes.

Overview

This year, 17 auditees obtained clean audits, with 15 maintaining this status over the three-year period. The province sustained this level of maturity by institutionalising daily and monthly controls, appointing competent staff, maintaining stability in key positions and ensuring that action plans effectively addressed any control weaknesses identified. These good practices supported the timeous submission of quality financial statements by all auditees, except for Wesgro, which was qualified due to asset management issues. This also resulted in material non-compliance relating to financial statement preparation. The remaining 20 auditees all achieved financially unqualified audit outcomes.

The province’s overall financial health was good, demonstrating its ability to manage financial resources in a manner that maintains favourable financial ratios as a result of their best practices. Every year, each department submits its first and second draft budget to the provincial treasury to determine whether the budget is in line with the regulatory framework and allocation letters, based on previous expenditure trends and capacity to spend. The province has also not incurred any unauthorised expenditure for the past three years.

Seven auditees submitted annual performance reports containing material errors in 2021-22, an improvement from 10 in 2018-19. Misstatements were mainly due to management not adequately reviewing the reported performance against supporting documentation. When performance information is unreliable, it may negatively affect the decisions made by users who rely on this information. Of these seven auditees, three were able to re-perform the verification process and resubmit accurate information, effectively correcting the misstatements. The provincial education and human settlements departments (two of the four key service delivery departments), Casidra and Wesgro were unable to correct all these errors, which resulted in reported achievements not being supported by appropriate evidence, as well as indicators not being well defined. For example, the provincial education department again struggled to collate information for reporting on the percentage of learners with textbooks, and the provincial human settlements department could not report accurately on the number of title deeds registered for new developments. The audit opinions for these two departments thus remained financially unqualified with findings.

The remaining two key service delivery departments – health, and transport and public works – maintained their clean audit outcomes and submitted annual performance reports that were free from material errors. The service departments’ mandates were generally aligned to the Medium-Term Strategic Framework, and indicators and targets were aligned to sector indicators. Such alignment has the benefit of positively affecting the use of public resources and promoting improved service delivery outcomes for all people in the province.

Two of the key service delivery departments (education and human settlements) experienced significant delays on infrastructure projects, which translated into delayed service delivery to people in the province. We performed audit work on three schools and two housing projects. Housing units were not allocated to beneficiaries as planned because poor contract management at the provincial human settlements department resulted in the contractor’s access to the site being delayed due to another contractor’s poor performance and construction drawings being submitted late. The provincial education department also experienced delays in the construction of schools, mainly due to a combination of events outside of the department’s control, such as the continued impact of covid-19 lockdowns on multiyear projects and poor performance by contractors. Where poor contractor performance caused the delays, departments and implementing agents exercised effective project and contract management in response.

In addition to the work we conducted on service delivery, we visited some health facilities to determine the efficiency of services provided to people in the province. On a positive note, we found that inpatient areas were clean, there were sufficient nurses to take care of patients, patients were treated in a friendly manner, and the number of patients waiting in line decreased significantly during the course of the day as patients were attended to. Shortcomings included relaxed security in rural areas, limited services due to staff shortages or broken machinery, substandard ablution facilities, and inadequate signage to guide patients to the correct services. We also looked at the extent of medical negligence and malpractice claims against the provincial health department, as such claims have the potential to divert money away from critically needed healthcare for people in the province. We found that the department is managing this exposure through a competent team assessing the merits of each claim, with the settlement of claims amounting to R47,6 million for 2021-22 and the total provided at year-end amounting to R426,5 million.

Our visits to schools identified shortcomings in the implementation of the National School Nutrition Programme, such as complete and accurate monthly stock registers not being kept, expired stock in storerooms, and food not being suitably stored. In some cases, this led to wastage, a lack of a balanced meal and learners not always receiving meals as intended. This greatly affected the programme’s purpose of serving a balanced meal to boost the concentration of learners and ensuring that teachers get the maximum out of the available teaching time.

In the area of compliance with legislation, the province’s robust control environment has decreased the number of matters identified at departments. We raised material findings at only three auditees, mainly relating to the prevention of irregular expenditure, transfers and conditional grants, and strategic planning.

The province incurred irregular expenditure of R330 million in 2021-22 (with R156 million being identified by auditees and R174 million through the audit process), which is relatively unchanged from the previous year’s R329 million. Of the total, R90 million related to prior year irregular expenditure identified in 2021-22. The provincial human settlements department was again the highest contributor to the total irregular expenditure, accounting for R222 million. The bulk of this amount (R180 million) related to prior year contracts that were still active in 2021-22, while R22 million related to non-compliance with the National Housing Code. The department should implement monitoring controls to ensure that all procurement regulations are complied with to reduce irregular expenditure, as this could have an impact on future audit outcomes.

In November 2021, we notified the accounting officer of the provincial human settlements department of a material irregularity relating to incorrect housing subsidy payments. The accounting officer implemented actions based on the issued material irregularity, and quantified the overpayments to beneficiaries to have resulted in a financial loss of R22 million. We assessed the accounting officer’s response to address the material irregularity and found it to be adequate to prevent any further losses.

The coordinating departments of the premier, treasury and local government continued with their oversight and support by promoting a culture of good governance through the corporate governance and review outlook processes implemented in the past, as well as assisting with skills shortages at outlying municipalities. These ongoing support interventions played a crucial role in sustaining the audit outcomes through institutionalising budgetary control, monitoring monthly reports, and enforcing financial and performance management principles, including compliance with legislation. The provincial premier’s department also implemented additional controls through its monitoring and evaluation component, which included evaluating performance indicators of departments and entities against usefulness criteria and verifying the quarterly reported information against supporting schedules after auditees had validated it against their supporting evidence. In light of the performance reporting outcomes, the premier’s department should consider enhancing the support intervention to improve systems so that it is clear exactly what information needs to be collected and collated, with an emphasis on auditees where we raised material findings on usefulness and reliability. This would also result in more credible annual performance reports being provided to the legislature for oversight purposes.

We again engaged with portfolio committees, during which they focused on all critical areas within departments and public entities and followed up all resolutions taken during the annual report hearings, which significantly contributed to the good audit outcomes. The public accounts committee holds hearings every year, shortly after the tabling of annual reports. Resolutions are taken during the hearings and tabled in the house by the end of December each year. All resolutions are subsequently followed up and departments and entities are called on to further account to the committee.

Call to action

We encourage the province to implement actions based on the recommendations provided in the areas where challenges were experienced, while continuing to promote – and where necessary, improve on – the culture of good governance and maintaining controls. The good foundation laid by the mature control environment is commendable, but should be leveraged further to enhance the impact on service delivery to people in the province.

The provincial leadership has committed to:

• intensify the reviews of the annual performance plans and report in line with the requirements of the performance management and reporting framework to ensure that the processes of information gathering for predetermined objectives are aligned to the technical indicator descriptions
• use the skills and best practices already in place at departments to assist those that have matters on contract and procurement management
• continue to support and engage the chairperson of the accounting authority and chief executive officer of Wesgro to address the qualification and compliance root causes and aim to achieve a clean audit.