Auditor-general Tsakani Maluleke has called out the normalised celebration of unqualified audit opinions, saying it is misplaced.
In fact, Maluleke believes the cohort of municipal, provincial and national government entities and departments that receive this audit outcome have become complacent with little to no visible efforts to improve.
“The category of unqualified with findings is not one we should celebrate. We have been concerned as team AGSA that for far too long, politicians, boards, accounting authorities, accounting officers as well as those in parliament celebrate unqualified with findings.
“Let’s remember, unqualified with findings is where the financial statements that are published are correct, however, there are problems on compliance and/or performance information.”
This comes as the auditor-general on Thursday released the audit outcomes of provincial and national departments for the 2024/25 financial year, which showed that the Western Cape continued to lead at provincial level. She cited the Free State and North West as “really concerning”, with no improvements in their audit outcomes.
The auditor-general pointed out the stark contrast between departments celebrating this audit outcome in the face of service delivery challenges that plague communities.
“This category in many ways explains the dissonance that South Africans feel when we announce audit opinions, outcomes and reports and there is some measure of celebration that at least our outcomes are largely unqualified with findings. But South Africans wonder why do they still not have services, why is it that the performance of government is still not what I expect, why is it that I still can’t trust that government will do what it said it would do?”
In many ways, that dissonance we would attribute to complacency of staying in this zone.
We’ve also seen that auditees in this category overspend on their budgets. They spend more than the money that they have available. We’ve seen that many of them contribute to the consolidated number of fruitless and wasteful expenditure, and that the majority of our material irregularities are issued to auditees in this very category.
— Auditor-General Tsakani Maluleke
She said it was regrettable that this has become the norm and urged for a change of mindset to improve financial controls across the board.
“Thirty-two years into our democracy, we believe that we’ve got to change our conversation around this category. What we’re seeing is that complacency has unfortunately set into the system.
“Many of these auditees have stayed in this category for a very long time. If you have a qualified opinion, adverse or disclaimer, and you are in unqualified with findings zone, it should not be where you stay forever.”
Maluleke said there were glaring issues associated with departments and entities that find themselves in this category.
“Many of them have high levels of non-compliance, they are the largest contributors to irregular expenditure which occurs when there has been non-compliance with laws and regulations relating to procurement in the main.
“Many of them, when they submit financial statements for audit, what they give us is not of good quality, which tells us that their own internal management practices are not strong,” she said.
She added that 72% of them gave AGSA a performance report for audit that had significant errors, which indicates that their disciplines, practices and controls over performance planning, monitoring and reporting and evaluation are not firm.
The auditor-general added that this category of unqualified opinions with findings is not a good indicator of solid financial management practices, stable performance management practices and disciplined procurement practices.
“We’ve also seen that auditees in this category overspend on their budgets. They spend more than the money that they have available. We’ve seen that many of them contribute to the consolidated number of fruitless and wasteful expenditure, and that the majority of our material irregularities are issued to auditees in this very category.
“Therefore, this category is not one where people should stay.”
Maluleke said it is important for auditees to strive for a clean audit outcome and to progress out of the unqualified with findings outcome.
“It should be about progress towards the very basics of a clean audit, the foundational aspects that are so important if we are to build a capable, ethical, developmental state.”
Of those provincial and national departments and entities who were awarded an unqualified opinion with findings, the auditor-general revealed that 13 of the auditees had been in the unqualified zone for 10 years.
Forty-four of them had been in this zone for between five and nine years, 56 of them spending between two and four years in the category and 48 having been awarded this outcome for a year.
Maluleke placed the blame at the doorstep of political leadership for the auditees who have failed to progress out of this zone.
“Other than the ones who have been in that zone for a year, the fact that there are auditees in this category that have not moved out of it tells us that the posture of the leaders in those environments is one that tolerates and celebrates unqualified with findings, hence complacency has set in.”
She called it concerning, particularly when analysing the state of affairs through the taxpayer-funded budgets that they are responsible for.
“The clean audits look after only 12% of the expenditure budget, which is the R2.21-trillion that is being managed by PFMA auditees that we analyse. It tells you that 88% of the budget sits in the hands of auditees that are unable to demonstrate that they have good financial management practices, stable performance planning, monitoring and reporting practices and the type of integrity measures and controls that ensure that when they procure goods and services, they do so in a manner that respects the rule of law.”
Maluleke conceded that circumstances change and one hit could set back an entity or department into this zone but urged that there be a plan to restore the clean audit status.
“It can happen that there is a non-compliance that hits you in one year, you regress from a clean audit, but then you get back. Sure, you may have come from an era where you may have been dealing with disclaimers of audit opinion, but you cannot stay in this category.”
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