The province improved its overall audit outcomes over the three years since the previous administration. However, the 2021-22 audit outcomes regressed from the previous year because the provincial transport and community safety department could not sustain its clean audit status due to material findings on performance reporting and compliance with legislation. Our general report messages consistently emphasise the need to implement a strong and sustainable control environment. Although auditees develop action plans to address internal control weaknesses that lead to repeat findings, accounting officers, internal audit units and audit committees do not consistently monitor the implementation of these plans. Oversight structures must play a more prominent role in ensuring that accounting officers take responsibility for implementing sound financial management disciplines.

Overview

The provincial treasury; the premier’s office; the provincial economic development, environment and tourism department; and the Limpopo Gambling Board were able to sustain their clean audit outcomes because they had embedded a culture of basic accounting disciplines. We commend the provincial treasury for maintaining its clean audit status over the three years since the previous administration. We remain concerned that the provincial health and education departments, which share the bulk of the provincial budget, are still receiving qualified audit opinions.

The province improved its compliance with laws and regulations over the administration period, with 12 auditees (71%) having material non-compliance findings in 2021-22, compared to 16 auditees (94%) in 2018-19. We find it encouraging that improved compliance translated into a notable reduction in irregular expenditure incurred. However, we urge leadership to develop a culture of zero tolerance towards non-compliance with legislation by consistently implementing consequences. Although the audit outcomes improved over the current administration period, the quality of financial statements submitted for auditing remained poor, with only six auditees (35%) submitting financial statements that did not require material adjustments (although this is an improvement from the two (12%) in 2018-19). This is an indication that auditees are not adequately dealing with the root causes of poor internal controls, but are rather relying on the audit process to identify misstatements.

Auditees are required to plan according to the Medium-Term Strategic Framework and the provincial development plan to track the progress made towards achieving their medium-term objectives and long-term goals. The outcomes on annual performance reporting improved during the administration period, but only five auditees (29%) submitted quality performance reports that did not require material adjustments; compared to six auditees (35%) in 2018-19, which further indicates their overreliance on the audit process to identify errors. The general lack of credible performance reporting resulted in poor-quality information being submitted to portfolio committees, which hampered their ability to make sound decisions to improve on key service delivery matters in the province.

Infrastructure is a critical element of effective service delivery and is crucial for supporting and intensifying the productive capacity of the province. Some of the infrastructure projects at the provincial health department were not completed in time due to inadequate contract and project management, such as the upgrading of Letaba Hospital that has been delayed by more than two years from the planned completion date. The delays were primarily because, on more than one occasion, the service provider did not obtain materials on time. Providing good-quality basic healthcare services is essential; and the lack of adequate infrastructure has a direct impact on the lived reality of people in the province, as it limits their access to basic and urgent medical care.

Overall, the financial health status of the province improved slightly but some auditees still require intervention. The financial health of Great North Transport and Corridor Mining Resources did not improve over the past three years. However, the Roads Agency Limpopo managed to resolve its cash flow challenges by implementing processes to ensure the optimal use of cash resources and the payment of creditors.

The provincial health department, which is one of the key service delivery departments, faces medical negligence and malpractice claims amounting to R14,29 billion. If these claims translate into actual liabilities, funds earmarked for strategic and service delivery objectives will need to be used to settle them. The premier must enforce the implementation of robust strategies to generate revenue and curb expenditure to prevent much-needed resources from being wasted and to ensure their efficient use. This will place the province in a better position to achieve its service delivery objectives and have a positive impact on the lived realities of the province’s people.

In a province where agriculture is one of the key economic drivers, we find it concerning that the provincial agriculture and rural development department underspent R90,63 million (10%) of the funds aimed at agricultural support and development (and these funds will thus have to be returned to treasury). The funds were intended to provide assistance to upcoming farmers, and its underspending negatively affects the livelihoods of people who depend on this sector. Leadership should focus on proper project management, including monitoring processes to detect project failures and targets not being achieved so that they can take corrective action as early as possible.

As highlighted above, it is commendable that irregular expenditure in the province decreased over the administration term. Over the previous two years, the irregular expenditure incurred averaged R3,38 billion. In 2021-22, this decreased by almost R1,26 billion to R2,12 billion. The decrease is largely due to non-complying contracts that came to an end in the previous year at the provincial departments of public works, roads and infrastructure, and of cooperative governance, human settlements and traditional affairs; as well as the Roads Agency Limpopo managing to reduce the approval of standing-time variation orders relating to delayed projects. The culture of non-compliance with supply chain management regulations is still prevalent at some auditees, and measures must be put in place to ensure consistent compliance with these regulations. Decisive leadership must be sustained to further reduce irregular expenditure and eliminate repeat findings to improve audit outcomes. Auditees must also develop processes to ensure that implementing agents are held accountable as per their service level agreements and must promptly impose sanctions for non-justifiable deviations. The provincial treasury must ensure that proper and timely investigations are conducted and that disciplinary actions are taken against officials before it approves any requests to condone irregular expenditure.

Since the implementation of our expanded mandate in 2018-19, we have issued notifications for five material irregularities, with an estimated financial loss of R120,35 million; of which two have been resolved. The material irregularity issued in 2021-22 relates to the provincial education department failing to calculate and withhold employees’ tax for leave gratuities paid when officials retired. This resulted in the South African Revenue Service imposing penalties and interest of R21,82 million on the department. While the best course of action would be to prevent these material irregularities from occurring, we are encouraged that accounting officers and authorities are taking appropriate actions to resolve the irregularities once notified. The Roads Agency Limpopo prevented a potential financial loss of R1,30 million while the provincial health department managed to recover financial losses of R3,71 million.

Call to action

The premier is committed to ensuring a culture of accountable and transparent leadership in the province, by entering into service delivery agreements with the members of the executive council. This includes the agreed-upon service delivery initiatives and projects to be implemented over the Medium-Term Strategic Framework period. Provincial leadership must implement – and continuously monitor the implementation of – their commitment for improved service delivery and must apply consequences for service delivery failures. We once again urge provincial and administrative leadership to implement measures to strengthen preventative controls, focusing on auditees that received qualified opinions and on the key service delivery departments. We commend the legislature for holding members of the executive to account by adopting a recommendation of the Standing Committee on Public Accounts to report on the status of implementation of resolutions to the house on a quarterly basis. The repeated qualification areas at the provincial health and education departments are not insurmountable, and we are confident that these departments can move out of the qualified space in the next audit cycle if they implement basic financial management disciplines.