AG states 88% of government expenditure under control of mismanaged departments

South Africa’s government departments and entities are showing little evidence of adequate financial controls, according to the latest audit reports.

The Auditor-General of South Africa (AG) on Tuesday released its national and provincial department audit outcomes for the 2024-25 financial year.

Figures outline the ability of state-owned entities and government departments to manage their expenditure efficiently and to accurately report their financial position.

AG Tsakani Maluleke expressed her disappointment in the figures, stating that government showed little commitment to improvement.

“There is no noticeable shift towards better performance – not in financial management and not in service delivery,” said Maluleke.

10% of government entities getting worse

The AG audited 417 national and provincial departments and entities, with 151 achieving clean audits.

However, these 151 entities accounted for only 12% of government expenditure, while entities reporting irregularities of some kind accounted for 88% of government expenditure.

“These 266 auditees continue to lack the institutional capability to produce credible financial and performance reports, or ensure compliance with legislation,” said Maluleke.

Malukele highlighted that these “high-impact” government entities handled roughly R2 trillion of government’s expenditure.

Maluleke was concerned that 113 of these entities in critical sectors showed no improvement in audits, with 57 having adverse findings every year for the last five years.

Alarmingly, the AG noted that 10.7% of auditees showed a worse performance than the previous year, 22 of those entities accounting for R523 billion in government expenditure.

“The scale of these regressions significantly outweighs the improvements made elsewhere,” said Maluleke.

The AG noted that some entities were employing a “minimum compliance mindset” by failing to appreciate the implications of the audits.

Maluleke explained a “growing trend” of financial irregularities being treated as “a mere technicality, rather than a serious governance failure”.

Additionally, some entities were accused of failing to honour disclosure requirements or attempting to exploit compliance loopholes.

“Equally, dismissing irregular expenditure or changing the rules to reduce the amounts disclosed will not address the problem,” Maluleke said.

Billions mismanaged

Irregular expenditure for the financial year totalled R42.5 billion, with procurement and contract management being the main causes.

That figure was down from R49.5 billion from the previous financial year, but many reported irregularities were carried over.

The AG explained that roughly R32 billion in irregular expenditure was still under review and not included in the report.

Irregular expenditure was separate from fruitless and wasteful expenditure, which totalled just R3.5 billion.

Overspend was down from R7.2 billion to R6.2 billion, while accruals – unpaid expenses that will be funded from next year’s budget – amounted to R51.2 billion.

SOEs required R453.4 billion in government guarantees “to remain afloat”, with Eskom and Transnet reporting R866 billion in liabilities between them.

Infrastructure projects continued to be a large cause of irregular expenditure, with 89% of 136 infrastructure projects valued at R47.3 billion having adverse findings.

“Poor planning, coordination and execution by the different role players in the infrastructure value chain led to the poor quality of spending on infrastructure delivery and maintenance.

“The planned level of services was also not delivered even after projects were completed, after lengthy delays,” said Maluleke.

Additionally, 96% of housing projects spanning all nine provinces at a combined value of R5.6 billion reported “shortcomings”.

Material irregularities

While irregular expenditure was waste attributed to incompetence, material irregularities reflected gross negligence.

“Material irregularities demonstrate the impact of a public sector culture that lacks commitment to performance, accountability, transparency and institutional integrity,”

“This impact finds expression in noncompliance, suspected fraud, financial loss, poor management of resources and harm to both public sector institutions and the general public,” the AG explained.

The AG found 292 cases of material irregularity during the 2023-24 financial year and resolved 140 of those in 2024-25.

In addition to the 148 unresolved material irregularities outstanding from the sixth administration, the AG reported 55 new instances for the 2024-25 financial year.

Material financial loss was evident in 161 of these cases, with misuse and harm to the public central to 42 of the outstanding material irregularities.

“One year into the new administration, our audits show no clear improvement in audit outcomes, financial management, service delivery performance, accountability, transparency or institutional integrity.

“This shows that our audit counsel has not been adequately heeded,” Maluleke concluded.

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